Long stalled Kudu gas-fired plant’s fresh hurdle

 

Windhoek- There is a strong possibility that Kudu gas project, Namibia’s answer to electricity self-sustenance’s development timetable could be shifted forward, forcing another unexpected delay on the project, which has been on the cards for decades.

State owned power utility, Namibia Power Corp plans to build a $1.3 billion, 1,050 megawatts Kudu gas-to-power plant, expected to come on the grid in 2018, a downstream project, which is to benefit from the massive 1.3 trillion cubic feet gas fields.

But the plant faces delays after Tullow Oil Plc, operator of Kudu gas fields and another upstream partner, Itochu Corp, from Japan, pulled out of the project, citing commitments to other big oil projects elsewhere.

Namibia, a net electricity importer, has turned to Chinese firms courting them to pump gas from the Kudu fields to the planned power plant after Tullow and Itochu Corp relinquished a combined 46 percent interest in the gas project.

“It’s a concern, once an important partner pulls out it’s no longer business as usual, there may be a delay, that has always been our worry,” Paulinus Shilamba, Nampower Managing Director said in an interview.

This would just one of the latest set-back for the planned plant, whose development has stalled over the years as the partners wrangled over the pricing of gas.

Kudu’s delays also emanated from Nampower opting to focus on smaller power generation project. The utility started paying serious attention to Kudu’s potential to solving Namibia’s power supply security situation after the irksome delays drew the attention of cabinet with President Hifikepunye Pohamba publicly expressing his frustration with the failure of the project to take off.

Government then decided to declare Kudu a national strategic project, in a show of political support towards its development.

The Namibian power utility would explore ‘contingency plans’ to plug power supply deficit which would have been alleviated with the planned gas plant coming on the grid early 2018, Shilamba said. 

“If there is a delay, the power supply gap will increase and will become very difficult to manage,” Shilamba said. “We calculated electricity deficit to last for two years (up to 2018), if Kudu is delayed, it will be a big challenge and very difficult to manage,” he added.

Tullow abandoned its 31 percent stake in the gas field, located 200 kilometres off the southern town of Oranjemund, to focus on ‘major oil development projects’. “Tullow has a number of major oil development projects ongoing and, as we allocate capital across the portfolio, it is clear that these developments rank higher than Kudu,” it said in a statement on October 31.

Namibia is courting China Africa Development Fund and China National Offshore Oil Corp to take over Tullow and Itochu’s interest, Mines and Energy Minister Isak Katali, said during a visit to Beijing on October 31. Namibia would also directly finance National Petroleum Corporation of Namibia, which owns a 54 percent in Kudu’s share of capital requirements in upstream development, Katali said.

Namibia, which produces the world’s highest-quality diamonds from the floor of the Atlantic Ocean and is the fifth-largest uranium producer, relies on imports of 60 percent on average and 80 percent during dry season of its electricity requirements from neighbouring countries, Nampower said in its 2013 annual report.

Nampower has appointed a preferred bidder for a 250 megawatts plant, initially envisaged as a standby plant until the Kudu plant came into operation, and construction is expected to start next year, Shilamba said. “The additional 250 megawatts alone is not sufficient, we need an additional contingency plan, could be another plant or we resort to emergency generators, which are very expensive” Shilamba said.

Nampower appointed Shanghai Electric Group Co. as main contractor to construct the gas fired power plant and Siemens AG as co-contractor to supply the plant’s equipment, Shilamba said in September.

November 2014
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