Africa Oil and its joint venture partner Tullow Oil have secured licence extensions from Kenya to continue exploration and production activities in South Lokichar until 2021.
The licence extensions mean the joint venture partners can now reassess the Project Oil Kenya and design an economic project at low oil prices while retaining the phased development concept. It will also allow Tullow, Total and Africa Oil, to reconsider plans for the development.
Tullow Oil has been undertaking a six-month review of the viability of its operations in Kenya after a planned sale of its stake in the project fell through.
The Joint Venture partners will in the coming months work closely with the government on land and water agreements, gaining approval of the Environmental and Social Impact Assessments and finalising the commercial framework for the project. The successful completion will enable the submission of Field Development Plans to the government.
Kenya’s Ministry of Mines and Petroleum recently granted the company an extension for their 10BB/13T blocks exploration licences after approving its work programme and budget for the next year.
Rahul Dhir, Tullow Oil CEO said Kenya held a substantial resource, but there were many development challenges particularly low prices.
Tullow owns a 50 percent operated interest in blocks 10BB and 13T in South Lokichar basin, Turkana County, where the company discovered about one billion barrels of crude in 2012. Africa Oil Corporation and Total each own a 25 percent stake.
Kenya’s oil is yet to be brought to market. A plan for small-scale crude exports via road trucking dubbed early-oil was suspended in the fourth quarter of last year after severe weather damaged roads. Tullow later announced the programme had come to an end.
Covid-19 also dealt a blow to its operations, forcing the company in May to submit a force majeure notice to Kenya's petroleum ministry. It withdrew the note in June after talks with the government resulted in tax breaks and a 15-month extension of the project's licence, the firm said in its half-year briefing.
Kenya had targeted first commercial oil exports via a planned pipeline linking the oilfields to a port in Lamu, in 2022.