Namibia: Nampower Wants U.S.$ for Kudu Gas

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New Era (Windhoek)

18 July 2008
Posted to the web 18 July 2008

Petronella Sibeene
Windhoek

NamPower has turned to the mining sector to break protracted negotiations on the sale and buying agreement of Kudu gas with Tullow and Eskom.

NamPower has been negotiating with Tullow and Eskom, the biggest shareholders and future bulk buyers of Kudu gas, to sell the gas in US dollars.

However, Tullow and Eskom want to buy the gas in South African rand.

Neither of the parties wants to take on foreign exchange risks that come with US dollar currency fluctuations and the high price of gas. Briefing the Standing Committee on Economics, Natural Resources and Public Administration, NamPower's Managing Director Paulinus Shilamba said his company is "in negotiations with the mining sector and mining companies have expressed willingness to have their electricity billed in US dollars."

The mining industry is the main consumer of electricity in the country.

"Kudu is still on the table and with Government's support, can be realised by 2012," Shilamba assured the Standing Committee when he briefed them on the electricity situation in Namibia this week. The Kudu gas-to-power plant once realised, will be based on combined-cycle gas-turbine technology (CCGT) and it will be the first of its kind in Southern Africa. This involves the burning of natural gas and the driving of a turbine with the resulting hot combustion gases. Kudu has 1.3 trillion cubic feet of proven gas reserves.

Though not a commercially viable stand-alone project, the project would involve the development of the kudu gas field and the delivery of 800 MW gas-powered station at Oranjemund.

Shilamba said Tullow Oil plc has a 70 percent stake in the project and is also in the process of investigating other production and transportation options including compressed natural gas.

In the meantime, an alternative 450 MW project at Oranjemund is under discussions and NamPower is awaiting Government recommendation on the support requested by the national power utility regarding the proposed project. The Kudu project was accepted as a regional project at the SADC heads of state meeting held in Mauritius in 2005 after they forecast power shortages as experienced today.

Meanwhile, the power situation in Namibia has become critical of late due to the high demand in South Africa and lower Eskom reserve margin. The situation spilt over to Namibia given the country's over dependency on South Africa.

Consequently, load shedding cannot be avoided in Namibia in the next two years although NamPower has tried to minimise its impact on domestic users.

Due to severe power shortages, NamPower requested its customers especially those in the mining industry to reduce their power consumption by 20 percent.

"The mining sector is most affected due to their heavy loads and NamPower's obligation as a responsible corporate citizen is to notify the nation and educate customers accordingly," Shilamba said.

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