Tullow Oil to cut back on stake in Kudu field

CAPE TOWN – Tullow Oil, which took control of Energy Africa last year, plans to cut back on its 90 per cent stake in Namibia’s Kudu gas field by the time the first gas is brought onshore, chief executive Aidan Heavey says.

The reduced shareholding will help the Irish-based oil and gas company to avoid overexposure to one big project, and paves the way for a new shareholder in the upstream portion of Namibia’s biggest power generation scheme. The US$1,1 billion (N$7,34 billion) project involves treating and delivering gas from the Kudu field to a gas-powered station operated by Namibia Power Corporation (NamPower) near Oranjemund, which is expected to be commissioned by 2009 with initial electricity production of 800MW.Tullow management was unwilling yesterday to give details of negotiations to sell a portion of Tullow’s operating interest in Kudu.And oil analysts were stumped as to who would be interested in taking on a stake in Kudu, where gas was first discovered in 1974 but never commercialised.Oil multinationals Shell and ChevronTexaco both pulled out of Kudu after 2001, leaving Energy Africa as the sole shareholder.Energy Africa, which delisted from the JSE after being sold to Tullow for US$570 million, subsequently sold 10 per cent of Kudu to NamPower.”For a small company to go for a project like that is way too risky,” said one analyst who guessed that an exploration and production company already exposed to gas was the most likely fit.Heavey said at a recent results presentation that a partner would allow Tullow to manage its exposure to Kudu.He was upbeat about Kudu, describing it as a “superb asset” whose “time has come”.The company, he said, was planning two appraisal wells because there was “substantial upside” in the Kudu area, with reserves ranging from 1,2 trillion cubic feet to nine trillion cubic feet.”South Africa right now is short of power …This is the time for Kudu.It’s a unique asset in a unique area,” Heavey said.South Africa is initially expected to import about 200MW of the electricity generated by Kudu.This component could rise as the plant’s second phase is completed, giving it total generation capacity of 1 600MW.Heavey said the project’s first stage involved offshore development, such as securing approval to carry gas through diamond mining areas and laying the pipelines.The cost of the first phase is expected to be split equally between the power station and the gas field.-Business ReportThe US$1,1 billion (N$7,34 billion) project involves treating and delivering gas from the Kudu field to a gas-powered station operated by Namibia Power Corporation (NamPower) near Oranjemund, which is expected to be commissioned by 2009 with initial electricity production of 800MW.Tullow management was unwilling yesterday to give details of negotiations to sell a portion of Tullow’s operating interest in Kudu.And oil analysts were stumped as to who would be interested in taking on a stake in Kudu, where gas was first discovered in 1974 but never commercialised.Oil multinationals Shell and ChevronTexaco both pulled out of Kudu after 2001, leaving Energy Africa as the sole shareholder.Energy Africa, which delisted from the JSE after being sold to Tullow for US$570 million, subsequently sold 10 per cent of Kudu to NamPower.”For a small company to go for a project like that is way too risky,” said one analyst who guessed that an exploration and production company already exposed to gas was the most likely fit.Heavey said at a recent results presentation that a partner would allow Tullow to manage its exposure to Kudu.He was upbeat about Kudu, describing it as a “superb asset” whose “time has come”.The company, he said, was planning two appraisal wells because there was “substantial upside” in the Kudu area, with reserves ranging from 1,2 trillion cubic feet to nine trillion cubic feet.”South Africa right now is short of power …This is the time for Kudu.It’s a unique asset in a unique area,” Heavey said.South Africa is initially expected to import about 200MW of the electricity generated by Kudu.This component could rise as the plant’s second phase is completed, giving it total generation capacity of 1 600MW.Heavey said the project’s first stage involved offshore development, such as securing approval to carry gas through diamond mining areas and laying the pipelines.The cost of the first phase is expected to be split equally between the power station and the gas field.-Business Report