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Heavyweights take stakes in Namibia play

As BP and Petrobras dive in, Windhoek hopes rise that the pair will help boost the country's flagging E&P sector

NEW interest by two heavyweight frontier-exploration operators could give a lift to Namibia’s flagging offshore activity.

In August, BP agreed to farm-in to a block in the southern offshore, for which Petrobras recently exercised an option to take over the operatorship. The agreements should lead to a well being drilled next year into a large, likely-oil structure, on which there is said to be good seismic data.

The two companies acquired their interests in the area, Block 2714A of the Orange basin, from the UK’s Chariot Oil & Gas, which held 100% of the block through its wholly-owned Enigma Oil & Gas. Petrobras farmed-in for a 50% interest two years ago, and took over as operator at the end of June, while BP has just agreed to farm-in for 25%. Chariot retains the other 25%.

Chariot says the first structure to be drilled will be Nimrod, with a potential for up to 4.9 billion barrels of oil. Because of direct hydrocarbon indicators over the structure, and no salt layers to impair the seismic imaging, the company rates the chance of success at 25%. A large 3-D seismic survey has identified 11 prospects in this block and the adjacent block to the south, 2714B, where Chariot has 100%. All are in water-depths of 400-850 metres, with the Nimrod location being shallow enough for a lower-cost semi-submersible rig to be used.

Namibia’s offshore is lightly explored, with only about 16 wells drilled including eight on the Kudu gasfield – still undeveloped, 37 years after its discovery. Besides the two Orange basin licences off the southern part of the coast, Chariot holds four areas in the Luderitz and Walvis basins off the central coast, and two areas in the Namibe basin off the northern coast.

Mixed prospects

A few other companies hold interests, notably HRT Oil & Gas, set up by a group of former-Petrobras geoscientists and engineers. HRT operates 10 blocks, eight of them adjacent or close to Kudu, and is planning to start drilling next year.

Prospects for the Kudu field, which fills the block immediately south of Chariot’s 2714B, remain mixed. Tullow, which has operated the field since 2004, said in August that “significant progress” has been made with negotiations over a gas sales agreement and a project development agreement, under which Kudu is planned to be brought on stream for a gas-to-electricity scheme. The company said it aims to start front-end engineering design work in the fourth quarter, leading up to a final investment decision in mid-2012 and start-up in second-half 2015.

However, in May, Namibia’s energy minister Isak Katali said Russia’s Gazprom, which had joined the project last year, had decided not to continue to participate. The withdrawal leaves the development without its largest backer – Gazprom had taken 54%, with Tullow holding 31% and Japan’s Itochu holding 15%. Tullow did not reply to questions about the shareholding situation.

The Kudu plan involves the construction of a combined-cycle gas turbine power station, of 800 MW capacity, near Orangemund in the south of the country, from which electricity could be supplied to South Africa as well as Namibia. Offshore, there will be production facilities in 170 metres of water and a landing pipeline 170 km long. Reserves in the complicated Kudu structure are generally estimated at about 40 million cubic metres, but with a considerable upside if hopes for outlying structures are fulfilled.

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