Kenya audits Tullow Oil’s expenditure in Turkana County

The Government has restarted recruitment of a consultant to audit Tullow Oil’s books in a bid to independently establish how much the UK oil exploration and production firm has spent in Turkana over the last six years.

The Ministry of Energy and Petroleum last year undertook a similar search for a company to audit Tullow’s spend but was unable to award a contract due to what it said was lapse of time.

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 of oil starts at around 2021.

“The objective of this assignment is to conduct an audit of petroleum costs in blocks 10BB and 13T for a period of six years starting from 2010/11 to 2016. To evaluate whether the expenditure is in line with contractual obligations and thus if acclaimed costs are entitled to cost recovery,” said the ministry in a public call for companies to bid for the job to audit Tullow Oil.

In addition to the costs already incurred, the consultant will give advice on cost implications of the early oil pilot scheme that Tullow Oil and its joint venture partners are about to embark on. The consultant will also undertake training for Ministry of Energy staff to be able to undertake such audits in future and rely less on reports filed by companies prospecting for oil in Kenya.

In the public notice, the ministry said the scope of the assignment will also include “capacity building (on job training) for three staff members on the principles under petroleum production sharing agreements.”

Last year, the ministry had embarked on a similar exercise and earlier on this year said it was getting ready to name a contractor that would undertake the independent audit. The ministry, however, said due to time lapses, a lot had changed and wanted to recruit a consultant afresh.

“Nothing major has happened but time has passed and necessitated that we undertake the recruitment of an independent auditor afresh,” said Ministry of Energy and Petroleum Cabinet Secretary Charles Keter.

He added that it was a necessary step for the Government to get a proper grasp of the expenditure by the partners in the Lokichar oil project well before commencement of commercial production. He added that with capacity improvement at the ministry, officials would keep tabs of the activities going forward.

“We are getting to a critical phase and must have everything in place,” said Keter. Once selected, the consultant will have six months to report back to the Ministry.

To cost at least Sh4 billion

Tullow Oil last year said it had invested over Sh150 billion ($1.5 billion) in the Turkana oil fields since it started exploring in 2010.

The investments have since gone up and 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. The partners are also embarking on the early oil pilot scheme that is expected to see an escalation of costs and which is estimated to cost at least Sh4 billion.

The ministry has in the past said the costs will be borne by Tullow and joint venture partners in Kenya. It will be included in their exploration and appraisal budget. “As Government, the only area we are spending on is the refinery upgrade and heated storage,” he said.

It is not the first time that the ministry is attempting to audit the exploration companies working in Kenya. Other than the 2016 bid to look into Tullow’s books, the ministry had in 2013 tasked the National Oil Corporation of Kenya (NOCK) with auditing not just Tullow but all upstream players.

This, however, did not yield much as industry players raised concerns on a possibility of conflict of interest, considering NOCK is a player in upstream, where it is exploring in Block 14 T in Kajiado.

The ministry then advertised for a private consultant in the same year although nine of the applicants applied, the exercise did not attract firms that had adequate expertise on the field. Last year, the ministry made another attempt to get and auditor but close to one year later the ministry still doesn’t have an auditor.