By Petronella Sibeene
Tullow Oil Plc and a Japanese oil company Itochu yesterday signed an agreement that will give a major boost to the Kudu Gas project.
It is anticipated that the venture business would become operational and pump gas for domestic use for export in 2011.
The Kudu Gas project has moved from a highly prospective gas discovery to development, albeit with some companies such as Shell and Chevron withdrawing.
For Tullow, which still retains a 70 percent share in Kudu, the biggest obstacle was securing finance to develop the find.
Itochu’s purchase into Tullow will now guarantee funding for the capital-intensive development.
The planned 800 MW Kudu power station near Oranjemund, southwest of the country, will be implemented at a total cost of approximately N$5 billion.
Earlier this year, the Japanese oil company received a 20 percent stake in the Kudu project where gas reserves are said to be at least nine trillion cubic feet.
Yesterday an agreement between the responsible parties was signed as confirmation of the introduction of Itochu into Namibia Production Licence No. 001 for Kudu gas.
Tullow has pledged to build a power plant fuelled by Kudu gas, but this will only utilise a fraction of reserves. Tullow plans to build an LNG plant for the rest of the gas – funded by the Japanese.
The deal comes ahead of other developments such as two key appraisal wells being drilled under the terms of the agreement. Results from the first of these are expected towards the end of July or early August.
Managing Director of African Region Tullow Oil Plc, Andrew Windham, says his company has already brought a drilling rig, the Pride South Seas. The company is in the process of drilling an exploration well with a view to increase the reserve base of the field. An amount of N$750 million is currently being spent by the Kudu partnership exploring for additional gas volumes in the Kudu licence.
An option still under discussion is the surplus gas to South Africa via a 700-kilometre pipeline to Cape Town. This will not only provide additional income to Namibia but also a potential shared gas storage facility.
Together with partners Namcor, Nampower and Itochu, Tullow is fully committed to finding a technical and commercial solution to enable a power station to be built in Namibia, added Windham.
“We are determined to do what we can with our partners and most importantly with the Government of Namibia to bring Kudu to development at the earliest possible time,” he said. Meanwhile, Itochu General Manager Hisatu Okubo says the investment in the Kudu project is the first for Itochu.
Funds for the project, he disclosed, will come from Japanese institutional finance through Japan Oil, Gas and Metals National Corporation (JOGMEC).
The Japan Bank for International Corporation (JBIC) will be another source.
While Japan does not have an embassy in Namibia, Okubo hopes many Japanese will pay attention to Namibia through this project.
“That’s one small step for a project, but one giant leap for the relationship between Namibia and Japan,” he added.
The offshore Kudu gas field is an “extremely important” natural asset to Namibia, said the Minister of Mines and Energy, Erkki Nghimtina.
Once developed, the Kudu project will provide the country with a greater diversity of energy supply.
“It will enable the government to meet its commitment of security of electricity supplies, vital for the economic growth and socio-economic development of Namibia,” Nghimtina said.
Kudu was acquired for virtually nothing when Tullow bought Energy Africa a couple of years ago. At that stage it was still regarded as an exploration prospect.
Since then, it has emerged as one of the biggest gas condensate finds in the world and one which will have a major impact on Namibia’s economy.
Tullow is a leading independent oil and gas exploration and production group, quoted on the London and Irish stock exchanges. The group has interests in over 100 exploration and production licences across over 20 countries and focuses on three principal core areas: Europe, Africa and South Asia.
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