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Tullow to spend Sh22.5b as Kenya eyes first crude oil export in June

By Macharia Kamau | January 12th 2017
President Uhuru Kenyatta (right) during a meeting with Tullow Oil Chief Operating Officer Paul McDade, when he called on him at State House, Nairobi last year.

Tullow Oil plans to spend an estimated Sh22.5 billion in Kenya over the next one year as it prepares to start oil production on a pilot basis mid this year. The firm says it expects to go into full commercial production by 2020 as well as further exploration works in Turkana.

The firm said it would continue to invest cautiously, almost halving its capital expenditure budget across different operations to $500 million (Sh51.9 billion) in 2017 compared to $900 million (Sh93.4 billion) spent in 2016.

In a statement yesterday, the British firm said it would spend Sh10.38 billion ($100 million) on preparing the oil fields in Turkana to start production and exporting on a commercial scale, which is expected to commence in 2020.

It also expects to spend Sh12.9 billion ($125 million) on drilling of four wells in the course of 2017, with the possibility of drilling another four depending on the results of the first four wells.

“Capital expenditure will continue to be carefully controlled during 2017. The group’s capital expenditure associated with operating activities is expected to reduce from $0.9 billion (Sh93.4 billion) in 2016 to $0.5 billion (Sh51.9 billion) in 2017,” said the firm in a trading statement and operational update.

It added that it planned a “Kenya pre-development expenditure of $100 million (Sh10.38 billion) and exploration and appraisal spend limited to $125 million (ShSh12.9 billion).”

The pre-development expenditure is expected to finance studies and other preparatory activities that will inform the full field development as well as the planned 890 kilometre pipeline from Turkana to Lamu.

Early oil export

At the moment the company, together with the Government of Kenya and its joint venture partners in Kenya, Africa Oil and Maersk Oil, are in plans to start exporting on a pilot basis mid this year. “Work continues on the Early Oil Pilot Scheme, full field development planning and the export pipeline,” said Tullow.

The firm restarted drilling in Turkana in December 2016 and has said the Erut 1 well is nearing completion and it would communicate the results in the coming weeks. It also plans to drill another three wells in the course of this year, which will inform the need to drill further in the Lokichar region.

“A four-well exploration and appraisal programme commenced in mid-December in the South Lokichar Basin with the drilling of the Erut-1 well... the well is nearing completion, with a result expected shortly,” the firm said.

“This programme could be extended by up to four additional wells in 2017, depending upon the assessment of the results from the initial four wells.”

In April, Tullow said after an appraisal of wells drilled in Lokichar estimated the recoverable resources to be in the region of 750 million barrels with the potential of hitting a billion barrels with further exploration.

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