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Tullow to pump Sh567m into Kenyan operations

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Tullow Oil plc CEO Rahul Dhir. PHOTO | DENNIS ONSONGO | NMG

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Summary

  • The announcement by the British multinational comes at a time it is eyeing a strategic partner to help implement a development plan for oil production in Turkana.
  • Tullow which says has spent more than $1 billion (Sh113 billion) to prospect for oil and develop wells in Kenya, has seen its annual spending fall significantly over recent years.
  • Kenya had set a December 2021 deadline for Tullow to present a comprehensive investment plan for oil production in Turkana or risk losing concession on two exploration fields in the area.

Tullow Oil is set to invest $5 million (Sh567.5 million) in its Kenyan operation this year as it gears up for commercial oil production.

The announcement by the British multinational comes at a time it is eyeing a strategic partner to help implement a development plan for oil production in Turkana.

“Tullow is prioritising investment in high return opportunities in its producing assets, whilst ensuring the business remains self-funded,” Tullow said yesterday of its 2022 investment plans in a trading update.

“Capital expenditure is forecast to be…$5 million (Sh567.5 million) in Kenya.”

Tullow which says has spent more than $1 billion (Sh113 billion) to prospect for oil and develop wells in Kenya, has seen its annual spending fall significantly over recent years as the firm continues its shift in focus from exploration to production.

The lower capex points to leaner times for contractors providing services in the Turkana oilfields, with the potential of job losses as the firm scales down its outlay.

The company, which entered Kenya in 2010, presented its long-awaited revised development plan for oil production in Kenya for approval last December.

This will pave the way for the planned development of a pipeline and oil processing facility in the basin that includes $3.4 billion (Sh373.6 billion) investment for upstream activities.

Kenya had set a December 2021 deadline for Tullow to present a comprehensive investment plan for oil production in Turkana or risk losing concession on two exploration fields in the area.

“In December 2021, as per the licence extension obligations provided by the Government of Kenya in September 2020, the Project Oil Kenya JV Partners submitted a Field Development Plan for the 10BB and 13T licences…,” Tullow said.

“The JV Partners continue to seek a strategic partner for this project and constructive discussions continue with interested parties.”

A deep-pocketed strategic partner would enable Tullow to cushion its risks for the multi-billion project that includes setting up a crude pipeline and processing facilities for the oilfields.

Tullow, which operates the project, announced earlier it plans to sell a significant chunk of its 50 percent stake in the blocks, having hit financial hurdles of its own.

Tullow, which struck oil nine years ago, has been under pressure from Kenya to develop the Turkana oil wells that it expects to produce up to 120,000 barrels per day once production starts.

Kenya first announced the discovery of oil in Block 10BB and 13T in Turkana in March 2012, raising hopes of petro-dollars needed to fuel economic growth. But the country is yet to fully commercialise crude oil.

The State announced last year it is ready to finally pay out billions of shillings to more than 516 landowners in Turkana County after Tullow presented a clearer plan for oil production in South Lokichar Basin.

Energy Principal Secretary Andrew Kamau had said preparations for the compensation payouts would in December.

Tullow and its partners in the project, Africa Oil and Total, had initially planned to reach a final investment decision in 2019 and production of the first oil between last year and this year.

The Ministry of Energy last December played down concerns of delays on Kenya’s oil dreams saying the plans had finally taken shape.

“The project is more investable,” said Mr Kamau.

The British firm expects to recover 585 million barrels of oil from the project over the full life of the field.

The commercially extractable volume climbed to 585 million barrels from the previous estimate of 433 million barrels, according to an audit by British petroleum consulting firm Gaffney Cline Associates (GCA).

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