Tullow Oil pays Kenya Sh577m on full control of Turkana project

Tullow Oil tanks at its Turkana field.  

Photo credit: File | Nation Media Group

British oil explorer Tullow paid the Kenyan government $3,690,000 (Sh577.9 million as at end of last year) as expenses grew for the firm on its complete takeover of the Turkana oil project. Disclosures by Tullow show that the payments to the government jumped six times from $778,000 (Sh90.07 million) a year earlier, mainly driven by withholding tax and training expenses. Tullow’s joint partners Africa Oil and Total exited the venture in May last year, leaving the British firm to shoulder all expenses of the project in South Lokichar Basin.

The exits saw Tullow take 100 percent control of the project whose commercialisation had been dogged by a lack of funds and delays by the government to approve the field development plan (FDP).

The British oil explorer, however, remains bullish on the project's prospects.

“Kenya remains a material option to drive value and growth for Tullow,” Tullow disclosed in its latest financial report.

“We are also actively working with the government of Kenya in developing options to accelerate production and cash flow to unlock value from this well-matured resource base.”

Tullow paid $1.679 million on withholding tax last year, as the charge jumped 240 times from the $7,000 paid a year earlier while $1.355 million was spent on training compared to nil expenditure a year earlier.

The British oil exploration company is currently awaiting approval for the FDP project from the Kenyan government.

Tullow submitted the revised FDP in March last year, two months before the exits of its joint partners from the oil project whose reserves were first discovered in 2012. Africa Oil says it exited the project to concentrate on other areas across the continent with higher petroleum potential like Namibia while Total left barely months after disclosing it was considering other ways of monetising its stake.

The duo owned a stake of 25 percent each of blocks 10BB, 13T and 10BA in the basin. Their exit saw Tullow take full ownership of the three blocks in addition to Block 12B. Tullow is yet to get a strategic investor to de-risk the project by pumping billions of shillings to set up a crude pipeline from Lokichar to Lamu and build processing facilities for the oilfields.

Commercial production from the project is expected to begin in 2026 and is forecast to peak a year later at an estimated 120,000 barrels of crude oil per day. But Tullow’s delays in getting a strategic partner have cast doubts on whether the timelines for the commercialisation of the project will be met.

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