Namibia’s petroleum commissioner, Maggy Shino, believes that the Kudu Gas-to-Power project will work, especially after the recent oil discoveries that have shone the limelight on Namibia.
Now operated by BW Energy, the Kudu Gas-to-Power Project offshore Namibia, Block 2814A in the Orange Basin, is expected to be sanctioned in mid-2024 before construction and commercial operations start by late 2026.
By that time, the Kudu Gas Project will be 51 years old and having suffered abandonment from some oil majors such as Chevron, Shell, Tullow, Gazprom, and Itochu.
But Shino is hopeful.
Shino told delegates to the Oil and Gas Conference organised by Namcor in August that the Kudu has refused to die.
“Our animal has refused to die, and more life is being pumped into it. We, therefore, call upon you to look at the project now with a new vision with a new lens and as a new opportunity because of additional gas reserves that we found,” she said.
Not only is Shino hopeful – she has a plan!
She told the conference that Namibia will build a floating platform 170 kilometres offshore within the block and a pipeline to move the gas to Elizabeth Bay near Lüderitz, where a power batch will convert the natural gas into electricity.
According to Shino, the Kudu Gas-Power Project can add 420MW to the grid, which is enough for the local market and export using the available power network.
“We, therefore, call upon you to look at the Kudu project now with a new vision and a new lens because now, with the additional gas reserve that we have had, it’s a project backed by infrastructure,” Shino said
BW Kudu general manager Klaus Endresen told New Era in 2022 that developing the Kudu Gas field, constructing a 190km pipeline and building the power station will cost, as an order of magnitude, some N$20 billion.
“We have completed the key pre-feasibility technical and developmental studies supporting the project.
“We are currently active in the local and regional electricity markets, seeking some long-term offtake arrangements. We expect to start the comprehensive Front End Engineering and Development studies within a few months. After a positive conclusion, we will be ready to implement,” Endresen said.
The aim, Endresen added, is to be able to switch on the power in 2026, thereby making Namibia electricity secure and self-sufficient in power generation.
From 3 trillion cubic feet to 10 trillion cubic feet
According to Shino, the Kudu gas project reserve could hold 10 trillion cubic feet from the 1.3 trillion cubic feet of proven natural gas reserve.
Speaking at a conference in London in October, Shino urged TotalEnergies and Shell, which discovered between them about 8.7 trillion cubic feet in the Orange Basin, to work with BW Kudu.
Geologists say a 50m thick gas field reservoir is 4,400m under the Atlantic Ocean in the Orange Basin. This gas field is about 170km west of Oranjemund offshore Namibia. They also say the gas trapped in the volcanic rock has a porosity of 12%.
Since Chevron Texaco discovered the gas field in 1974, the companies that controlled the project had drilled seven wells by 2010.
Chevron, Regent Oil Company, and Southern Oil Exploration Corporation (Soekor) drilled the exploration well – Kudu 9A-1 in December 2073.
In October 1987, Soekor drilled the second well, Kudu 9A-2, and in January 1988, the companies drilled Kudu 9A-3 and found some gas-bearing sandstone in the upper and lower reservoirs of about 147.5 m.
The findings of Kudu 9A-3 encouraged the companies to drill Kudu 9A-4 around 2010.
Despite this hope, international oil companies that hopped onto the Kudu Gas-to-Power Project in 1974, including Chevron Texaco, packed their bags and left.
All the companies for Kudu
When the discovery was made, Chevron and partners Regent Oil Corp and the South Africa state-owned Southern Oil Exploration Corporation (Soekor) were involved in the Kudu gas project in 1974.
Regent Petroleum (SWA) Limited had 45%, Soekor 10% and Chevron Oil Company 45%.
Soekor left the project in 1987 and gave the prospecting lease to Swakor (now Namcor).
The Anglo-Dutch company Shell joined in 1993, bringing US$140m, while the South African company Energy Africa, owned by Engen (56,5%), came in the 2000s. Engen is 80% owned by Petronas of Malaysia, which had a direct 8,7% in Energy Africa.
Regent Petroleum changed its name to Texaco following some changes within the company and was acquired by Chevron in 2001. Chevron became Chevron Texaco.
Shell was the first to leave the project in August 2002, saying it doubted that the Kudu gas project held 5 trillion cubic feet, big enough for a floating LNG unit.
When it left, Shell said it could not commit to an envisaged sustainable gas export project. After Shell’s departure, Chevron Texaco became a 60% shareholder, while Energy took up 40%.
Chevron Texaco left the Kudu gas project in December 2003. The company said the Kudu gas project did not align with their gas strategy.
Energy Africa stayed and said it would acquire a 100% shareholding. In a statement issued after Chevron Texaco’s departure, Energy Africa said the Kudu gas project was a very important development.
“Energy Africa remains very positive about the future of the Kudu gas field project and is committed to continuing discussions with various stakeholders to decide on the development of Kudu early next year,” the company said.
