Tullow says a dip in oil prices presented challenges in the implementation of its initial project plan.
Oil price collapse this year has forced the entire oil and gas sector to slash its exploration budgets.
Tullow Oil is the operator of the blocks with 50 per cent interest. Africa Oil and Total each hold 25 per cent.
British firm, Tullow Oil is restructuring activities at its Kenyan project site in Turkana to limit costs amid suppressed crude prices.
Tullow Oil Plc chief executive Rahul Dhir said on Wednesday even though the company is satisfied with reserves of about 1.5 billion barrels of oil (bbl) in Kenya, a dip in oil prices presented challenges in the implementation of its initial project plan.
“We have discovered over 1.5 billion barrels of oil in place and are shallow, productive reservoirs with light oil. This is very large, but the original development plan was meant to work at oil prices of at least $50 (Sh5,472.50) per barrel” he said during the company’s Capital Markets Day.
“The world has significantly changed in 2020 with continued low oil prices of less than $45(Sh4,925.25) per barrel, and hence, there is a fundamental need to redesign the development so that we can deliver an economic project at ‘lower for longer’ oil price world.”
Oil price collapse this year has forced the entire oil and gas sector to slash its exploration budgets.
Kenya extended the company’s licences this year after it threatened to pull out due to impact of coronavirus by invoking force majeure — unforeseeable circumstances that prevent someone from fulfilling a contract.
The government gave a condition that the joint venture between Tullow, Africa Oil and Total deliver an agreed work programme and budget by December 2021.
“The main areas that will improve the project economics will be to optimise the reservoir performance such that we can deliver higher initial production rate (upwards of the current 72 barrels of oil per day) by drilling at the most productive part of the fields in the earlier phase,” said Mr Dhir.
He said Tullow would optimise capital costs and life cycle operating spend to accelerate more resources within the licence period.
Tullow Oil is the operator of the blocks with 50 per cent interest. Africa Oil and Total each hold 25 per cent.
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