Tullow sinks Sh180b in Turkana oil: Audit

Tullow Oil spent Sh180 billion in exploration works during its early years at the Turkana oil blocks, according to an audit by the Ministry of Petroleum and Mining.

This will be part of the money the firm will recover after it starts commercially producing and exporting Kenyan oil.

The Government last year contracted audit firm Swale House Partners to undertake a Petroleum Cost Recovery Audit, which entailed looking at the reports submitted by Tullow to independently verify the firm’s expenditure.

It was also supposed to determine whether the expenses incurred by the oil company were eligible for recovery from the oil profits once it starts exporting the Turkana crude, which is expected in 2022.

Petroleum Principal Secretary Andrew Kamau said the auditors found that the company had spent $1.8 million (Sh180 billion) over the six years to 2016 while exploring for oil in blocks 10BB and 13T.

Tullow has in different reports said it has spent between Sh150 billion and Sh200 billion on the Lokichar blocks.

“We have audited what the company said they had spent to see if it’s correct,” said Mr Kamau. The ministry is now in the process of hiring a legal firm to finalise the report.

“The law firm will guide us because we have some queries and might also want more information about the audit report,” said the PS.

The cost that Tullow has incurred is likely to go up sharply with the oil project now heading to the commercial production phase.

Among major areas of spending include the 900km pipeline that will transport crude oil from the oil fields to Lamu Port, which has been projected to cost about Sh100 billion.

In an update last month, the company said it planned to invest $70 million (Sh7 billion) in the course of 2019 in “pre-development expenditure”.

Wood Group, a UK firm, is currently undertaking the Front End Engineering Design for the pipeline, which will inform what it will look like as well as give a better projection of the cost.