NamPower, Eskom, Namcor and Energy Africa sign Kudu project deal

Jul 06, 2004 02:00 AM

New life has been breathed into the Kudu gas project which, according to officials, can save Namibia and the region from a major electricity crunch.
Utilities NamPower, Eskom and the Namibia Petroleum Corporation (Namcor), together with South Africa-based exploration company Energy Africa, signed a Joint Development Agreement (JDA) and a Memorandum of Understanding (MoU). It embraces a renewed commitment to the Kudu gas project, off the Namibian coast

Speaking at the signing in Windhoek, Mines and Energy Minister Dr Nickey Iyambo said he had had sleepless nights recently after the heads of NamPower and Namcor warned him about a looming disaster because of power shortages. He said the shortages would be prevented if the agreement resulted in the development of the long-awaited Kudu gas field project.
Energy Africa and Namcor will be in charge of the exploration on a platform 170 km offshore, a processing facility and a pipeline. NamPower is to set up an 800 MW combined cycle power stationthat is proposed for Oranjemund.

Energy Africa MD Rhidwaan Gasant said Kudu, discovered in 1974, had between 1,4 and 1,45 tcf of proven reserves of gas in the field, sufficient to supply an 800 MW power station for more than 20 years.
NamPower chief Dr Leake Hangala said the next 18 months would be crucial as they focused on determining the commercial viability of the Kudu gas project. He said electricity demand in South Africa would overtake supply by 2007 and they want to counter that by having the first phase of Kudu up and running by March 2009. In Namibia demand was also growing by the day.

The second phase -- extending the capacity from 400 MW to 800 MW -- would be completed by 2014. Depending on demand, the power station's capacity can be expanded from 800 MW to 1 200 MW or even 1 600 MW.
Gasant said they would use standard technology to drill four wells at the initial stage because of the high cost and safety but Hangala said the power station would use the latest technology.

The Energy Africa MD said they would enter into serious negotiations over the next few months to reach a final agreement by 2005. Hangala said the project would have to follow a very strict schedule.
"If we lose a year on Kudu, we will have to cut supply to some towns or big companies to provide more to others or new companies. It won't be good for anybody," he said.
He said the primary aim was to ensure the viability of the project in supplying natural gas to an 800 MW combined cycle power station that is proposed for Oranjemund. NamPower signed an agreement to sell the electricity to Eskom after processing gas provided by the partnership of Energy Africa and Namcor. The US oil major (Energy Africa) has a 90 % interest in Kudu while the remaining 10 % is owned by Namcor.

Kudu has seen several partners come and go. ChevronTexaco and Shell withdrew earlier, questioning the viability of the project. However, Galant said they were "extremely confident" that there was a reserve of about 3 tcf of gas or more.
"There is even more gas than what we thought initially," he said.
Energy Africa spent close to $ 200 mm on Kudu so far. Hangala said the project would be the biggest in Namibia and would amount to N$ 6,3 bn. Namibia's national budget for this financial year amounts to N$ 11,5 bn.
"The amount speaks volumes of the massive investment," said Minister Iyambo.

Eskom's Thulani Gcabashe said the signing meant "the Kudu project has come".
"We have had partners come and go but Eskom is here to pledge support. There is definitely room for a gas-fired power station and the region requires additional electricity," said the Eskom CEO.

Source: The Namibian
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