Tullow to pump Sh4bn into Kenyan operations this year

Tullow Oil is set to invest $40 million (Sh4.1 billion) in its Kenyan operation this year as it gears up for commercial oil production.

The announcement by the British multinational came despite the local government rejecting its claim of spending a cumulative Sh204 billion in the Turkana oil fields. Tullow’s exploration and oil field development costs are expected to be recovered over years once production and sale of the commodity starts around 2022.

“The capital investment total comprises … Kenya and Uganda pre-development expenditure of circa $40 million (Sh4.1 billion) and circa $15 million (Sh1.5 billion) respectively,” Tullow said of its 2020 investment plans in a trading update. The company, which has put part of its Kenyan assets on the market, aims to raise $1 billion in asset sales.

The multinational added that the Kenya’s commercial oil production risks being delayed because of slower-than-expected progress in signing revenue-sharing agreements with the government and acquisition of land for the pipeline.

“Progress has been slower on some workstreams such as access rights to land and water and the long-form commercial agreements to be entered with the Government of Kenya,” Tullow said.

“This slow progress means that the target of reaching final investment decision (FID) by year-end 2020 becomes more challenging.”

The multinational said its plans to sell part of its stake in the Kenya joint venture remains on track.

Tullow’s move to ask the Kenyan government to acknowledge its $2 billion (Sh204 billion) claim is seen as a bid to make it easier to sell its stake to other parties. Tullow recently wrote off $800 million (Sh82 billion) of its exploration costs in Kenya and Uganda after lowering its forecast for long-term crude oil prices per barrel from $75 to $65.