Canada firm not free yet, a year after Kenya project exit

Sunday July 07 2024

Oilrig worker at Ngamia 3 oil exploration site in Nakukulas village, Turkana South Sub County, Kenya on July 13, 2014. PHOTO | FILE | NMG


Africa Oil Corp still has liabilities amounting to $1.8 million for its operations in Kenya and another claim of an unspecified amount from the local community, a year after it exited the three oil blocks in Turkana oilfield.

Africa Oil, a Canadian oil and gas company, in a report to its shareholders for the first quarter of this year, put its “accounts payable and accrued liabilities” at $11.8 million down from $14.2 million in December last year relating to its exit from Blocks 10BB, 13T and 10 BA on June 30.

“Accounts payable and accrued liabilities mainly relate to liabilities, exit and office close-down costs associated with the withdrawal from Kenya,” said Africa Oil in its report to shareholders for March 2024.

Its liability is likely to increase as the company discloses it has since been informed of another claim of an unspecified amount from the local community.

Read: Deep-pocketed Indian firms eye Tullow stake in Kenya oil

After the exit of its subsidiary, Africa Oil Kenya BV, the parent company revealed in its half-year results for 2023 that it had settled $15.5 million between April and June in 2023 to the Kenya Revenue Authority and other undisclosed partners. The firm says it is still awaiting the government’s approval to transfer its interests and future obligations in the three oil blocks to British oil explorer Tullow Oil.


Until May 2023, the three blocks were owned jointly by Tullow Oil, which had a 50 percent stake, TotalEnergies (25 percent) and Africa Oil (25 percent). However, Africa Oil and TotalEnergies left the joint venture “unequivocally and unconditionally” raising doubts on the viability of a project the country had once staked its hopes of altering its economic fortunes by joining the oil-producing club.

On May 23, 2023, Africa Oil announced its withdrawal from the entirety of the production sharing contracts and joint operating agreements for Blocks 10BB, 13T, and 10BA, and wrote to the Energy ministry asking it to transfer all its rights and future obligations to the remaining joint venture partner, Tullow Oil.

Tullow, which now owns 100 percent of the blocks, has since informed Africa Oil of pending liability to the local community.

“The company has been notified by the operator of the project about a claim made against the operator by local communities in relation to past operations which may relate to the period prior to June 30, 2023,” said Africa Oil.

Africa Oil ended its interest in the Turkana oil project in May, opting to concentrate in regions with high petroleum potential. It still has interests in Nigeria, South Africa, Equatorial Guinea and Namibia.

Africa Oil Kenya BV bought its stake in the Turkana oil project through the acquisition of exploration rights to Block 10BB from Turkana Energy Inc.

Read: Total, Africa Oil exit Kenya crude project

The exit of the Africa Oil and TotalEnergies has left the cash-strapped Tullow seeking a strategic investor to provide funds and help move the project to the commercialization stage.

The Energy Cabinet Secretary Davis Chirchir said that the twin exits from the Turkana Oil project that started with the administration of the late President Mwai Kibaki had spooked potential oil explorers.

Mr Chirchir revealed that a greenfield investment, which has seen the potential investors pump billions into the project and turn it into commercial production, had been started by the decision by the two multinational oil companies to abandon their equity to Tullow Oil.

The CS added that heightened pressure against fossil fuels has meant that prospects for licensing of blocks for a non-oil-producing country like Kenya are lower compared to a producing country where market infrastructure has been developed.

“Where at a phase where if companies like Total and Africa oil can write off their investment in a block where discoveries have been made, the risk capital that goes into a block where discoveries have not been made is a challenge,” Mr Chirchir told an oil exploration summit last year.

With the rising chorus against fossil fuels as the world tries to shift to renewable energy, however, hitting the black gold does not necessarily guarantee its production as investors are shying away from the dirty fuel.