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Tullow woes delay Kenyan oil dream

By Macharia Kamau | March 13th 2020
By Macharia Kamau | March 13th 2020

Tullow Oil has cast doubts on whether it will be able to commercially produce oil in Kenya by 2022, citing delays in the signing of key agreements with the government.

It also cites continued lack of access to land and water that would enable it to get into the final phase of the project as reasons for the delay.

This is even as the firm reported a loss for the year to December 2019. Its losses worsened in 2019 and amounted to $1.7 billion (Sh170 billion) from a profit of $85 million (Sh8.5 billion) in 2018.

The firm cautioned yesterday that the slump in oil prices might dampen the planned sale of some of its assets in Africa, including Kenya, where it plans to sell half of its stake in the Turkana oil blocks.

In its financials for the year to December 2019, the oil company said it continued to experience delays in the Kenyan project and was doubtful as to whether the project will reach the Final Investment Decision (FID) this year.

The FID, which was set for 2019 but pushed to 2020, is expected to see the joint venture partners (including Total and Africa Oil) commit resources as well as agree on the award of key construction contracts. Only after FID can the partners award contracts for key aspects such as pipeline construction and commence development of the oil fields.

The firm said land acquisition for various aspects of the project and access to water for use in oil production had not moved as fast as expected.

It expects to draw water from Turkwel Gorge.

The combination of these factors and financial challenges the firm is experiencing have cast doubt as to whether the project can start commercial oil production by 2022.

“Progress has been slower on some work streams such as access rights to land and water and the long-form commercial agreements to be entered with the Government of Kenya,” said the firm yesterday.

“This slow progress means that the target of reaching FID by year-end 2020 becomes more challenging.”

“There is a material uncertainty that may cast significant doubt that the Group will be able to operate as a going concern,” said Tullow.

In early December the firm kicked out its then chief executive and the director of the exploration. It is also in plans to lay off staff, including at its Kenyan operation in addition to reducing spending.


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