Tullow in partnership talks for Kudu gas field

CAPE TOWN – A new equity partner in Namibia’s giant Kudu gas field is likely to be announced soon, with majority shareholder Tullow Oil expecting to conclude talks before a drilling programme to test for more gas reserves starts next month.

The London-listed company, which acquired 90 per cent of the rights to Kudu when it bought Energy Africa for N$4,1 billion in 2004, said it was negotiating to bring a partner into the project to reduce its working interest to 70 per cent. It has previously said a reduced shareholding would help it avoid overexposure to one big project.Namcor, the Namibian petroleum parastatal, holds the remaining 10 per cent of the offshore gas field.Announcing results for the year to December last week, Tullow said it was in “exclusive negotiations with a potential partner” and expected to conclude arrangements before two appraisal wells were drilled to test for further gas reserves next month.Kudu has 1,3 trillion cubic feet of proven gas reserves, which will be used to fire a US$1,1 billion power station at Oranjemund producing up to 800 megawatts of electricity, half of which will be exported to South Africa.Drilling for further exploration is expected to ascertain whether there are sufficient additional reserves to double that capacity.Namcor has previously estimated that first gas will be delivered from Kudu by 2010.Tullow said “encouraging progress” had been achieved on Kudu in the year to December, during which the group’s operating profit rose 32 per cent to N$4,1 billion due to strong growth in production and realised oil and gas prices.Apart from bringing in an equity partner and preparing for the drilling programme, Tullow said it had been focusing on the gas sales negotiations for the power project.This presumably refers to talks with Eskom on the price for power from the Oranjemund station.The group previously said the biggest challenge to meeting the project’s schedule was concluding the chain of commercial agreements from gas sales to power purchase agreements.Past shareholders in the Kudu gas field, which was discovered in 1974, include oil multinationals Shell and Chevron Texaco, both of which pulled out after 2001.The appraisal programme is part of significant exploration planned by Tullow in Africa this year, which involves drilling at least six wells in Uganda, Namibia and Ghana.The group said it planned to invest £350 million this year to raise production and deliver on its major exploration campaigns.Business ReportIt has previously said a reduced shareholding would help it avoid overexposure to one big project.Namcor, the Namibian petroleum parastatal, holds the remaining 10 per cent of the offshore gas field.Announcing results for the year to December last week, Tullow said it was in “exclusive negotiations with a potential partner” and expected to conclude arrangements before two appraisal wells were drilled to test for further gas reserves next month.Kudu has 1,3 trillion cubic feet of proven gas reserves, which will be used to fire a US$1,1 billion power station at Oranjemund producing up to 800 megawatts of electricity, half of which will be exported to South Africa.Drilling for further exploration is expected to ascertain whether there are sufficient additional reserves to double that capacity.Namcor has previously estimated that first gas will be delivered from Kudu by 2010.Tullow said “encouraging progress” had been achieved on Kudu in the year to December, during which the group’s operating profit rose 32 per cent to N$4,1 billion due to strong growth in production and realised oil and gas prices.Apart from bringing in an equity partner and preparing for the drilling programme, Tullow said it had been focusing on the gas sales negotiations for the power project.This presumably refers to talks with Eskom on the price for power from the Oranjemund station.The group previously said the biggest challenge to meeting the project’s schedule was concluding the chain of commercial agreements from gas sales to power purchase agreements.Past shareholders in the Kudu gas field, which was discovered in 1974, include oil multinationals Shell and Chevron Texaco, both of which pulled out after 2001.The appraisal programme is part of significant exploration planned by Tullow in Africa this year, which involves drilling at least six wells in Uganda, Namibia and Ghana.The group said it planned to invest £350 million this year to raise production and deliver on its major exploration campaigns.Business Report