Govt worried about Kudu gas

GOVERNMENT has not given up hope in the Kudu gas field development but is concerned about the slow pace of progress.

Speaking in the National Assembly on Thursday night, Mines Minister Erkki Nghimtina said oil and gas remain a critical element for Namibia to achieve security of energy supply.Although the exploring and supporting activities such as licensing attract huge investment resulting in substantial revenue for the State, Namibia has struggled to get the Kudu gas field development off the ground.Nghimtina said they have noted the slow progress of the project and continue to monitor developments in order to come up with appropriate action.’We will report on progress in the next financial year,’ he said.Initially Government hoped to have the long-awaited N$5 billion Kudu gas power project at Oranjemund up and running by 2010.Instead, it has taken a backseat with NamPower investing millions in other power projects in the meantime.The Kudu power project is seen as a not commercially viable stand-alone project as it is characterised by a high US dollar-denominated gas price – meaning that the foreign exchange and hedging cost will translate into high electricity tariffs.Gas supplier company Tullow Oil insists that NamPower must buy the gas in US dollars whereas the Namibian power utility wants to buy it with local currency since it sells its commodity in Namibia dollars.Other dominant areas of negotiations between Tullow Oil and NamPower include the price at which this gas could be sold.NamPower has already started looking at alternative power sources, including a smaller plant at Oranjemund and a gas pipeline to the Western Cape in South Africa.Southern Africa faces a steady decline in a power surplus as demand fast exceeds the available generation capacity.This situation has already reached a critical level, with Eskom in South Africa stating that it can no longer guarantee Namibia of power all the time.Last month, Tullow also announced that it was considering alternative commercial options for the Kudu Gas Field, including marine Compressed Natural Gas (CNG) exports to Namibia and South Africa.Kudu is located in the Orange sub-basin, some 130 km from the Namibian coast.It is estimated to contain 1,3 trillion cubic feet of proven natural gas reserves.