An oil rig worker at Ngamia 3, one of the oil wells drilled by Tullow Oil and its partner Africa Oil in Turkana. Oil production is expected to begin in 2020. PHOTO | FILE
Tullow Oil has announced it expects to produce oil for the first time in Kenya by 2020.
The announcement made through its 2015 half year report puts to rest speculations that had earlier suggested Kenya would start producing oil by 2017.
In the report released on Wednesday, the multinational exploration company says a sanction decision for oil production is expected by the end of 2016, and that the first production will happen “approximately three and a half years post project sanction”.
The company has also allocated $100 million (Sh10.2 billion) for exploration and appraisal drilling in Kenya.
For its pre-development activities, Tullow has set aside $225 million (Sh23 billion) to be used in Kenya and Uganda. The two countries are working together towards sharing an oil exportation pipeline.
Despite reporting a drop in sales for the first half year of the year, the firm said it was sticking to its local exploration programme.
Tullow Oil generated sales of $820 million (Sh82 billion) in the first six months of 2015, a 35 per cent drop from $1.265 billion (Sh126.5 billion) made over the same period last year.
Losses in the first six months amounted to $68 million (Sh6.8 billion), which is better than $95 million (Sh9.5 billion) incurred over the first half of 2014.
The company said that the low prices of oil on the international market was the main reason for the drop in sales.
“Our financial results for the first half of 2015 are in line with market expectations and reflect the re-setting of our business in response to the weaker oil price,” said Tullow chief executive Aidan Heavey in a statement.
“Revenues are lower due to the fall in oil price and asset sales but our hedging programme offset some of the impact.”
Oil prices are hovering at the $50 per barrel level, a six-year low, which has made exploration companies cut back on their budgets.
Tullow Oil said that it will continue with its local exploration programme which includes drilling wells in Turkana and Baringo counties.
“Preparations are now well advanced for the Ngamia field Extended Well Tests (EWTs) which are due to commence in August. In preparation, multi zone completions have been installed in the Ngamia-8, Ngamia-3 and Ngamia-6 wells and clean up flow testing has been completed. The Ngamia EWT flow test will be followed by water injection testing,” said the company in a statement.
The fall in oil prices has also affected local firms such as Atlas Development which said that it expects second half results to be significantly lower than what it had projected due to tenders that it was expecting from explorers are being delayed or getting cancelled.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
