Total, Africa Oil exit Kenya Turkana crude project
Tuesday May 23 2023
British exploration firm, Tullow Oil has assumed full ownership of the Kenya crude project in Turkana after its joint venture partners Africa Oil Corp and Total Energies exited.
Tullow said that it has been informed by its two minority partners of their intention to issue notices of withdrawal from Blocks 10BB, 13T, and 10BA in the South Lokichar Basin for differing internal strategic reasons.
As a result, Tullow’s working interest in these blocks will increase from 50 percent to 100 percent.
"With the strategic exit of Africa Oil Corp and Total Energies from the project, Tullow will assume a 100 percent equity position, subject to the government of Kenya's approvals and will continue its work with the State and its host communities to make the region a significant energy-producing province," Tullow said.
The Turkana oil project has suffered several delays with the investors and government postponing timelines, making the future uncertain over a decade after the oil discovery.
Read: How Museveni killed Kenya’s crude pipeline dream
Last year, Tullow said the future of the project is dependent on the company and its partners getting a strategic investor.
Kenya had set a December 2021 deadline for Tullow to present a comprehensive investment plan for oil production in Turkana or risk losing concession on two exploration fields.
Tullow said in its financial report for the year ended December 2022 that the book value of its Kenyan assets stands at $252.6 million (Ksh32.3 billion) but added that a positive outcome of its current efforts to gain a production licence and attract a new strategic investor would unlock higher valuation of the asset.
The British exploration firm said progress continues on the Turkana oil project following the submission of an updated Field Development Plan (FDP) to the Energy and Petroleum Regulatory Authority (Epra), in March this year.
The approval of the FDP—which will need to be ratified by Parliament —will enable Tullow to get a government licence to commence commercial drilling of crude oil in the 10BB and 13T oil blocks.
The revised FDP followed the revelation that the commercially recoverable oil from the reserves is significantly larger than previously estimated.
An audit by British petroleum consulting firm Gaffney, Cline & Associates led the firms to revise the production capacity of the oilfields to 120,000 barrels of oil per day (bopd), up from previous estimates of 70,000 bopd.
This saw the revision of the FDP that has increased the size of the crude oil processing facility in Turkana and the size of the pipeline to evacuate the oil to Lamu, increasing the projected cost of the project from Ksh319 billion ($2.3 billion) to Ksh377 billion ($2.7 billion).
The revised FDP also increased the diameter size of the planned Lokichar-Lamu crude oil pipeline from 18 inches to 20 inches to handle a higher product volume and drilling of additional exploration wells.
Kenya has apportioned Ksh2.4 billion ($17 million) over the next three financial years for preparatory work for the Lokichar-Lamu crude oil pipeline, signalling a determination to tap oil cash.
A budget schedule by the National Treasury showed that Ksh651.26 million ($4.7 million) has been apportioned for research, feasibility studies, project preparation, and design of the pipeline in the new financial year starting in July.
Funding for the preparatory activity on the planned crude pipeline will rise to Ksh872.68 million ($6.33 million) and Ksh878.35 million ($6.37 million) in the 2024/25 and 2025/26 fiscal years, respectively—marking renewed financing for the venture that wasn’t allocated any cash in the current financial year.
- Reporting by Allan Odhiambo and Adonijah Ndege.