Two Indian State-owned oil firms are in talks to buy a stake in Tullow’s oil project in Turkana, days after two partners exited the project after a decade of waiting for the development to take off.
Oil India and ONGC Videsh, which is the overseas investment arm of the Oil and Natural Gas Corp of India are in talks to buy an undisclosed stake whose value remains unclear in the three oil blocks that are wholly owned by Tullow.
A deal, if struck, will provide the much-needed capital that the British oil explorer has been looking for a strategic investor to cushion its risks for the multi-billion shilling project that includes setting up a crude pipeline and processing facilities for the oilfields.
“All I can say is some discussion is going on,” Oil India Chairman Ranjit Rath told reporters on Thursday in London.
The revelation of a potential deal comes a day after Africa Oil and Total withdrew from the project amid citing concerns about the economic viability of the Turkana oil project.
Tullow fully owns the oil blocks 10BB, 13T and 10BA in the South Lokichar Basin but a combination of delays in tapping a partner and approval of the commercial plan have delayed the project.
Energy and Petroleum Cabinet Secretary Davies Chirchir on Wednesday said that an estimated Sh469.5 billion Kenyan shillings ($3.4 billion) is needed to develop infrastructure at the South Lokichar basin.
Tullow had earlier disclosed plans to sell a significant chunk of its initial 50 percent stake in the blocks, having hit financial hurdles of its own.
The firm has been looking for an investor for at least three years in a bid to unlock the project. ONGC Videsh Ltd first held talks with Tullow Oil in Nairobi in July last year.
Tullow had in June last year tied the future of Kenya’s Turkana oil project to the firm and its partners getting a strategic investor.
Africa Oil and Total, who each had a 25 percent stake in the project withdrew on Wednesday, piling pressure on Tullow.
Tullow has been bullish on the prospects of getting a financial partner before the end of this year, which will provide cash to fund the next stage of development and unlock value.
Production from the South Lokichar Development conventional oil development project is expected to begin in 2026 and is forecast to peak in 2027, to approximately 120,000 barrels per day of crude oil.
Tullow has severally changed timeliness for the final go-ahead for its onshore Kenyan oilfields, which are expected to produce up to 100,000 barrels per day.
The British oil firm is also awaiting the government’s decision on the Field Development Plan (FDP) that it submitted for review in March.
Kenya had set a December 2021 deadline for Tullow and the former partners to present a comprehensive investment plan for oil production in Turkana or risk losing concession on two exploration fields.