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Namibia: Energy provision(EIU Viewswire Via Thomson Dialog NewsEdge) COUNTRY BACKGROUND FROM THE ECONOMIST INTELLIGENCE UNIT Most energy is imported Namibia has no oil refinery so imports all its petroleum requirementsamounting to some 830m litres a yearas refined products. From January 2005, consignments have been split 50:50 between multinational oil companies such as BP and Total, which supply the local market from their South African refineries, and Namibia Liquid Fuels (NLF), a joint venture between Sasol, a South African synthetic fuels company, and a local black economic empowerment partner, in which a number of highly-placed officials are the main shareholders. The new Anti-Corruption Commission began an investigation of NLFs three-year contract, which is not known to have brought any benefits to Namibian consumers, in mid-2006. Electricity generation and transmission by the state-owned Namibia Power Corporation (NamPower) is the main form of primary energy production, although most rural households use wood and charcoal. Most of the electricity supply is generated by the 249-mw Ruacana hydropower station on the Kunene River, but in years of low river-flow, NamPower is obliged to increase electricity imports from South Africa; the 120-mw Van Eck coal-fired station in Windhoek and the 24-mw diesel-powered Paratus station at Walvis Bay usually remain on stand-by. In 2004/05 (July-June) Ruacana provided 49% of the total supply of 3,363 gwh and imports from a South African electricity company, Eskom, provided 45%; the balance was imports from Zambia and Zimbabwe and via the short-term energy market of the Southern African Power Pool. Growing domestic demand, particularly from the mining sector, and a looming regional power shortage (Eskom is forecast to have little surplus electricity to export from 2007) have made the expansion of domestic generating capacity an urgent priority. In 2004/05 domestic electricity sales totalled 2,945 gwh (implying transition losses of 12%), 6% up on the preceding year, of which one-fifth was supplied to the Skorpion zinc mine and refinery. After plans for a second, larger hydropower station on the Kunene River at Epupa Falls fell through in the late 1990s, a gas-to-power projectusing gas from the as yet undeveloped offshore Kudu field to supply an 800-mw gas-fired plant at Oranjemundwas adopted as the preferred option for expanding capacity. Other options under consideration include a small hydropower plant at Popa Falls on the Kunene River and a 10-mw wind plant at Luderitz. Electricity distribution was decentralised in 2002, when five new asset-based regional electricity distributors, in which NamPower has an average 28% interest, took over responsibility for supplying individual consumers. The Electricity Control Board is the overall regulator of the sector. Gas from Kudu could transform theenergy equation The Kudu offshore gasfield was first discovered by a US company, Chevron, in 1973. With a current proven resource of 1.4trn cu ft and potential reserves of up to 20trn cu ft, it is situated 100 km from the mouth of the Orange River, just within Namibias maritime boundary with South Africa. Owing to successive changes of ownership of the Kudu exploration licence it has taken longer than originally expected to devise a commercially feasible project for using the gas from the field. With the acquisition of a 90% stake in Kudu by Tullow Oil, an Irish company, through its takeover in 2004 of South Africa-based Energy Africa, progress on the Kudu gas-to-power project has picked up. The National Petroleum Corporation of Namibia (Namcor) has a 10% interest. The envisaged Oranjemund plant would export a proportion of the power generated to Eskom, making Namibia a net exporter of electricity for the first time. The main outstanding matters to be resolved before the project can be formally launched are the completion of a gas sale agreement between Tullow and NamPower (which will own the Oranjemund station) and a power purchase agreement between NamPower and Eskom. The Kudu projects current estimated cost is N$7bn (US$1.2bn), to be financed mainly by loans for both the main private-sector element (Tullow) and the public-sector element (the governments share of the cost of the power station). Tullow plans to drill two wells in early 2007 to appraise Kudus ultimate reserve potential; should substantial additional reserves be proved, a second gas-to-power project, exports to regional gas markets and a liquefied natural gas project are some of the further development options identified by the company. Hydrocarbon potential No commercial oil deposits have yet been located, despite considerable offshore exploration activity since 1992. Quite extensive geological data have been accumulated which show that the Namibian coastline contains a number of known hydrocarbon traps, mainly located in four seismic basins, the Orange (shared with South Africa), Luderitz, Walvis Bay and Namibe (mostly in Angola). Six foreign oil firms currently hold offshore exploration rights: the Anglo-Australian resources group BHP Billiton, Hunt Oil of the US, the UKs Tower Resources, Croatias INA Industrija and Russias Sintezneftegaz; a Vancouver-based company, EnerGulf Resources, and Namcor signed an agreement in 2005 to jointly explore and develop the northernmost offshore block along the maritime border with Angola within the Namibe basin. In addition, a large onshore oil exploration permit in northern Namibia covering 140,000 sq km of the Ovambo basinaround, but not including, Etosha National Parkis held by First African Oil Corporation, a wholly-owned subsidiary of Irelands Circle Oil. In October 2004 a gravity and magnetic survey and the re-evaluation of previous exploration data indicated significant potential for a hydrocarbon deposit. Copyright 2006 Economist Intelligence Unit |