Namibia Pressing Forward on Natgas Project

Namibian President Hifike-punye Pohamba has ordered the country's Minister of Mines and Energy Isak Katali to expedite implementing the country's long delayed Kudu natural gas project.

The project will both earn the country needed foreign hard currency and help alleviate the nation's chronic electricity shortfalls.

Namibia has recently announced that it has an estimated 11 billion barrels of oil reserves and attendant natural gas fields off its coastline. The Kudu natural gas field has an estimated 1.3 trillion cubic feet of exploitable natural gas reserves. Partners in the Kudu natural gas field include the Russian Federation's state owned natural gas Gazprom, Britain's Tullow Oil PLC, Japan's Itochu and the state-owned the National Petroleum Corporation of Namibia, or Namcor. Tullow Oil and its partners are planning on developing the Kudu natural gas field to power a $1 billion 800 megawatt onshore power station to be built near the coastal town of Oranjemund. When completed, the power station will feed both the Namibian and South African electrical power grids.

Namibia's electrical power demand grew from 225 megawatts in 1992 to 378 megawatts in 2003, a growth rate of over 59 percent in a decade. The Namibian government projected that demand for electrical power grows at a rate of approximately 4 percent annually, resulting in a demand of approximately 540 megawatts by next year, which the Oranjemund 800 megawatt power facility is designed to meet. For electricity generation Namibia currently relies upon a coal fired thermal power station in Windhoek with 120 megawatt installed capacity, a diesel powered station at Walvis Bay of 24 megawatt capacity and one hydro-electric power station at Ruacana of 249 megawatts generating capacity, for a total installed electrical generating capacity of 393 megawatts. High import costs for coal landed at Windhoek renders the production of electricity at the Windhoek thermal power station uneconomic, leaving the Ruacana hydroelectric power station currently Namibia's main power generating source.

The Kudu offshore natural gas field was discovered by Chevron in 1974 and is located roughly 80 miles offshore. Gazprom, and Namcor jointly hold a 54 percent share in the project, while Tullow Oil PLC holds a 31 percent stake and is the operator of the field.

The country's dire energy needs and lack of investment capital have led it to sign some extraordinary contracts - on 4 November the international exploration and production company Serica Energy PLC been awarded an 85 per cent-interest stake in a petroleum agreement in the Namibia's offshore Luderitz Basin in the southern Atlantic. Serica Energy PLC's is partnered with the National Petroleum Corporation of Namibia (NAMCOR) and Indigenous Energy Ltd.

The Luderitz Basin is one of three sedimentary basins lying south of the Walvis Ridge geological formations in offshore Namibia. Serica Energy PLC's website noted, "Whilst Serica will evaluate opportunities to bring forward early drilling of the large prospects already identified it is expected that the first well in the license will be drilled in the third or fourth year of the initial period."

Namibia has ambitious plans to expand the country's power resources, designating $1.78 billion to go into implementing projects within the next five years. Besides developing the Kudu natural gas complex, they include the Erongo coal site, the Baynes power facility, the Orange River hydroelectric cascade and renewable biomass, wind and solar power energy projects.

Namibia's main power source, the Ruacana hydropower station, will get a fourth generator installed to add 92 megawatts to its current 249 megawatt capacity by next year. The downside of generating electrical power at Ruacana is that the facility is dependent on the highly variable water flow in the Kunene River, leading to uneven power production especially during the dry winter season, when Namibia is forced to import up to 50 percent of its electricity from South Africa.

While the projects go forward and Namibia's energy prospects look bright, contracts leaving Windhoek a mere 15 percent share in developing the country's energy assets may well prove to be a point of political contention in the future.

By. John C.K. Daly of Oilprice.com