Ministry starts audit of oil exploration firm expenses

After several failed attempts at probing the expenditure of British firm Tullow Oil, the Kenyan government has finally identified an audit firm to look into the company’s bill.

Tullow will claim all expenses incurred since 2010 when the oil revenues start trickling in, which may substantially reduce the country’s earnings from the natural resource.

The Ministry of Petroleum and Mining said it had settled on a contractor that would conduct an audit on Tullow’s petroleum costs in Turkana’s blocks 10BB and 13T.

Swale House Partners will undertake the audit spanning six years between 2010 and 2016. The audit is expected to inform the ministry as to how much Tullow Oil will recover from the sale of crude oil once commercial production starts at around 2021.

It will also determine whether the firm has been meeting obligations set out in the Public Sharing Contract (PSC) with the Government that specifies levels of investments it should make in exploration as well as community projects.

“(The recruitment of a consultant) is done and the process is ongoing,” said Petroleum Principal Secretary Andrew Kamau.

Swale House Partners will have six months to report back to the ministry.

In addition to the costs already incurred, the consultant will give advice on cost implications of the early oil pilot scheme, whose implementation is set to commence in earnest tomorrow when trucking of crude oil from Turkana will start.

The consultant will also undertake training for Ministry of Energy staff to undertake such audits in future and rely less on consultants and reports filed by companies prospecting for oil.

The Government has made several attempts to recruit a consultant to undertake the audit but the tendering process has usually aborted midway.

There was also a 2013 attempt by the National Oil Corporation to audit all players in the upstream segment of the industry, which failed as players said the State firm was a competitor in upstream.

The firm has in the past said it has spent more than $1 billion (Sh150 billion) in exploration and appraisal activities in Lokichar, which is likely to go up as the firm gears to start commercial production by 2022.

The investments are expected to further increase as the firm and its joint venture partners get into an intense phase that is expected to lead to commercial production.

In April, Tullow said it would invest an estimated Sh290 billion in the initial stage of the commercial development phase, part of which will towards building the production facility while Sh110 billion will go towards building of the pipeline.

The company is also embarking on the early oil pilot scheme that is expected to see an escalation of costs, estimated to be at least Sh4 billion.

[email protected]