Continental Focus, International Reach

Kudu Gas-to-Power to Benefit from Technological Advances

Thursday, March 21, 2019

A number of oil and gas projects have failed to gain ground over the years due to the prohibitive price in producing the resources. The Kudu Gas-to-Power project has been one of those projects, that is until recently. According to reports, the project has seen a revival by BW Kudu Limited, who says recent technological advancements as well as a consistent market for reliable economical energy makes the electricity project viable.
BW Kudu Ltd, a subsidiary of BW Offshore, became the operator for the Kudu Gas field in 2017 with a 56% shareholding with Namcor holding the remaining 44%.

BW Kudu’s Namibia Country Manager, Klaus Enderesen, is fairly confident that the necessary local and international investors can be secured to mobilize the approximately $2 billion needed to bring the 475-MW project to fruition. Enderesen was cited in an interview with New Era as saying that once all the necessary elements are in place, it will take about three years to see the Kudu Gas-to-Power project providing stable and reliable electricity to the Namibian market. However, he noted that it will take another year for all the additional elements to be in place, including sufficient research on exporting that power to supply electricity to South Africa.
“The project will not burden the tax payer because it will be financed through private investments. The project sponsors that need some government support will only need assurance from government, mainly in the form of an undertaking that the electricity will be bought by public institutions and paid for (even when supplied to a State-owned enterprise), provided that the price is right. The project sponsors will also make use of international guarantee facilities, which do not have the same impact on government’s balance sheet as a government guarantee,” said Enderesen, while remaining confident that government will provide the political support for the project advocating for active and aggressive government support on the project.

To make the project more cost effective, the single buyer model that has been touted for the project, which would have seen all the electricity produced sold to NamPower, is being modified to a multi-buyer model. This modification has been refined to include a private energy supply concept that would most likely see Kudu Gas also supply electricity directly to private buyers and Independent Power Producers (IPPs).
BW Kudu will pay $10 million to operate, of which the first instalment of more than $2 million has already been paid to the state. The certified resource base in the Kudu gas field is about 420 million boe. This is about the same size as what South African President, Cyril Ramaphosa described as a ‘game changing’ discovery by Total off the south coast of South Africa earlier this year.

BW Kudu explained that the Kudu Gas development plan is based on two wells together producing 250 Mboe over 25 years, the redeployment of an FPSO provided by BW Offshore, and a gas export pipeline from the FPSO to shore where a 475-MW power plant would be constructed to serve the domestic and regional market.

“The full development of a local and clean resource like Kudu natural gas would provide significant environmental, social and financial benefit to the Namibian country and its citizens,” Enderesen stated to New Era. “Kudu can provide the required base load and will fit neatly in the local electricity mix complemented by solar PV and wind power.”

A 475-MW power station is to be developed and it is expected to have a dramatic and positive effect on the national balance of payments, increasing to about N$18 billion after 25 years. The project is also expected to increase the domestic Gross Domestic Product (GDP) by almost two percent and contribute corporate tax, income tax, royalties, levies and license fees to the government.
Enderesen concluded that the construction of the Kudu Gas power plant would directly employ more than 1,200 people, and during operation, the power plant will directly employ 60 to 70 people with the same amount of people employed offshore. He added that the project also has the potential to develop a substantial support industry seeing as Kudu would be the first extractive hydrocarbon initiative ever in Namibia.


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