ICC, Slide 1, 31 October 2007

ICC Windhoek, October 2007ICC Windhoek, October 2007

Kudu Gas to Power Project – Kudu Gas to Power Project – Contributing to regional supplyContributing to regional supply

presented by Margaret van der Merwepresented by Margaret van der Merwe

Generation Projects: Power System Development, NamPowerGeneration Projects: Power System Development, NamPower

ICC, Slide 2, 31 October 2007

Content

Background and key components

Challenges and Solutions

Benefits

Conclusion

(Courtesy of Tullow)

ICC, Slide 3, 31 October 2007

Kudu gas field history – key milestones 1974 - Discovered by Chevron/Regent/Soekor

1993 - Licence awarded, drilled four wells

– Shell (75%), Energy Africa (25%), Energy Africa farm-out 15% to Texaco

Various licence holder changes

– 2002 - Shell relinquished to ChevronTexaco (60%), Energy Africa (40%)

– 2003 – ChevronTexaco relinquished to Energy Africa (100%)

– 2003 - Energy Africa (90%), Namcor (10%)

– 2004 - Tullow Oil acquires Energy Africa

– 2007 - Tullow indicated Itochu farm-in (20%)

2007

– Tullow indicated plan to do more exploration/appraisal drilling wells to test multi-tscf play

– Kudu-8 drilled, gas bearing sands thicker and better quality than Kudu-5, but lower permeability, unaided production flow rate would not exceed Kudu-5

– Results to be incorporated in geological model for the area in advance of any decisions on further drilling (Courtesy of Tullow)

ICC, Slide 4, 31 October 2007

Upstream project concept (Courtesy of Tullow)

ICC, Slide 5, 31 October 2007

Challenges

ICC, Slide 6, 31 October 2007

Kudu Project – Challenges

The Kudu project as base load gas to power consists of three

components:

– supply of gas;

– conversion of gas to power;

– off-take (sale and purchase) of power.

Without agreed terms of commercial arrangements between the

components there can be no further development of:

– financing arrangements for the gas to power component;

– technical arrangements of any component.

Agreement of commercial terms and conditions is challenged by

mutually acceptable:

– allocation of foreign exchange risks;

– acceptable liability regime (risk package); and

– price levels.

ICC, Slide 7, 31 October 2007

AverageDaily Demand

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hours of Day

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year'

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Off peak Shoulder Peak Namibian High Season Load

ICC, Slide 8, 31 October 2007

Unlocking value of gas

The base load Kudu project consists of :

– supply of gas to a power station in Namibia;

– conversion of gas to power in Namibia;

– transmission lines connecting the Namibian power station to the Namibian and South African grids for the off-take of power in Namibia to Namibia and South Africa.

The mid merit/peaking Kudu project consists of :

– supply of gas to a power station in Namibia as well as to an import/export pipeline between Namibia and South Africa;

– conversion of gas to power in Namibia;

– transmission lines connecting the Namibian power station to the Namibian and South African grids for the off-take of power in Namibia to Namibia and South Africa;

– import/export pipeline between Namibia and South Africa;

– conversion of OCGT power station at Ankerlig to CCGT.

ICC, Slide 9, 31 October 2007

Evaluation: Power in Namibia, Excess Gas and Power to South Africa

1. Security of Energy Supply (Electricity and Gas)

• Power Station in Namibia

• Power Supply to Namibia during non-generating hours

• Bi-directional pipeline

2. Value of Project including Speed of Implementation, Cost and Risk of Electricity Supply

3. Consistency with GRN Energy Policy

4. Strategic Benefits to Namibia and region

5. Macro-economic Benefits to Namibia and region

Kudu CCGT PSKudu CCGT PS Ankerlig CCGT PSAnkerlig CCGT PS

690 km Gas Pipeline with compression

Kudu Gas Field, Offshore Pipeline & Conditioning

GTF

APS

KPS1

2

NAMSA Pipeline

A

B

ICC, Slide 10, 31 October 2007

Kud

u Po

wer

Pro

ject

Pla

n

1st Quarter 2008: Final Investment Decision

2008: Construction Starts

5 July 2004: Signing of JDA & MOU, Feasibility Phase Started

2011: Commercial Operation

ICC, Slide 11, 31 October 2007

GRN supporting development of Kudu

2004:

− Cabinet declared project of National Importance, Ad Hoc Cabinet Committee on Kudu Established

2005:

− Cabinet approval for NamPower’s investment in strategic projects

2006:

− Cabinet approval for GRN equity injection into NamPower to develop Strategic Projects - Budgetary allocation

− Cabinet approve establishment of re-enforcement team to assist NamPower in negotiation

− Heads-of-State meeting pledge regional support to unlock value of Kudu

• 2007:

− Heads-of-State meeting re-emphasizes support to development of Kudu

− Bilateral Gas Trade Commission tasked task force to identify areas of support and facilitation required to progress Kudu

ICC, Slide 12, 31 October 2007

Benefits of the Kudu Project

• Employment− during construction about 1500

− operation about 70

• Development of Namibian skills and experience− CCGT power stations

− infrastructure of similar type and scale to the Kudu CCGT power station

− international projects generally

• Catalyst for general development investment in local area as a whole− Housing and Accommodation

− Office facilities

− Roads upgrade

− Harbour Facilities in Luderitz for landing of equipment

− Electricity, Water, Sewerage, etc

− Medical and Emergency Services

− Secondary Industry :Cleaning Services, Catering, Trade, Maintenance of Vehicles, Transportation, Recreational, Tourism, etc

ICC, Slide 13, 31 October 2007

Conclusion

Growth in the Namibian economy caused and requires growth in electricity demand, out stripping the current supply options

− Kudu Power Project is a generation option in Namibia to ensure the availability of reliable electricity supply

Kudu Project will kick-start economic growth given its massive investment

− Kudu Project supports Namibia’s vision and objectives in advancement through Technology and Innovation

− The commercialization of gas onshore will be a catalyst to the development and growth in the gas industry

Kudu Project requires multi-sector, inter-ministerial, inter-agency and inter-governmental support and co-ordination

Getting it right will instill investor confidence in the region

ICC, Slide 14, 31 October 2007

Thank You

ICC, Slide 15, 31 October 2007

Integrated Project Structure

Import/Export PipelineGas

TreatmentFacility

Kudu Power Station

NamibianTrans-mission

Grid

RSATrans-mission

Grid

AnkerligPowerStation

Gas FieldOffshore Pipeline

PipeCo

NamPower & Others

Tullow & Itochu & Namcor

Eskom EskomNamPower

Gas in PipelineSpec Gas

Power

Wet Gas

PowerGas to Power Power from Gas