By Nevin, Tom
African Business , No. 215
Beneath the boisterous south Atlantic, some 170km off Namibia's southern coast, a treasure trove of unbelievable wealth, nearly 5km under the sea, lies waiting to be exploited. Should the latest round of explorations confirm earlier expectations, Kudu 4 gasfield could contain three trillion cubic feet of virtually pure (96%) methane gas. The hunt is on for customers such as power stations. Kudu 4 could well be Namibia's golden-egg laying goose.
An exploration consortium, Shell Exploration and Production Namibia made up of Shell (75%), Texaco (15%) and South Africa's Engen (10%) - is funding and conducting the operation. Estimated exploration and development costs are in the region of N$3.2bn.
The problem, or perhaps the opportunity, is to find a customer who requires enough gas to make the development of the field a viable proposition. Right now, the gas consumption infrastructure in Southern Africa is insufficient to support Kudu. Thus, to kick-start the development, a major baseload end-user may be required.
"Unlike oil, which is easily transportable and has ready domestic markets, a successful development of gas generally depends on a market with long-term sales contracts," explains Mr Ger Kegge, Shell Exploration's Managing Director. The N$3.2bn price tag requires the sale of volumes of gas that exceed Namibia's anticipated energy requirements. To this end, the project must be considered in a Southern African context.
Kudu 4 could be a massive energy source looking for a market - such as power generation or primary industry with consumers who could immediately consume large volumes of gas.
"South Africa's power provider, Eskom, could be the answer," states Mr Kegge. "Much of that country's power is generated by coal-fired plant, and gas can be considered a far more attractive proposition than coal. It is more efficient and more environmental friendly: It saves water and needs little land."
However, South Africa is coal-rich and coal is deeply entrenched as a power generating fuel. Many power stations have been built on coalfields producing low quality coal that is good for nothing else.
But the question comes down to one thing: Who will build South Africa's next power station? …