therewere small remnants of salt in the northern Walvis and Namibe basins. Explorers point out that apparent car- bonate build-ups visible on seismic lines could be of great interest. Meanwhile, seabed coring by state oil company Namcor confirmed the presence of methane hydrates.
Exploration optimism Explorers have identified four-way structural closures on potential leads. The potential size of these structures indicates that they could hold reserves of billions of barrels. Such expectations tend to generate hyperbole among investors and Namibia is no exception. When US-based Energulf Resources,
together with partners Russian Sintezmorneftgaz, Canada’s UNX Energy, South Africa’s PetroSA, and Nambia’s Namcor, drilled the Kunene-1 gas discovery 2008 in the northern Namibe basin, speculation went into overdrive. The well was reported to hold some 14.5tn cf of gas. Subsequent testing showed that the discovery was not economically viable. However, the operating consortium remains opti- mistic about the area’s prospects, noting that its hydrocarbon potential has been proven. Industry sources sug- gest that the problem with this well
Kudu gas field
The Kudu field was discovered in 1974 by ChevronTexaco. Since then, the licence has been held by Shell, Energy Africa and, more recently, UK-based Tullow Oil. Tullow acquired Kudu in 2004 when
it took over Energy Africa. The initial split was Tullow 90% (Energy Africa’s holding) and state-owned Namcor 10%. In 2007, Japan’s Itochu farmed in to Tullow’s share for a 20% stake. At this stage Tullowannounced a $104mn drilling plan. Initially, the set up was Tullow 70%, Itochu 20% and Namcor 10%. A total of seven wells have been
drilled on the field, including the discovery well in 1974. The reservoir is at a depth of 4,200 metres and consists of Barremian age sandstones interbedded with volcanics. This fea- ture has made reserve estimation and projected field performance problem- atical. Its reserves have been quoted by operators as 1.3tn cf, but oil industry opinion suggests that this may be smaller. Tullow’s four-year licence expired in
August 2009. The companywas unable to proceed with field development as it was required to under its contract. Russia’s Gazpromcame into the picture
was its poor reservoir characteristics. Companies exploring in Namibia
range from small independents to state-controlled multinationals such as Petrobras. One of the largest acreage holders is London-based Chariot Oil and Gas, with a total of eight licences in the northern, central and southern offshore regions. Potential source rocks in its southern block 2714A, located between the Orange and Luderitz basins, are the same as those in the Kudu gas field to the south-west. The belief is that these source rocks are oil prone but highly over-mature and gas- generating in the kitchen area for Kudu, whereas in the kitchen area of Chariot’s southern blocks these source rocks are in the oil window. Chariot and its 50%partner Petrobras may opt to renew the licence in August this year. If so, they would be committed to drilling one exploration well, says Chariot’s
Matthew Taylor. Brazilian
HRT
Participacoes em Petroleo has been one of the most publicly enthusiastic companies about Namibian prospects. The company was created by former Petrobras executives who had worked in Angola as well as in Brazil. In September last year the company
in 2010 during an African investment drive led by Russian President Dmitri Medvedev. Gazprom acquired a two- year licence in 2010, with a provision that if it can move ahead on develop- ment, thiswill be renewed as a 25-year contract. Following Gazprom’s
farm-in,
Tullow’s sharewas reduced to 31%and Itochu’s to 15%. The companies were not compensated for the loss as the contract had already expired. Gazprombank, the banking arm of
Gazprom, also signed a contract with Namcor to provide banking services to Namibia’s oil and gas sector, and has provided an initial $20mn for the pur- pose. The total holding of Gazprom and Namcor in the Kudu project is 54%. Tullow remains the upstream operator of the project. The aimof the project is to construct
an 800-MW power plant on the coast, whichwill use Kudu gas as a feedstock. State power utility Nampower is already soliciting bids for the plant construction. Tenders are expected to go out in April 2011. Nampower also said that it is close to signing a power purchase agreement with Tullow, which could be signed in September this year. Gazprom has also been in negotia- tions with South African power utility
raised 2.62 reais ($1.54bn) in an initial public offering to finance its explo- ration activities in Brazil’s Solimoes basin, where it holds interests in 21 blocks, as well as offshore Namibia. Capital markets analysts note that HRT was successful in its offer as it followed state-owned Petrobras’ $70bn share sale one month earlier. In late February 2011, HRT
Exploration Manager independent
announced that it would be farming out 50% of two of its Namibian licences in the northern Walvis basin. The company is also in talks with the Banco Nacional do Desenvolvimento, the Brazilian National Development Bank, for a loan. Simultaneously, HRT announced plans to take over Canada’s UNX Energy. UNX has one British Virgin Islands-registered subsidiary, Cabanas Business Group, and three Namibian subsidiaries – Kunene Energy, Cumoxi Investments and the Namibia Industrial Development Group. Kunene Energy was the original licence holder for UNX’s ultimate assets, and was founded by Namibian entrepreneur Knowledge Katti. UNX holds between 40% and 90% of eight blocks in the southern Orange basin. It also owns a 2.7%stake in block 1711 in the Namibe basin, where the Kunene-1 well was drilled.
Eskom, to purchase surplus electricity from Namibia.
Namcor’s financial woes Meanwhile, there is still an ongoing problem with the future of Namcor as the company has no real funds. Namcor’s operational losses in 2009 were $36mn and it only registered a small profit last year because of a gov- ernment subsidy. Namcor has the right to import 50%
of Namibia’s fuel needs. Until 2010, this was operated via an agreement with Swiss oil trader Glencore. The Namibian government cancelled the contract uni- laterally last year, paying $64mn in out- standing fees in late February 2011. Glencore said in a statement that it will pursue thematter, adding that Namcor’s difficultieswere related to the lowprices it had to charge customers downstream. At the time of writing Namcor had
not confirmed the cancellation. Rumours of Namcor’s privatisation
have abounded for years and local lob- bying has been intense. Local media reports that a national consortium, Erumbi Energy, will acquire the fuel import rights, with technical support provided by oil trader Trafigura and Angolan state oil company Sonangol. But this has been denied by the Namibian EnergyMinistry.
PETROLEUMREVIEW APRIL
2011
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