Kenya puts Tullow on notice over Turkana oil fields

Kenya puts Tullow on notice over Turkana oil fields

British firm Tullow Oil risks losing concession on two exploration oil fields in Kenya if it fails to present a comprehensive investment plan for oil production in Turkana.

Kenya has issued an ultimatum to be presented with an investment plan not later than December 2021 following a delay by Tullow to develop the field for commercial production. Kenya is yet to see the petroleum wealth benefits, amid growing frustrations.

Tullow, which struck oil in the Lokichar basin of Turkana a decade ago, says the delay has been due to several factors, including unfavorable global oil prices, approval delays for land and water rights, a tax dispute and Covid-19 disruptions.

Ministry of Petroleum and Mining has stated that the December deadline would be enforced as conditions are always there in the Production Sharing Contract (PSC).

Tullow has said it is in the process of submitting an investment plan by June this year to prevent possible loss of exploration licenses on blocks 10BB and 13T.

Tullow says it working with its joint venture partners to complete a revised assessment of the project by the second quarter of 2021.

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The Group is required to submit a technically and commercially compliant Field Development Plan (FDP) with the Government of Kenya by December 31. If the FDP is not submitted by then, the extension period expires on the due date.

Kenya’s final decision on whether to allow Tullow Oil and its partners to carry on with the development the oil project is dependent on the investment plan.

Winning an oil license means a firm is typically given a few years of exclusive rights to explore. Successful exploration and oil discovery usually entitles the firm to subsequently receive an authorization for the area’s production. This could last up to 30 years.

Tullow and its p joint venture partners, Total and Africa Oil, had initially planned to reach a Final Investment Decision (FID) in 2019 and production of first oil between 2021 and 2022.

Last year, Tullow received an extension to its exploration licenses in Kenya to the end of 2021 owing to a three-months halt attributed to disruptions from Covid -19.

Kenya agreed to extend Tullow’s licenses after intense consultations between May and August 2020.

The license deal saw the explorer lift the Force Majeure it had declared on the Turkana oil project in May last year while the government agreed to exempt the supplies brought in by British oil exploration firm from value-added tax (VAT). The Treasury had removed the VAT exemption on taxable supplies.