Windhoek – Upstream developers of Kudu gas field off the coast of southern Namibia are hoping to finalise a sales agreement with energy utility Nampower by mid-next year, paving the way for exploitation of the massive fields and construction of an 800MW gas-to-power plant.
The Namibia Power Corporation is the sole buyer of gas from the Kudu field, which is estimated to contain 1.3 trillion cubic feet of proven natural gas reserves.
And the good news for Namibia does not end there: recent exploration and additional data analysis is said to suggest that reserves could reach three trillion cubic feet.
Exploitation of Kudu, which is located in the Orange Sub-Basin, has been on the cards since gas was discovered there in 1974.
One of the major reasons for Kudu failing to take off has been the absence of a gas sales off-taker and the failure for interested parties to reach an agreement on whether the pricing of the gas should be denominated in local currency or US dollar.
The Namibian government recently directed Nampower to fast track the construction of a US$1.2 billion power plant.
As such, Nampower is the sole beneficiary of the gas from the Kudu field and an agreement on pricing, if reached before or in 2014, could pave the way for the exploitation of the resource and the construction of the Kudu Power Plant.
Plans are for the power station to be on-line in 2018.
State-owned petroleum company Namcor owns a 54 percent stake in the Kudu field and the remaining shareholding is split between UK-listed and African-focused oil and gas company, Tullow Oil, and Japan’s Itochu Corp, which own 31 percent and 15 percent shareholding respectively.
“All the gas pumped from the Kudu fields will be committed to the Nampower plant and nothing else,” Namcor MD Obeth Kandjoze said last week.
“The pricing of the gas will be denominated in US dollars and this is no longer a point of negotiation.
“Even Nampower themselves have realised that there is no other cheaper method of generating electricity other than gas at this stage. There is also a realisation that the Kudu power plant needs to come on stream sooner,” Kandjoze said.
The planned Kudu gas to power-plant could see Namibia, a net electricity importer, exporting excess power to neighbouring countries such as Zambia and South Africa.
“We expect to reach an agreement on the pricing of the gas next year,” Kandjoze said.
He says that Kudu upstream partners expect work on a subsea front-end engineering and design (FEED) started in March this year by UK-based Genesis Oil & Gas Consultant to be completed in November.
Namcor has also shortlisted three companies, US-based Modec, BW Offshore from Singapore and Bumi Amarda from Malaysia for a design competition of a floating production system (FPS), as Kudu partners step up efforts to pump gas by 2018.
An FPS is a technical term, which describes the method companies use to pump oil or gas onshore.
Meanwhile, Namcor also says that it is reducing its shareholding in the Kudu gas fields to 16.2 percent from 54 percent and has appointed Deloitte LLP to manage the farm out.
Kandjoze said that Namcor hopes to have secured an investment partner to take up the 37.8 percent stake, within seven months.
Once secured, the investment partner is expected to finance the state-owned petroleum company’s share of capital in upstream development of the Kudu gas field.
“The partner we are looking for is one who will finance Namcor’s share of capital in upstream development of Kudu gas.
The partner will carry Namcor’s share of capital requirements for Kudu until gas starts flowing and we are in a position to start paying back the loan. For us it’s a bridging mechanism until we are able to repay the loan,” Kandjoze said.