Kenya to buy 20% stake of Turkana oil project

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Kenya to buy 20% stake of Turkana oil project

The government of Kenya has announced it is considering exercising its back-in option to buy up to a 20% stake in the Turkana oil project.

Tullow Oil currently owns the full stake in blocks 10BA, 10BB, and 13T in the South Lokichar Basin in Turkana. This is a result of its joint venture partners, TotalEnergies and Africa Oil Corporation, selling their stakes to Tullow.

The potential involvement of the Kenyan government or a government-owned entity like the National Oil Corporation of Kenya (Nock) would significantly alter the ownership structure of the project.

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The back-in option is provided by the production-sharing agreement, which is a common type of contract in the oil and gas industry. This agreement allows the government to join the contractor group by acquiring a 20% stake in the project. The exercise of this option typically occurs once the project transitions from the exploration phase to the development phase.

The financial aspects of exercising the back-in option will be a crucial factor in the government’s decision. Acquiring a 20% stake in an oil project is a substantial financial investment, and the government will need to carefully consider the costs and benefits of such an action.

The fate of the project and the government’s decision to exercise its back-in rights will depend on the ongoing review of the field development plan (FDP). The FDP outlines the project’s technical and economic details, and its approval is a critical milestone in the project’s lifecycle. The government’s decision may be influenced by the outcomes of this review, which will likely assess the project’s viability and economic potential.

The decision to take a stake in the project has both economic and strategic implications for Kenya. On one hand, it can potentially boost the country’s revenue and energy security. On the other hand, it involves managing the complexities and risks associated with the oil and gas industry.