Key investment decisions by UK oil explorer Tullow regarding Kenya's oil project are expected to delay further due to the collapse in oil prices due to the pandemic and a geopolitical price war, analysts have projected.
A report by GlobalData, a leading data and analytics company, says firms like Tullow whose Kenya project has faced delays are set to continue facing further hiccups tied to the economic climate.
The report says as business sentiment tumbles, sub-Saharan Africa is likely to see a slowdown in upstream activity for ongoing projects and final investment decisions (FIDs) in 2020.
“With global crude oil prices currently hovering around the $30 per barrel mark and cases of Covid-19 on the rise daily, companies have been forced to rethink project timelines for 2020 and operators are beginning to scale back spending in the short-term as they struggle to source adequate capital," Conor Ward, oil and gas analyst at GlobalData, said.
“The break even oil and gas prices of the majority of projects with anticipated final investment decision (FID) for 2020 are now considered as high risk."
Tullow did not comment on the assessment by press time. The Tullow oil project in Kenya has yet to receive an FID.
The firm remains uncertain if it will be ready this year as planned earlier, describing the timeline as “challenging”.
The fields already produce about 2,000 barrels of oil per day in the early production system. The oil is trucked from Turkana to Mombasa. A first cargo of 250,000 barrels was shipped on a tanker last August.
Project partners are planning a pipeline from Lokichar to Lamu on Kenya’s coast.