Tullow Oil to spend Sh22.5bn on Kenya this year


A worker at the Ngamia 3 oil exploration site, run by Tullow, in Nakukulas village, Turkana. PHOTO | FILE

British explorer Tullow oil will spend at least Sh22.5 billion on appraisal and exploration activities in Kenya this year.

The Africa-focused oil and gas producer also plans to carry out four such ventures and 82 development activities in the East Africa region at a cost of Sh48.5 billion.

In a statement released Wednesday the group, which recorded a 42 per cent improvement in the loss position posting a Sh60 billion loss for 2016, said it will reduce capital expenditure on operations by 45 per cent this year after the Uganda farm-down.

“Capital expenditure will continue to be carefully controlled during 2017. The group’s capital expenditure associated with operating activities is expected to reduce from Sh90 billion in 2016 to Sh50 billion in 2017. The 2017 total comprises Ghana capex of Sh9 billion, West Africa non-operated capex of Sh3 billion, Kenya pre-development expenditure of Sh10 billion and exploration and appraisal spend limited to Sh12.5 billion,” Tullow said in the statement.

The group said Kenya was among major beneficiaries of its Sh90 billion capital investment last year as the country shared more than 80 per cent of the investment with Ghana and Uganda.

Tullow posted its fourth annual loss consecutively as write-offs and impairments of exploration costs continue to hit hard, draining Sh88.7 billion of the firm’s liquidity.

READ: Tullow strikes more oil in Turkana ahead of early export plan

The latest loss is however less than the Sh100 billion reported in 2015, attributed to successful operations in its TEN offshore oilfields in Ghana.

Tullow chief executive Aidan Heavy said the boost from West Africa operations had given the firm strong impetus to grow portfolio in East Africa as well as shed off the debt burden which has been growing over time.

“The clear highlight of 2016 was delivering Ghana’s second major oil and gas development, the TEN fields, on time and on budget.

‘‘Production from TEN, alongside our other West African oil production, has provided Tullow with positive free cash flow and enabled us to begin the important process of deleveraging our balance sheet,” Mr Heavy said in a statement.

The firm said drilling commenced in the South Lokichar Basin in mid-December 2016 with a four-well exploration and appraisal programme after identifying a number of new prospects and appraisal opportunities.

Among those identified include exploration well Erut-1. Drilling is now concentrated in the Amosing 6 well and will later move to Ngamia 10 after discoveries that the reserve’s oil had migrated to the northern limit of the South Lokichar basin and has de-risked multiple prospects in this area. 

“Tullow believes that significant upside remains across the South Lokichar Basin with the potential to increase the resource estimate to be over one billion barrels of recoverable oil,” Tullow said.