Australian investors frustrated by state government moratoria on Coal Seam Gas production have alternatives. Unfortunately this means investing outside Australia, and in the case of Tlou Energy (TOU), well outside. Serowe, Botswana to be precise.

In a carbon constrained universe, gas is a viable answer. It is the only existing lower carbon content alternative with sufficient scalability to power homes and industry economically. In Australia, the politics of CSG are toxic. However, in emerging economies, it is not only a compelling option, in many cases it’s the only option. 

TOU is tendering to provide power in Botswana from a methane field. The gas discovery is ready for initial production drilling, expected to commence in October. TOU’s plan is to build a power plant at the site that will start producing 2 megawatts of power, ramping up to 10 megawatts. A 100 km transmission line will be built to link the plan to the national power grid.

Some caveats are required. Clearly, this is a higher risk investment proposition, starting with sovereign, geographical and development risks. The stock is also listed in London. Many large mining companies find UK investor pessimism weighs on the share price. Additionally, the writer holds shares in, and is biased towards this company.

Here’s the chart:

TOU is trading close to support at 10 cents per share, well down on January 2018 levels closer to 30 cents. News flow around a successful tapping of the gas field could act as a catalyst to the share price, and that in itself could attract shorter-term trading participants.

However I’ve added TOU to my portfolio with a longer timeframe in mind. Much of Africa is undergoing significant change, and the continent’s wealth of resources is well established. A company that establishes a reputation for power delivery using local human and physical resources may find long-term demand and opportunity in the more stable societies of Africa. Does any else recall Woodside Petroleum’s humble beginnings on the North West Shelf?