Tullow keeps trucking oil to Mombasa on hold

A truck transports oil from Turkana County to Mombasa
A truck transports oil from Turkana County to Mombasa. FILE PHOTO | NMG 

Trucking of Kenya’s crude from Turkana to Mombasa will remain suspended until sections of roads severely damaged by heavy rains are repaired.

British oil explorer Tullow on Wednesday said the early oil pilot scheme (EOPS) was put on hold after adverse weather in the fourth quarter of 2019 posed security risks.

“Trucking remains on hold until all roads are repaired to a safe standard,” Tullow said in its trading update.

Tullow uses a fleet of 100 specialised tankers to lift 2,000 barrels per day over the 1,000 kilometres.

The suspension derails the Ministry of Petroleum’s shipment target of 500,000 barrels of oil. In December, Tullow said only 150,000 barrels of oil had been ferried to Mombasa for pre-shipment storage.



Tullow said it expects to report a $1.5 billion (Sh150bn) writedown after lowering its long-term oil price assumptions by $10 to $65 a barrel.

“Write-offs include Jethro, Joe and Carapa well costs in Guyana as a result of drilling results and Kenya Block 12A, Mauritania C3, PEL37 Namibia and Jamaica licence costs due to the levels of planned future activity or licence exits,” it said.

In Uganda, the oil explorer said that there was no breakthrough where it is looking to reduce its stake.

A final investment decision for Kenya is still pencilled in for the end of this year, but that target is “challenging”, Chief Operating Officer Mark MacFarlane said.

JPMorgan analysts said in a note: “Looking forward, alongside the CEO and other organisational changes we anticipate through 2020, we look for greater clarity on realistic timeframes to progress in both Uganda and Kenya, which hold the key to medium term growth potential.”

Tullow and the government are using the early shipments to test the market and to provide invaluable data and experience to be used in driving the oil business at the development stage.

Trucking of crude to Mombasa was launched by President Uhuru Kenyatta in June 2018 but the project has faced many hurdles including protests by local community demanding security be beefed up over banditry and allocation of jobs and tenders in the oil operations. The protests forced Tullow to suspend trucking for a month.


The writedown at comes after the exit of CEO Paul McDade in December and the scrapping of the group’s dividend after the group failed to meet production targets due to a weak performance at its assets in Ghana.

To shield against oil price fluctuations, Tullow has hedged 45,000 barrels per day (bpd) of its 2020 output with an average floor price of $57.28 a barrel. For next year, it hedged 22,000 bpd at an average floor price of $52.80 a barrel.

Tullow shares shed 70 percent in the fourth quarter of 2019 on production downgrades in Ghana, the oil quality found in a well in the Orinduik block offshore Guyana and the disappointing size of a well in its Guyanese Kanuku block.

Tullow, a partner of French oil major Total in several projects, has forecast 2020 output to shrink to a maximum of 80,000 bpd and fall again to around 70,000 bpd in 2021-2023. It is still looking for a replacement for its former Chief Paul McDade, who stepped down last month.

Tullow’s full-year results are due on March 12 and will include updates on the review of its assets and management structure.