Kenya in fresh search for consultant to audit Tullow’s operations

Kenya has opened a fresh search for a consultant to audit the operations of Tullow Oil, more than three years after an earlier hunt failed to attract qualified candidates.

Petroleum principal secretary Andrew Kamau says the specialised auditor will undertake cost recovery audits on explorers who make commercial oil finds such as Tullow Oil and its partner Africa Oil.

The Ministry of Energy in November 2013 opened the search for a firm to inspect the exploration costs of oil and gas explorers, but none of the applicants for the job had expertise in the field.

“We’re putting together the terms of reference and then we’ll put out an expression of interest call,” said Mr Kamau in an interview.

“An auditor was not found in the earlier call. We’ve also been receiving unsolicited bids. This is a very specialised job and the applications we received didn’t match up,” he said.

The fresh impetus to audit Tullow Oil comes after the Irish oil explorer recently disclosed that it has so far incurred $1.5 billion (Sh150 billion) in exploration costs to be recovered once production begins.

Even though Tullow Oil shares a work program and budget update with the Kenyan government on both a quarterly and annual basis, Mr Kamau said he could not vouch for the authenticity of the reports in the absence of audited reports.

READ: Tullow’s Sh150bn exploration bill raises queries on costing methods

The government is yet to begin auditing these expenses four years since Tullow Oil announced in March 2012 Kenya’s first commercial oil discovery.

Lokichar basin, with proven reserves of 600 million barrels of oil, is estimated to have a 25-year life span with production put at 80,000 barrels of oil per day, according to Tullow’s regulatory filings.

British charity Oxfam and civil society groups have expressed fears that in the absence of proper audits explorers such as Tullow may inflate recoverable costs ultimately denying Kenyans the full benefits of their national resource.

Oxfam and lobby group Kenya Civil Society Platform on Oil and Gas have raised fears that leaving Tullow unchecked may lead to unethical practices such as taking out costly shareholder loans for funding, bloated expatriates’ wage bill, and making auxiliary payments on non-core expenses such as entertainment.

The draft Petroleum Bill proposes to establish an Upstream Petroleum Regulatory Authority whose function is to regulate upstream petroleum operations including auditing explorers’ costs.