More delays in Kenya oil dream as State holds up firm's exit plan

Workers walk past storage tanks at Tullow Oil's Ngamia 8 drilling site in Lokichar, Turkana County. [Reuters]

Canada’s Africa Oil Corp now says its earlier announced plans to pull out of Kenya’s Turkana oil project have hit fresh headwinds following delayed State approvals.

Africa Oil last year announced its decision to withdraw from the Kenya Oil project along with its minority partner, the French company Total Energies.  This move dealt a significant setback to Kenya’s aspirations of becoming an oil exporter. The Canadian explorer said on Monday while it had sought Ministry of Energy approvals to trigger the exit, the process had been thrown in limbo by unexpected delays.

It also signalled that British oil producer Tullow Oil, which is the majority operator of the project, is yet to get a strategic partner following the plans for the exit of Africa Oil and Total throwing the project’s future into uncertainty.

The company agreed with its joint venture (JV) parties its withdrawal from the entirety of the production sharing contracts and joint operating agreements for Blocks 10BB, 13T and 10BA in Kenya effective June 30, 2023. 

Africa Oil, however, says it is waiting for government consent to complete its withdrawal and the transfer of rights and future obligations. “In May 2023 the company submitted notices to withdraw from its concessions on Blocks 10BB, 13T and 10BA in Kenya,” said Africa Oil in regulatory filings seen by The Standard.

“The company’s withdrawal from the concessions is subject to approvals from the Kenyan authorities and, while the company is working with its JV parties and the authorities to effect a smooth withdrawal process, there can be no certainty that such approvals will be forthcoming on terms acceptable to all parties.” 

The Standard could not immediately get a comment from authorities on the status of approvals paving the way for Africa’s Oil and Total’s exits. 

The exit of two minority partners from the Turkana project and oil blocks in the South Lokichar Basin, left the London-listed oil and gas explorer to handle the entire investment.

The latest fallout and any possible bickering with the Kenyan government leaves the project in limbo and deals a blow to Kenya’s hopes of being a commercial oil-producing country in the near term. Kenya in March 2012 announced that it had discovered huge crude oil deposits that could be commercially exploited in Turkana County’s South Lokichar sub-basin.

More than a decade after Tullow Oil made the oil find, the project is yet to be commercialised. 

The large fiscal windfall associated with new oil resource revenue could help the ruling Kenya Kwanza coalition stabilise energy prices, boost development and improve the standards of living for citizens through access to key services and amenities such as roads, health, food security and education.

Tullow Oil is the current operator of the project and had a 50 per cent stake, while partners Canada’s Africa Oil Corp and French Total Energies SE held 25 per cent each before the latter two firms announced the exit plan.