Tullow Oil, a British exploration firm, has become the sole owner of the Kenya crude project in Turkana after its joint venture partners, Africa Oil Corp and Total Energies, exited the project.
Africa Oil Corp and Total Energies informed Tullow of their intention to withdraw from Blocks 10BB, 13T, and 10BA in the South Lokichar Basin due to differing internal strategic reasons. As a result, Tullow’s working interest in these blocks will increase from 50% to 100%.
Tullow stated that with the exit of its partners, it will assume a 100% equity position, subject to the approval of the government of Kenya. The company intends to continue its collaboration with the government and local communities to develop the region into a significant energy-producing province.
READ:Dangote oil refinery in Nigeria commissioned
Turkana oil project
The Turkana oil project has faced several delays, with investors and the government postponing timelines, leading to uncertainty over the project’s future, even after a decade since the oil discovery. Last year, Tullow stated that the project’s future relied on the company and its partners securing a strategic investor.
Kenya had set a deadline of December 2021 for Tullow to present a comprehensive investment plan for oil production in Turkana. Failure to meet this deadline could have resulted in the loss of the concession on two exploration fields. Tullow’s financial report for the year ended December 2022 revealed that the book value of its Kenyan assets stands at US $252.6M, and the company believes that a positive outcome from its efforts to obtain a production license and attract a new strategic investor would increase the valuation of the asset.
Tullow has made progress on the Turkana oil project by submitting an updated Field Development Plan (FDP) to the Energy and Petroleum Regulatory Authority (EPRA) in March 2023. The approval of the FDP, which needs to be ratified by Parliament, will enable Tullow to obtain a government license to begin commercial drilling of crude oil in the 10BB and 13T oil blocks.
The revised FDP reflects an increase in the commercially recoverable oil reserves, as determined by an audit conducted by British petroleum consulting firm Gaffney, Cline & Associates. The estimated production capacity of the oilfields has been revised from 70,000 barrels of oil per day (bopd) to 120,000 bopd. Consequently, the FDP has been adjusted to accommodate a larger crude oil processing facility in Turkana and a larger pipeline to transport the oil to Lamu. The projected cost of the project has increased from US $2.3Bn to US $2.7Bn.
For the preparatory work on the Lokichar-Lamu crude oil pipeline, Kenya has allocated US $17M over the next three financial years. This funding signifies the country’s commitment to tapping into the potential benefits of the oil industry.
The National Treasury’s budget schedule shows that US $4.7M has been allocated for research, feasibility studies, project preparation, and pipeline design in the upcoming financial year. The funding for preparatory activities on the pipeline will increase to US $6.33M and US $6.37M in the 2024/25 and 2025/26 fiscal years, respectively. This marks renewed financial support for the project, which did not receive any funding in the current financial year.