WINDHOEK: The long-awaited Kudu Gas power project to be located north of Oranjemund, will not meet its 2016 deadline due to many outstanding and unresolved issues.

“The Kudu Gas project will still be coming, but will not meet the deadline of 2016. It is expected to take a little bit longer to get off the ground”, NamPower Managing Director (MD) Paulinus Shilamba said during a media briefing at the national power utility’s headquarters on Tuesday.

The project involves the implementation of an 800 megawatt (MW) power station north of Oranjemund in the Karas Region.

It is expected that half of the power generated by the Kudu Gas power station will be consumed in Namibia, while the balance will be exported to regional markets.

Shilamba said they are currently negotiating with the government on strategic support required for the Kudu Gas project to move ahead.

Support is required on risks which NamPower is unable to mitigate, and where third parties would expect Government guarantees.

In addition, he said, 49 per cent equity partners will have to be sourced as NamPower will retain only 51 per cent in the Special Purpose Vehicle (SPV), which was established to take a majority stake in the Kudu Gas field.

The remaining issues on selling 400 MW – 50 per cent of the project’s capacity – to regional off-takers, have progressed well.

“Also, foreign exchange risks associated with US dollar-priced gas may be resolved if certain conditions can be met by off-takers, as well as Government support,” he said.

The issuance to the market of the respective tenders on the project; the conclusion of the Gas Sales Agreement with the upstream developers; the conclusion of the Power Export Agreement with secondary off-takers, as well as the conclusion of all other commercial contractual undertakings are all in their final stages.

Shilamba is confident that the project will take off as soon as the unresolved issues are solved, but stated that it is certain that it will not meet the deadline of 2016.

NamPower was mandated to develop the Kudu Gas power station in terms of a 2004 Cabinet resolution.

The development of the project, regarded as one of the possible solutions to the country’s projected electricity deficit, is expected to start in 2012, should the current negotiations between the relevant parties conclude favourably.

Gazprom and the National Petroleum Corporation of Namibia (Namcor) are the main shareholders in the project, owning a collective 54 per cent interest, while British-based Tullow Oil holds 31 per cent and Japan’s Itochu Corporation holds 15 per cent of the shares.

Namcor earlier signed a Memorandum of Understanding (MoU) with Gazprom’s lending arm, Gazprombank, paving the way for the construction of an 800 MW power station at Walvis Bay, a pipeline and other infrastructure for the project to the tune of US.dollars 1,2 billion (approximately N.dollars 9,5 billion).

In 2010, Namcor and Gazprom agreed to establish a partnership to develop the Kudu Gas field, and to take the majority stake in the project.

The agreement came shortly after Russian President Dmitry Medvedev led a delegation on a State visit to Namibia in 2010.

The gas field is estimated to contain 1,3 trillion cubic feet of proven natural gas reserves.

However, more recent explorations and analysis suggest that reserves could reach three trillion cubic feet and, potentially, up to nine trillion cubic feet.

The development of Kudu has been dragging on for years because the new partners, combined majority shareholders Namcor and Gazprom, as well as Tullow Oil and Itochu, have not come to an official agreement yet.

The Kudu gas project is expected to cost about US$7 billion (approximately N.dollars 55,7 billion).