Tullow Oil, the Irish oil and gas exploration company, has said it will sell a 20 per cent stake in its Namibian production licence to Itochu Corporation in a deal valued at about €6 million. Ciarán Brennanreports
The production licence in Namibia contains the Kudu gas field. In return for its stake, Itochu will pay 40 per cent of the cost of two appraisal wells to investigate the potential of the Kudu field.
Under the terms of the transaction, Itochu will make further financial payments depending on the ultimate volume of reserves developed which, on initial estimates, could see Itochu paying about $30 million (€22.5 million) for its share of the wells. It will also provide Tullow with development financing for the project.
Itochu is a Japanese finance house which specialises in funding energy importation, particularly liquified natural gas, to Asian markets such as Japan and China. It also has technical, engineering and project management expertise in gas development.
The Kudu gas field, located 160km (100 miles) off the southern shore of Namibia, has gas reserves of between 1.5 and three trillion cubic feet. The facility, in which Tullow currently holds a 90 per cent stake, is expected to come on stream in 2011 or 2012.
When operational, it will supply a planned $1.1 billion power station at Oranjemund on the border of Namibia and South Africa. Gas will also be sold into the South African market.
The objective of the two-well appraisal programme is to establish commercially productive flow rates from the extensive Kudu East reservoir.
A semi-submersible rig is scheduled to arrive on location at the end of April and each well is expected to take about 80 days to drill.
"We are delighted to welcome Itochu, a strong international partner, to work with Tullow in the appraisal and development of the Kudu gas field," said Tullow chief executive Aidan Heavey.
"This is a very exciting time in the appraisal programme which has the potential to transform the Kudu asset by significantly increasing the reserve base and to open up a number of additional development options.
"The successful development of this asset has the potential to make a very important contribution to Namibia's long-term power needs."
