Tullow Oil suspends plans to exit Kenya
Anglo-English based oil explorer Tullow Oil has made an about turn on its oil project in Kenya suspending its planned exit through the sale of blocks in the South Lokichar Basin.
In a trading statement issued on Wednesday, the explorer says it has held off the sale plans as it conducts a comprehensive review of the project including a consideration for alternatives to an eventual exit.
The change of heart by the explorer comes on the back of the extension of its exploration period for the 10BB and 13T license blocks to December 2021 after the operator withdrew a force majeure notice in August- a disclaimer indicating it couldn’t honour its contract with the government.
“Separately, the farm down process has been suspended while the Joint Venture Partners complete a comprehensive review of the development concept to ensure it continues to be robust at low oil prices, and also consider the strategic alternatives for the asset,” noted Tullow.
Tullow has nevertheless delayed its declaration of a final investment decision (FID) on the project, with the decision now likely to emerge around the end of the extended exploration period in December 2021.
The extension of term with see Tullow continue with early oil exploration activities which includes the export of Kenyan crude to the international market to test the quality of output.
In January this year, the operator hired French bank Natixis to run a joint sale of its combined oil blocks along with co-explorer Total throwing plans for Kenya’s full oil development into disarray.
The planned sale of the blocks would draw criticism forcing Tullow to engage the defensive mode as it insisted of the viability of the project.
“There is enough oil in Kenya, and the business fundamentals remain intact: recent independent reserves audits demonstrate that we have a substantial underlying reserves and resources base in East Africa,” Tullow said on March 12.
The operator’s withdrawal of a force majeure notice in August and now the suspension of the sale of its Kenyan assets is expected to firm up confidence in the commercial exploration of oil in the country.
The size of Kenyan oil blocks is estimated at over 500 million barrels or an equivalent 79.5 billion litres.
Kenya is betting on the commercial exploration of the oil blocks to become a petrol-dollar state.
Current international oil prices puts the value of oil in the country at nearly Ksh.3 trillion.
The government has made advanced plans to profit from the black gold as it seeks to establish a pipeline connecting the port of Lamu and the Turkana oil fields to ease the transportation of crude to the international market.