Kudu Gas Project sparks investor interest

AS pressure mounts for Namibia to realise one of its several planned power-supply projects, a Malaysian engineering company has expressed interest in investing in the US$1 billion Kudu Gas Project.

NamPower Managing Director Leake Hangala told diplomats on Friday that Namibia was “already behind” in taking a decision on whether to develop the project, considering that the region expected to face a major power crunch by 2007. The Kudu Gas Project has been slated for commissioning in 2009.”The demand is overtaking the supply and giving us sleepless nights.But we don’t want to create a situation of panic,” Hangala said.At the occasion Namibia’s High Commissioner to Malaysia, Neville Gertze, said he had held talks with a major Malaysian engineering corporation Ranhill – specialising in oil, gas, power and water infrastructure – which had expressed interest in investing in Kudu if it could have access to the surplus power the envisaged Kudu Power Station is expected to generate.The first phase of the Kudu Gas Plant is expected to produce about 800 megawatts of power – domestic demand is currently 500 megawatts.Hangala said NamPower had been pursuing the Kudu Gas Project more aggressively than the hydropower options it had looked into over the years, because it would be the quickest to develop and had the greatest power potential.Hangala pledged to look into details of discussions between Gertze and Ranhill, handed over to him at the conference.He said the project’s main investor, Tullow Oil Plc through Energy Africa, was looking to “share the risk” and was open to discussing partnership options.A delegation from Tullow was in the country last week to discuss the project.Hangala said Namibia had already received positive feedback from South African power giant Eskom that it would be prepared to buy any surplus the Kudu Gas Plant would generate.According to Gertze, Ranhill would be prepared to build the power station as well as pipe the gas onshore.Hangala said NamPower was awaiting feedback from a Cabinet Committee that it had briefed about a fortnight ago on the status of the Kudu Gas project as to whether Namibia should continue to pursue the project and how it should be funded.The cost of first phase of the project is estimated at US$400 million.The project recently entered the feasibility stage and studies are ongoing.Hangala said in his opinion it would be preferable for Namibia to use its “own money” to fund the project to limit large repayment costs on foreign capital and the financial effects a loan arrangement could have on consumers.He said Namibia also had to be cautious about accepting foreign capital, which inevitably would have conditions attached, such as the employment of foreigners over Namibians or the use of foreign construction material over what is locally available.Tullow Oil has a 90 per cent stake in the Kudu Gas Project through its ownership of Energy Africa.Namibian Government petroleum company Namcor owns the other 10 per cent.Currently the gas reserves are put at 1,3 trillion cubic feet, about 170 kilometres off Oranjemund.Noting that electricity supply was critical for inviting investment to Namibia, Hangala said NamPower would continue to pursue a project to connect the region to the Democratic Republic of the Congo, home to the greatest power generation potential on the continent.Eventually, he said, Namibia would have to pursue all power generation options at its disposal.Building the gas-fired station would not rule out the development of other power-generating projects, which Hangula said could be developed simultaneously.He did not rule out pursuing the controversial Epupa Hydropower Project, saying that Namibia would be prepared to accept Angola’s proposal that the project be developed at Baynes, rather than at Epupa.The Kudu Gas Project has been slated for commissioning in 2009.”The demand is overtaking the supply and giving us sleepless nights.But we don’t want to create a situation of panic,” Hangala said.At the occasion Namibia’s High Commissioner to Malaysia, Neville Gertze, said he had held talks with a major Malaysian engineering corporation Ranhill – specialising in oil, gas, power and water infrastructure – which had expressed interest in investing in Kudu if it could have access to the surplus power the envisaged Kudu Power Station is expected to generate.The first phase of the Kudu Gas Plant is expected to produce about 800 megawatts of power – domestic demand is currently 500 megawatts.Hangala said NamPower had been pursuing the Kudu Gas Project more aggressively than the hydropower options it had looked into over the years, because it would be the quickest to develop and had the greatest power potential.Hangala pledged to look into details of discussions between Gertze and Ranhill, handed over to him at the conference.He said the project’s main investor, Tullow Oil Plc through Energy Africa, was looking to “share the risk” and was open to discussing partnership options.A delegation from Tullow was in the country last week to discuss the project.Hangala said Namibia had already received positive feedback from South African power giant Eskom that it would be prepared to buy any surplus the Kudu Gas Plant would generate.According to Gertze, Ranhill would be prepared to build the power station as well as pipe the gas onshore.Hangala said NamPower was awaiting feedback from a Cabinet Committee that it had briefed about a fortnight ago on the status of the Kudu Gas project as to whether Namibia should continue to pursue the project and how it should be funded.The cost of first phase of the project is estimated at US$400 million.The project recently entered the feasibility stage and studies are ongoing.Hangala said in his opinion it would be preferable for Namibia to use its “own money” to fund the project to limit large repayment costs on foreign capital and the financial effects a loan arrangement could have on consumers.He said Namibia also had to be cautious about accepting foreign capital, which inevitably would have conditions attached, such as the employment of foreigners over Namibians or the use of foreign construction material over what is locally available.Tullow Oil has a 90 per cent stake in the Kudu Gas Project through its ownership of Energy Africa.Namibian Government petroleum company Namcor owns the other 10 per cent.Currently the gas reserves are put at 1,3 trillion cubic feet, about 170 kilometres off Oranjemund.Noting that electricity supply was critical for inviting investment to Namibia, Hangala said NamPower would continue to pursue a project to connect the region to the Democratic Republic of the Congo, home to the greatest power generation potential on the continent.Eventually, he said, Namibia would have to pursue all power generation options at its disposal.Building the gas-fired station would not rule out the development of other power-generating projects, which Hangula said could be developed simultaneously.He did not rule out pursuing the controversial Epupa Hydropower Project, saying that Namibia would be prepared to accept Angola’s proposal that the project be developed at Baynes, rather than at Epupa.