Kudu gas back on track

May 08, 2017

By Timo Shihepo

WINDHOEK – After two years of silence, talks over the highly awaited Kudu Gas-to-Power Project have resumed.

This comes at the back of BW Offshore kickstarting the process of paying for its shares last week.

BW Kudu Limited, the subsidiary of BW Offshore entered into a Farm-Out Agreement for a 56 percent stake on the upstream side of the Kudu license, in February.

The Namibian state-owned oil company, National Petroleum Corporation of Namibia (Namcor) will hold the remaining 44 percent of the license.

As per the agreement, BW Kudu, the Oslo Stock Exchange listed company and world leader in offshore floating production will become the operator of the Kudu license. Namibia plans to develop the 1,3 trillion cubic feet of Kudu gas fields that were discovered by Chevron in 1974 about 170 km off Namibia’s southern coast in the Atlantic Ocean.

Namibia imports 60 percent of its electricy and the project will ensure that the country will have sufficient power for its own needs and surplus to supply its neighbours.

The Southern Times has learned that talks between BW Offshare and Namcor resumed after BW Offshore paid its first pro rata share worth about R31 million.

The Kudu project, which was mooted in 1997 and established in 2005 was expected to be commissioned by end of this year. It however has been delayed by the upstream side of the project.

It was a requirement that Namcor sells 56 percent shares because the Namibian government has refused to bankroll the power project. Finance Minister Calle Schlettwein pulled the plug on Kudu project in November 2015 out of fear that the multi-billion power project will drain the government coffers.

Based on this, Namibia’s power utility, NamPower, which owns 51 percent shares of the downstream project is also looking at farming out more shares. It has already sold out 49 percent shares to partners.

Both Namcor and NamPower have confirmed to The Southern Times that talks regarding the power project have resumed.

“Ever since BW Offshore came on board talks have resumed and we are now looking at concluding the sales agreement and have a financial close date in December. It is ambitious but we are working very hard. Yes it is true that BW Offshore has paid its first pro rata share worth $2,4 million,” says Namcor managing director, Immanuel Mulunga.

Financial close occurs when all the project and financing agreements have been signed and all the required conditions have been met.

On his part, NamPower managing director, Simson Haulofu said: “We have resumed the Kudu work, now. It was on holiday, it was because of the upstream issues”.

NamPower was already aiming to reach the financial close by December last year but the utility had to stop because Namcor still didn’t have a partner by that time, according to Haulofo.

Talks between NamPower, Namcor and several partners have now resumed since last month and they are looking at concluding several important agreements, as soon as possible.

One of the core project agreements is the gas sales agreement, because partners will not have a financial close on the downstream leg of the project without signing a gas sales agreement.

A gas sales agreement is the primary legal contract between a buyer and a seller. In this case, Namcor is the seller and NamPower is the buyer of gas.

Haulofu said first meetings have already taken place between them and Namcor regarding the sales agreement.

“We have now resumed the discussions. First meetings have already taken place between us and Namcor. We have remobilised our resources to make finalisations on gas sales agreement plus other commercial agreements that needs to be concluded.”

NamPower has set December 2017 – March 2018 as the new deadline for the financial close agreement.

Government has made it clear that they do not have money and has written to both Namcor and NamPower that they must find ways to finance their shares.

“Government has made it clear to us and we are looking at ways how other people will help finance our 44 percent. Government will however be required to chip in with some guarantees but at the moment we do not expect them to pay for the project,” said Mulunga.

NamPower is also thought to have been forced by the government to sell more shares from its 51 percent that they own on the downstream side of the Kudu project.

Haulofu denied these claims saying that this was a mutual agreement between government and NamPower.

“No we were not forced by government. We are only doing this because we are also looking at investing in other projects in parallel with the Kudu project and we can’t put all our eggs in one basket.  It is not a definite thing yet but we are looking at farming out some percentages from the 51 percent,” he said.

One Response

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