After years delay Tullow wants Kudu money back
After years of uncertainty and delays, the London-based Tullow Oil plc (Tullow) and its partners, Itochu Corporation (Itochu) from Japan and the National Petroleum Corporation of Namibia (Namcor), are decided to move the Kudu Gas-To-Power project ahead in Namibia.
Located 130 kilometers offshore the Namibia coast, the Kudu oil and gas field was discovered in 1974 by a Chevron led joint venture of Chevron, Regent and Soekor.
Belonging to the block 001 of the Orange northern sub-basin , Kudu lies by 170 meters of water depth and 4,400 meter total depth close to the boarder of the territorial water with South Africa.
Since its discovery Kudu changed operator several time including with Shell until Tullow acquired Energy Africa in May 2004.
Actually the working interests of the Kudu gas field are shared between:
- Tullow 31% is the operator
- Itochu 15%
- Namcor 54%
This turnover among the share holders resulted mostly from the uncertainties about Kudu oil and liquids reserves compared with natural gas.
After years of exploration and tests Kudu appeared to be mostly a natural gas field with 1.38 trillion cubic feet (tcf) of proven reserves, 3.82 tcf of probable reserves and 9.98 tcf of possible reserves.
Shortly after the acquisition, Tullow awarded the conceptual study and the front end engineering and design (FEED) contracts to Woodhill Frontier and JP Kenny, both from the Wood Group.
Tullow to develop Kudu in two phases
For the FEED work delivered by the London office of Woodhill Frontier and JP Kenny, Tullow decided to develop Kudu in two phases:
- Phase 1 as a Gas-To-Power project
- Phase 2 as a natural gas export project
Kudu phase 1 is to:
- Extract and process the natural gas with an offshore platform
- Export the gas through a 170 kilometers pipeline up to a power plant located at Oranjemund in Namibia, along the border with South Africa.
- Convert the natural gas into 800MW of electrical power.
Kudu phase 2 has been explored through multiple scenarios including:
- Export pipeline to South Africa
- Liquefied natural gas (LNG) Conventional
- Niche LNG
- Compressed natural gas (CNG)
The decision regarding the most relevant scenario on Kudu phase 2 will depend on the revised estimation of the recoverable reserves beyond the Kudu phase 1.
Interestingly the market price of the natural gas will affect the profitability of the phase 1 and 2 in opposite way.
If the gas prices remain at the current low levels, the direct monetization of this gas into electrical power is very attractive and can last as long as necessary.
In producing 800MW, the Kudu phase 1 will cover far more than Namibia domestic consumption, so that 40% could be exported to the neighboring South Africa.
If the gas prices come to increase again for example in aligning again on crude oil prices, the phase 2 to export gas will become a serious option.
So regardless of the gas prices, Kudu is to power Namibia and provide it an additional source of revenues.
For the Kudu phase 1 project, the offshore platform would have production capacity of 130 million cubic feet per day (cf/d) in order to provide the corresponding feestock to generate 800MW at the power plant.
In respect with the amount of money invested by Tullow along the last seven years and the estimated $1 billion capital expenditure for the Kudu phase 1, Tullow is now willing to get his money back in making the final investment decision (FID) in 2013 for a first production to start in 2017.
