Final decision on Namibia's Kudu gas-to-power project seen mid-2016 - CNBC Africa

Final decision on Namibia's Kudu gas-to-power project seen mid-2016

Southern Africa

by Reuters 0

A final investment decision is expected mid-2016 on Namibia's long-delayed Kudu gas-to-power project. Photo: Wikipedia

A final investment decision is expected mid-2016 on Namibia's long-delayed Kudu gas-to-power project, which is seen as key to boosting electricity security in the south west African country, a senior government official said on Thursday.

The project, where costs have doubled to around $2.3 billion, will entail gas from the offshore Kudu field being transferred to a floating production system, before being piped some 170 kms (105 miles) to a planned 885 megawatt (MW) power plant at Oranjemund along the coast.

"We are on track. The project is at a stage where it’s never been before and we should be able to make a final investment decision or financial close by June next year," said Immanuel Mulunga, managing director of the National Petroleum Corporation of Namibia (Namcor).

Namcor owns 44 percent of the upstream venture, for which the state has committed to help fund associated development costs.

Mulunga said a preferred technical operator, which will also take the 31 percent equity vacated by Tullow Oil, was selected and negotiations were ongoing. He did not name the preferred operator.

Discussions were also continuing with the World Bank's private arm, the International Finance Corporation (IFC), over the possibility of the IFC taking an equity stake in the venture, he added.

"All the pieces of the puzzle are coming together," Mulunga said of the project expected to produce first power at the start of 2019.

The Kudu field, with proven reserves of around 1.4 trillion cubic feet of gas, has not been developed for four decades after being discovered by Chevron in 1974.

Mulunga said a gas sales agreement between the upstream partners and Kudu Power had been drafted and agreed to the "fullest extent possible", while talks with preferred contractors for the subsea pipelines and floating production system were expected to be concluded early in 2016.

"The gas price is affordable for Namibia and for the international market and we are quite confident the project will happen," he said on the sidelines of an African oil and gas conference in Cape Town.

Once the power plant is built, it is expected to provide Namibia with 400 MW of power, and between 100-300 MW of surplus power will be purchased by South Africa's state owned utility Eskom, which is struggling to provide sufficient electricity in Africa's most advanced economy.

Zambia's Copperbelt Energy Corporation has also agreed to buy up to 300 MW of electricity to supply its key mining sector.

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