Epupa Makes Way for Kudu
Article from The Nambian
The controversial planned Epupa Hydropower scheme has given way to the development of the Kudu gas–to–power project as Namibia pushes for electricity independence.
Initially Epupa was touted as the main solution to the power crisis facing not only Namibia, but the whole southern African region.
However, recent months have seen the emergence of the Kudu gas–to–power project – a US$800 million development off the Oranjemund coast – as the solution to Namibia’s difficulty in servicing the peak demand periods.
"We view it as essential not only that Kudu proceeds, in the interests of security of national supply and industrial development; but also that it proceeds in a manner that inspires continued and indeed increased international confidence in Namibia," said NamPower Managing Director Leake Hangala in the company’s latest annual report released this week.
He said the Kudu project would permanently alter Namibia’s historical power import dependency and, among numerous other benefits, provide a platform for development of new, energy–intensive industries in the Walvis Bay corridor and elsewhere in the country.
NamPower, the Ministry of Mines, Energy Africa as well as the National Petroleum Corporation of Namibia (Namcor) – all partners in the Kudu development – recently started with detailed environmental, technical, commercial and financial feasibility and viability studies.
Initial estimates of the cost of developing the project amount to US$800 million.
The Kudu gas fields, considered to be some of the largest in the world, have proven gas reserves of 1.3 trillion ft3.
Namibia imports more than 50% of its electricity from South African power utility Eskom, but the demand is starting to outstrip the supply.
NamPower, Namcor and Energy Africa signed a joint development agreement on the gas–to–power project in July.
Eskom and the Namibian utility signed another agreement on the sale of the electricity to South Africa.
Energy Africa has a 90% interest in the project and will develop the field with Namcor.
Namcor owns the other 10%.
NamPower, with technical help from Eskom, will develop and operate a gas–fired power station at Oranjemund.
The electricity will be sold to NamPower for resale to the Namibian market.
The balance will be sold to Eskom.
The proven gas reserves of 1.3 trillion ft3 would be sufficient to fuel an 800MW power station for the next 22 years.
However, the reserves are estimated at 3.3 trillion ft3.
To prove that quantity, the developers need to produce a reservoir for one to two years and drill at least one more test well.
The first phase of the power station will be the construction of a 400MW power plant in March next year, taking 36 months.
The gas will be onshore by March 2009 and the first gas will be delivered to clients by October 2009.
In the same year, the developers want to construct a second 400MW gas–fired power plant.
The partners hope there will be enough reserves for two more power plants of 400MW by 2014.
South Africa is expected to run out of electricity generation capacity by the end of the decade.
Hangala said Namibia’s power consumption grew by nearly nine% last year, even without counting the substantial new demand resulting from the Skorpion mine and smelter complex in the South, which added another 15% to the rate of growth.
As a company, NamPower achieved a record turnover with strong operating cash flow generation and an underlying balance sheet strength.
While revenue increased by 21.4%, mainly because of Skorpion mine ramping up its capacity, investment income dropped by 5.4% to N$142.5 million from N$150.7 million.
That was mainly due to a decrease in money market rates.
However, NamPower still recorded a pre–tax profit of N$74.9 million, a decrease of 37.4% from the previous year.
Hangala said NamPower was preparing to enter a new chapter in its own history and that of the Namibian power industry.
For Matheus Shikongo, Chairman of the NamPower Board, the future of the company "holds attractive challenges and opportunities".