So Near Yet So Far
Then, in May 2004, Tullow Oil acquired Energy Africa for US$500m, becoming a Kudu gas project shareholder. In July 2004, Tullow, through Energy Africa (90%), signed a joint development agreement with Namcor (10%).
The agreement involved piping gas to shore for treatment and delivery to an 800MW power station to be developed and commercially operated by NamPower near Oranjemund.
NamPower would buy and sell the power to local consumers and Eskom for the South African market. Eskom and NamPower also signed power purchase agreements with Energy Africa and Namcor.
The idea was to confirm whether there was gas, after which the companies would draft an engineering and design work to seek funding. This was supposed to have been completed by 2005 when the government of Namibia awarded Tullow and Namcor production licence 001.
In 2007, Tullow brought in the Japanese company Itochu Corporation as a 20% shareholder of licence 001. Itochu was supposed to pay 49% to fund two appraisal wells to establish whether Kudu gas had commercially productive flow rates.
Itochu established CIECO E&P (Namibia) in April 2007 for the Kugu gas project when the Kudu-8 appraisal well was drilled.
Namcor negotiated with the Russian-owned Gazprom International to buy into the Kudu gas project in June 2009 under licence 002. Namcor had 54%, Tullow Oil 31% and Gazprom 15%. However, the Russian company quit in May 2011, saying in a letter to the then-mines minister Isak Katali that the project did not pass their high-level approval.
Gazprom also cited a restructuring exercise which led to the decision to withdraw from the project. After Gazprom left, the Namibian government gave the licence – 003 – to Namcor, Tullow and Itochu Corporation in late 2011.
In March 2013, the upstream companies Tullow, Namcor and Itochu signed a project development agreement and a gas sales agreement with downstream parties Kudu Power and NamPower.
This was the beginning of the pre-development phase, which included Front End Engineering and Design (FEED), conducting a pipeline route survey and Floating Production System (FPS) site geotechnical survey. The final investment decision was expected in the second quarter of 2014, but Namcor’s suspended managing director said the government refused to give certain government guarantees and revoked agreements that would have allowed the project to take off.
Mulunga revealed this eight years later during the Namibian International Energy Conference 2022.
The dry years and pushback
Tullow Oil did not stay long, even after all these plans. The company bailed out in early November 2014, citing financial problems.
In a statement, Tullow Oil said: “It is clear that these developments rank higher than Kudu. However, Kudu remains an excellent project for Namibia, and we are committed to assisting the government in moving it forward.”
Tullow had interests in Ghana’s Jubilee gas field in Ghana and US$1b investment plans for oil in Mauritania, Kenya, Ethiopia and Norway.
Itochu announced in early August 2015 that it would return its stake in the Kudu gas project at no cost to Namcor. The company said the Kudu gas project would not yield good economics after pumping into the project US$14,5b.
The Namibian government said the project would go on and was courting the China-Africa Development (CAD) Fund and its potential partner, China National Offshore Oil Corporation (CNOOC), to take up a 46% shareholding.
Katali said they had met CAD and CNOOC officials over the Kudu gas project and were willing to buy into it. The CAD spokesperson Liu Hao also said they would be willing to work with Namibia to develop the Kudu gas project.
It was unknown whether Namibia pursued these Chinese companies because nothing materialised.
The doubts over Kudu gas
Dr Leake Hangala headed NamPower from 1995 until 2006 when the Kudu gas project was experiencing teething problems. He was there when NamPower signed an offtake agreement in 2004.
On 14 November 2014, Hangala told an energy policy forum in Windhoek that the Kudu gas project was a waste of money and that those pushing for the project were deceiving the government.
Hangala cited Tullow’s departure and that Eskom had not shown interest in the offtake agreement.
Although Hangala later said he had not said anything like that, the media insisted that he said this in the presence of mines minister Isak Katali and trade minister Calle Schlettwein.
A year after Hangala’s comments, Schlettwein, the finance minister then, said developing the Kudu gas project was costly and urged Namibia to focus on renewable energies.
Schlettwein said the finance ministry’s assessment put the Kudu gas project unit cost of electricity at about N$255 per kWh.
“In contrast, the 2013 renewable energy IPP procurement round in South Africa yielded unit electricity prices ranging between R0,67 to R0,145 depending on the type of generation project,” he told an energy conference in Windhoek.
Four years after Hangala’s doubts, Tom Alweendo, who became the mines minister during President Hage Geingob’s administration, told the national broadcaster NBC in August that the Kudu gas project might not be viable for Namibia.
Alweendo doubted if the project would take off after he was not sure the project would take off after a 44-year delay.
“I have been hearing this thing for a long time, but I am not convinced it is viable unless you show me otherwise. If it were viable, it would have happened already. If it has not happened for 25 years, something is wrong,” Alweendo said.
