[Premium] Kudu Developer Explains Deferred FID
Oslo-based upstream shipowner BW Offshore has said why it missed its original 4Q2017 target date for a final investment decision (FID) on the Kudu offshore gas to onshore power project in Namibia.
In a presentation to analysts January 8 in Oslo, the company's CEO Carl Arnet said the FID had been deferred until "towards the end of 1H 2018" because the Namibian government said late 2017 it was “less comfortable about building double the size of power plant to what it required." The original size of the onshore gas-fired plant was 880 MW; Arnet said both sides had now agreed to halve this to 440 MW.
BW Offshore, which owns floating production ships, had said last year that its main role in the project would be to provide and operate a floating production unit (FPU).
Arnet now said BW is “working with a well-known bank that is interested in infrastructure” to develop the Kudu project but that pre-FID it was too early to comment on the project’s final equity shareholding, and therefore the project’s overall cost and BW’s share of that. He did not name the bank; nine months ago though BW inked a co-operation accord with Chinese financier ICBC which is infrastructure-focused.
The gas sales contract for the revised power project is now 0.55 trillion ft3, added Arnet, adding that leaves additional reserves that could be developed for any subsequent power projects: “As the first power plant is put in, there will be room for more power plants to be installed onshore, so there’s room for future growth." Kudu’s main reservoir is estimated to contain 2C resources of 1.33 trillion ft3 (37.7bn m3). He also said BW could operate a pipeline taking gas to shore.
Arnet described Kudu as having some volume risk on the reservoir, but said the commodity price risk had been removed by the gas sales agreement, and that therefore the main risk was the construction risk – including some sovereign risk. In February 2017, BW announced it had farmed into the Kudu licence with a 56% equity interest, with Namibia state Namcor's interest correspondingly reduced from 100% to 44%. Arnet said it had paid Namibia $2.4mn for its 56% Kudu interest "but we will have to fund more, upon FID."
The January 8 Oslo presentation by BW was chiefly to discuss its planned 2H 2018 start-up of oil production, as 81.5% operator, on the Dussafu licence offshore Gabon where it expects to produce (at 100% equity) 10,000 to 15,000 b/d in 2019-20 from the Tortue oilfield there (not to be confused with the Kosmos-operated gasfield of the same name offshore Senegal).
Production drilling on Tortue (Gabon) is to start January 22. The shallow water development was approved by the government last month, and the floating production ship (FPSO) that BW is providing is expected to depart Singapore 2Q 2018 for the field.