Capital Markets

Tullow shares dip after stop in Turkana operations

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Oil exploration in Ngamia 1 in Turkana County. British exploration firm Tullow Oil’s shares dropped 1.53 per cent in Monday’s trading as investors digested news of suspension of its drilling operations on two Kenyan blocks over security concerns. Photo/FILE

British exploration firm Tullow Oil’s shares dropped 1.53 per cent in yesterday’s trading as investors digested news of suspension of its drilling operations on two Kenyan blocks over security concerns.

The company’s shares lost 15 British pence to close at 963.50 pence (about Sh1,330) as drilling work remained suspended for the third day on Monday at the two exploration blocks in northwest Kenya following protests by locals, who are demanding more jobs at the sites.

Tullow yesterday responded to claims that it had excluded locals from employment in its operations with a statement saying people from the Turkana County account for 800 out of the 1,400 people employed in its Kenya operations.

“Tullow takes its relationships with the local communities extremely seriously and the decision to suspend exploration and appraisal operations was taken to prevent further escalation of the demonstrations while discussions to resolve this issue for the long term are ongoing,” said the company in a statement.

Josphat Nanok, the governor for Turkana County, said that local lawmakers had spurred residents in the area to hold demonstrations over unspecified grievances.

“These protests have now turned more or less violent to a point where the national government has to intervene. It has also been fuelled by local members of Parliament. The grievances are not so clear,” he told Reuters by phone.

“This is an issue now with the national government. It has escalated to (a matter of) security, so let the national government deal with it.”

Tullow said it was working closely with local communities, the local government and the national government so that it can resume work on Blocks 10BB and 13T as soon as possible.

Tullow and its partner Africa Oil have struck oil on both blocks and are in the process of determining its commercial viability.

The police have increased security patrols in the affected areas, but have made no arrests, Administration Police spokesman Masoud Mwinyi said.

“I can confirm there was a protest on Saturday by local people alleging denial of employment. The local administration and leaders in the region are in a meeting trying to resolve the dispute,” Mr Mwinyi said.

On Saturday, Tullow said it would not comment on whether any of its staff had to be evacuated from the sites.

In July, London-listed Tullow, which is already producing oil in Ghana and awaiting government approval to do so in Uganda, estimated resources in the Lokichar basin in Kenya’s northwest at 300 million barrels of crude oil.

Tullow holds a 50 per cent stake and is the operator of both the 13T and 10BB blocks, with Africa Oil holding the rest.

Tullow’s share price fell on a day that Britain’s top share index rose to a five-month high, led by temporary energy provider Aggreko, with broader sentiment towards equities lifted by U.S. indexes hitting record highs on Friday.

The FTSE 100 was up by 11.30 points, or 0.2 percent, at 6,732.64 by 0820 GMT, after the S&P 500 ended last week at another record high, boosted by gains in technology shares after strong results from Microsoft and Amazon.com.

The gains took the UK’s top share index to a five-month peak, leaving it just 1.5 percent off the 13-year closing high set in May.

Analysts said the biggest weight on the index was the energy sector, which was led lower by Tullow Oil, down 1.5 per cent after suspending drilling operations on two blocks in northwest Kenya due to security concerns.