Even when BW Energy was on the ground, there seemed to be doubts when, in December 2019, NamPower excluded any gas plans in its 2019-2023 business plan.
NamPower managing director Simson Haulofu said Namcor was responsible for developing the Kudu gas project field and delivering the gas to Oranjemund.
Haulofu said that for 15 years since 2004, NamPower developed a power station project (the downstream project) at Oranjemund in anticipation of running on gas from Kudu, but the gas delivery never materialised.
Namcor also sold its 44% in the project, saying they were not the operators and needed a small carrying interest.
“We expect BW Kudu to pick up the baton to commercialise this energy source that has been on the ground since it was discovered 45 years ago,” Mulunga said.
Mulunga admitted that Namcor’s decision would impact BW Kudu’s financial plans since the finance minister, Ipumbu Shiimi, had approved government guarantees.
Endresen said a market for the gas has to be guaranteed before pouring resources into developing the gas field.
“We will ensure the market before we develop the project, not the other way around,” Endresen stated.
Keeping Kudu Gas hopes alive
One person who never doubted the viability of the Kudu gas project was Isak Katali. Throughout the doubts, Katali maintained that the project would work.
“As I have been saying, this project should fail or succeed with me. It is true this project has succeeded with me. I am leaving the ministry knowing I have achieved one big project,” Katali told Nampa on 16 March 2015.
Katali was taken off in March 2015 when Geingob appointed Oberth Kandjoze to the mines ministry. Just like Katali, Kandjoze, the Namcor managing director before becoming the minister, said the Kudu gas project would continue.
In October 2016, Kandjoze revealed that the government would sell 56% of its 100% to BW Offshore and leave the other 44% to local investors.
“There is no vein in me that says this (Kudu) project must be killed,” he said, adding that the project was strategic to the government.
Another person who supported the Kudu gas project is Mulunga, who said in February 2017 that the project was a critical strategic power generation project for Namibia.
Mulunga also said the Kudu gas project would reduce reliance on imported power and accelerate economic development.
BW Energy in the area
When all hope was lost, BW Energy came onto the scene with an offer for a 56% farm-in agreement in early 2017. Namcor clung to the other 44%.
The Oslo-based BW Energy owns the Dussafu license within Gabon’s Ruche Exclusive Exploitation Area. It also owns the Maromba discovery in Brazil.
BW Energy is an affiliate of the BW Group, a global maritime energy transportation and floating gas infrastructure company with an 80-year history.
The Group has shares in BW Offshore, BW Ideol, BW LNG, BW LPG, BW Epic Kosan, BW Dry Cargo, BW Solar, Hafnia, DHT, Navigator Gas, Corvus and Cadeler.
The Kudu gas deal signed on 7 February 2017 between BW Kudu Ltd, owned by BW Offshore, makes BW Kudu the licence operator. BW Kudu agreed to pay for past costs on the field transfer.
BW Offshore CEO Carl Arnet said: “Kudu represents another opportunity for BW Offshore to take a proactive development role in a project that will produce for 15-25 years.”
Arnet further said the 2014 drop in oil prices had helped make the project economically feasible.
In January 2021, BW Kudu Limited increased its working interest in the Kudu license offshore from 56% to 95% for US$4m. Namcor retained 5%.
Shino said the Kudu gas project is backed by infrastructure and clean energy sources.
“With the production of electricity from natural gas, we can provide an energy transition solution and lower our carbon emissions as a continent and nation.
“There is a need for us to have baseload power, and the Kudu Gas project is the only solution that can give us baseload power. Only with baseload power can you industrialise as a nation,” Shino said.
BW Kudu general manager Endresen said the project would create jobs (direct and indirect) and generate an income stream for the state via royalties and taxes.
Overview of the Kudu Field
- Discovered in 1974 by Chevron & partners – 130 km offshore, WD 170 m
- UN sanctions imposed in 1976 caused foreign companies to withdraw.
- Swakor drilled two wells in 1987/88
- In 1993 Shell & Energy Africa awarded an exploration licence in 1st licencing round.
- Shell started in 2002 after drilling four wells.
- ChevronTexaco acquired Shell’s interest but withdrew in 2003
- Energy Africa assumed 100% interest and transferred 10% to NAMCOR.
- Tullow acquired Energy Africa in 2004 and was awarded Production Licence 001 in 2005
- Itochu farmed in for 20% in 2007, and a further appraisal well drilled.
- Gas-to-power negotiations faltered, and an alternative CNG development plan was rejected by MME in 2009
- Gazprom was introduced in 2009 by MME to deliver gas to power, and Production Licence 002 was awarded to Gazprom /Namcor 54%, Tullow 31%, and Itochu 15%, but Gazprom withdrew in 2011
- Production Licence 003 awarded in 2011 to NAMCOR, Itochu & Tullow (Operator)
- BW Energy farm-in agreement in 2017
