Tullow Oil loses control over Kudu

By: JO-MARÉ DUDDY

RUSSIAN gas giant Gazprom and Namcor have partnered up to muscle out Tullow Oil as the main shareholder in the Kudu gas field, securing 54 per cent of the interest in the multibillion-dollar offshore energy project.

UK Tullow’s share has been cut from 70 per cent to 31 per cent, while the working interest of Japan’s Itochu has been trimmed from 20 per cent to 15 per cent, Upstream Online has quoted Alastair Baumann, upstream asset manager at Namcor.
Namcor Managing Director Sam Beukes last night refused to comment on the deal. Tullow, however, confirmed their sliced interest to The Namibian.
Peter Owens, General Manager of Tullow Kudu Namibia, told the paper in an email that “progress is being made in reinvigorating the development” of Kudu and that inter-governmental talks between Russia, Namibia and South Africa have taken place to try and move forward the project via a gas-to-power project. Tullow fully supports this initiative to commercialise Kudu gas, Owens said.
“Should this initiative proceed as planned, Tullow will be [the] upstream operator and will reduce its equity to around 30 per cent,” he said.
The announcement ends months of speculation about Gazprom’s clout after a company delegation accompanied Russian President Dmitry Medvedev, previously the chairman of Gazprom’s board of directors, on his state visit to Namibia last June.
During the visit, lending arm Gazprombank signed a memorandum of understanding (MoU) with Namcor. Namcor was evasive about the extent of Gazprom’s involvement, but the Russians made no secret about their intentions.
“It is quite a nice, sexy little project,” Gazprom International Chief Boris Ivanov described Kudu at a business lunch meeting in Windhoek during the Medvedev visit. The day after signing the MoU, he told Reuters in Luanda that Gazprom was in advanced talks with Eskom to sign a power purchase agreement to build a 800 megawatt gas power station at Walvis Bay to the tune of US$1,2 billion.
Tullow was clearly in the dark about these developments. In a reply to a letter from the website administrator of the Oranjemund Bush Telegraph shortly after the Russian visit, Owens said: “We are informed by Namcor that there is no agreement between Gazprombank and themselves for Gazprom to either develop Kudu gas field or build a power station. We are aware that NamPower has not been approached by Gazprom on this matter. Tullow Oil has not been approached either and so we cannot substantiate any of the statements attributed to Gazprom in the press.”
In December, Owens told The Namibian in an email that Tullow has been ready to develop the Kudu field since detailed engineering design studies were completed in 2005, and that the company spent N$700 million on Kudu over the past four years alone.  “Progress has been frustrated by a number of commercial issues,” he said.
Owens denied that currency was the main obstacle, instead saying that finding a viable customer to buy the electricity generated by Kudu was the big challenge. Eskom was favoured, but pulled out of the project at the end of 2007 following unsuccessful negotiations with NamPower.
Throughout 2008 and the early part of 2009, Tullow devoted its resources to finding an alternative solution which could bypass the need to sell electricity to Eskom, Owens said.
This included the supply of gas to a 500 megawatt Namibian power station, appropriate for national needs, and the sale of surplus gas to a South African gas developer. Tullow presented this option to the Ministry of Mines and Energy early last year.
“At the same time, it seems, the Russian government had engaged with the Namibian Government to re-establish relationships and seek investment opportunities in Namibia. Gazprom, whose majority stakeholder is the Russian government, identified Kudu as a suitable investment project,” Owens said.

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