Tullow enters new phase with mega Turkana camp plan

London Stock Exchange-listed oil and gas company Tullow is scaling up its exploration operations in northern Kenya with the planned construction of a mammoth logistics centre that signals the transition to the critical wells appraisal stage.

Tullow is building the new camp on a 426-acre parcel of land leased from Turkana residents in Kapese. The facility is located seven kilometers from Lokichar - one of the areas it has struck oil.

“Tullow has recorded success in the exploration phase of its programme in Kenya and is entering the extended exploration and appraisal phase,” the explorer says in the latest regulatory filings.

The oil firm said the project is informed by the challenges its operations in Block 10BB and 13T are facing with the provision of adequate camp facilities, material storage yards and work areas for contractors.

The plan is to have the new base replace Tullow’s four sites, currently located in the Lokichar and Turkana basins.

“Tullow operates from several locations in the Lokichar and Turkana basins, which are Twiga, Ngamia, Ekales and Engomo camps,” said Mercy Kabangi, Tullow Kenya’s senior communications advisor, adding that the Kapese camp is a short to medium term facility that will support the firm’s operations for the next three to six years.

It will, among other things, be capable of holding approximately 1,200 workers and larger aircraft. The firm has set aside Sh9.1 billion for its exploration and appraisal activities in Kenya this year. It has, however, not disclosed what portion will go into building the new integrated support base (ISB).

Tullow’s massive investment in the base is significant because Block 10BB holds the Amosing and Ngamia wells, the two locations where the company has made oil finds in varying amounts since its first announcement in 2012.

Extended well tests on Ngamia basin are set to begin mid next year while tests on the Amosing well are set to begin next month, a crucial stage in determining the amount of commercially viable oil in the Turkana basin.

The 13T oil block holds Ekales and Twiga wells on which Tullow is currently conducting early development activity, with drilling results from the Ekales-2 well expected next month.

An operations update by Tullow last week showed that the Ngamia-7 well found 132 metres of oil net of costs of extraction (also called net oil pay) while the Ekales-2 appraisal well found net oil pay of between 50 and 70 metres.

“This result, and the promising initial flows from the Amosing oil field extended well test, give us further confidence in the size and scale of our two cornerstone fields for the development of the South Lokichar Basin,” said Tullow exploration director Angus McCoss in the statement.

Mid last year, Tullow pledged to meet the government’s target of commercialising oil by 2017, even as it described the resource discovered as being of high quality and highly marketable internationally.

Tullow, which is Britain’s fourth-largest oil and gas firm, and its partner Africa Oil have struck commercially viable oil deposits totalling 600 million barrels in Turkana’s Lokichar basin.

READ: Tullow strikes oil in two new South Lokichar Basin wells

The 2017 target, and the growing number of successful resource finds in the two highly promising blocks in northern Kenya, has necessitated the latest investment in a new camp.

“The total area of land leased is approximately 426.3 acres and Tullow proposes to develop about 380 acres, which is currently fenced with an electric wire fence,” Tullow says in the regulatory filings

“The land is currently used as an airstrip for arriving and departing passengers mainly going to work at various Tullow operating locations in South Lokichar.”

Phase one of the new base will include a community liaison office, a 400 man camp, a contractors’ work area, a fuel and maintenance facility, security and information systems offices and a logistics centre.

The second phase of the multi-million shilling project will include construction of a central power plant, fuel distribution and water treatments systems, an 800- man camp, an air terminal and medical centre.

Tullow personnel currently reside in several rig and support camps that are not centralised, an aspect the oil firm views is not cost-efficient for the next stage of its activities.

“The current facilities are not designed and do not have the capacity to support an extended exploration and appraisal programme and to allow Tullow and its service contractors operate in the remote South Lokichar region,” the UK-based oil explorer notes.

The investment by Tullow in Kenya comes at a time when the company is cutting back on expenditures as part of measures taken in the wake of falling international prices of crude.

Tullow Oil in January announced that it would slash its global exploration budget by Sh9.1 billion ($100 million), but added that it will continue focusing on its East African business.

The budget cut reduced its projected exploration expenditure for this year to Sh18.2 billion ($200 million) from the Sh27.3 billion ($300 million) it announced in November.