As interest heats up offshore Namibia with explorers looking to make oil and gas discoveries, a project associated with the southwestern African country’s first offshore discovery remains in limbo.

But the operator of the Kudu Field’s gas-to-power project says the company is in it for the long haul.

“We’re open to all kinds of solutions. We are there for the longer term and…have the patience to really see if can get this to fly,” BW Offshore CFO Knut Sæthre told Hart Energy. “We think it’s a good field that deserves to be developed and it could be good for the people of Namibia.”

The Kudu Field, located in the Orange Basin, is estimated to hold 1.3 trillion cubic feet of proven natural gas reserves. Discovered by Chevron Texaco in 1974, the field has changed hands several times, having hosted Royal Dutch Shell, Gazprom, Tullow Oil and now BW Offshore working with National Petroleum Corp. of Namibia (NAMCOR).

Plans for the subsea development include use of an FPSO, from which gas will be transported via pipeline to a new onshore power plant to help meet local and regional demand. BW Offshore, most known for its floating production services, became operator in 2017.

“We needed to have an agreement with the government for the offtake of the power and the electricity, which of course you also need some guarantees and that became an issue,” Sæthre said.

Namibia’s electricity needs were also scaled down from about 880 megawatts to about 440. “That means a lot less revenue,” he said.

Costs for what once was a more than $2 billion project have fallen, following the 2014 oil price drop. BW Offshore managed to lower drilling, subsea and pipeline costs and opted for a smaller FPSO than originally planned to bring down costs further, Sæthre said.

However, “We’re still struggling with government guarantees and their willingness to participate,” he said, noting BW’s team in Namibia continues to work with the government. “If the government is not willing to participate in a way that was intended a few years ago, we would then like to see whether we could make something happen with a more private initiative.”

Companies involved in the project had planned to reach a final investment decision (FID) in 2014. But that didn’t happen, and there is no deadline set for FID.

“There are too many loose ends right now. …We had a big plan and we had IFC [International Finance Corp.] onboard for financing but then the government couldn’t come up with the guarantees that we needed for that financing,” Sæthre said. “It fell apart. Now we’re trying to pick up the pieces again and pull it together in a new way.”

That could involve turning to private investors. The company is open to partnering with other companies, though Sæthre said it hasn’t come to that point yet. “It might be that NAMCOR is going to farm out, so that is also on the table,” he said. “But we’re still working on it and trying to get there. For us what is important is that we have a gas field that is looking extremely good, there is no question about the reserves in that gas field, and we have a country or a region that has a great need for energy.”

Growing Interest

The largely unexplored waters offshore Namibia has been attracting oil and gas companies in recent years. Beliefs are that Namibia was among the African countries connected to South America, near Brazil, before the two continents separated during the breakup of the Gondwana supercontinent that created that South Atlantic Ocean.

The area offshore Namibia could be similar to Brazil’s prolific Santos and Campos basins. But plentiful discoveries have yet to come on Namibia’s side. Tullow Oil said in September 2018 it encountered noncommercial hydrocarbons with its Cormorant-1 exploration well offshore Namibia. However, “gas signatures, indicative of oil, were encountered in the overlying shale section, supporting the concept of a working oil system in the area,” Tullow said at the time.

Chariot Oil & Gas, an early mover offshore Namibia with an acreage position of about 16,800 sq km and about 8,000 sq km of 3-D seismic, struck out with Prospect S last year in the Walvis Basin.

But the search continues as more players jump into the action. Exxon Mobil Corp. in April said it increased its Namibia exploration acreage by about 28,000 sq km, farming into four blocks with NAMCOR. The company plans to begin exploration activities this year.

Meanwhile, eyes are on Total’s Venus-1 that will be drilled in ultradeepwater offshore Namibia this year. The prospect is southwest of the Kudu Field. “This giant prospect has multibillion-barrel potential. Its 3,000 meters water depth will be a record for Africa,” Wood Mackenzie analysts said earlier this year. “However, Namibian exploration is more associated with dusters than gushers, so there is risk here.”

Still, if activity leads to discoveries and development, it could bode well for BW Offshore, according to Sæthre. Even pairing a renewable source of energy, such as solar or wind, with constant energy from the gas field could be good for the energy mix, he added.

“We know we have the gas; there is need for the energy,” he said. “So, it should be possible to get somewhere if you have the patience to work on it. We have that patience.”

Progress Elsewhere

Farther north, offshore Gabon, BW Offshore is making progress on the asset it acquired from U.S.-based Harvest Oil & Gas in 2017. Within 18 months of acquisition, the company marked first oil from the Tortue Field via the BW Adolo. The company is currently producing a total of about 12,500 barrels of oil per day from two wells at the field.

“The drilling rig will come back this summer and we will start phase two of that development and double production when that comes onstream next year,” Sæthre said. “So we have proven capabilities as an operator now,” having built a team of geophysicists, geologists and reservoir engineers.

On the opposite side of the South Atlantic, BW is awaiting approval of operatorship from Brazil’s oil regulator ANP on the Maromba Field. In March, the company said it entered an agreement to acquire 70% of the Campos Basin field from Petrobras for $90 million.

“It’s got more than a billion barrels of oil in place and we’re very excited about the opportunity,” Sæthre said. 

Velda Addison can be reached at vaddison@hartenergy.com.

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