Tullow: Theres enough oil in Kenya, no plans to exit

British based oil explorer Tullow Oil has defended its operations in the country insisting there remains enough oil reserves in the country and that Project Oil Kenya (POK) remains commercially viable.

The explorer’s defence comes as the project comes under increased scrutiny by Kenyans amidst a slowdown in the development of the Turkana Oil fields and the explorer fired 35% of its global workforce.

“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,” noted Tullow in a statement issued Thursday.

“Throughout 2019, over 95% of the Tullow’s reserves and resources have been independently audited, and the results underpin the quality of the asset base.”

According to the Anglo-Irish Oil Company, the board remains fully committed to Kenya with the approval of requisite 2020 budget targeting a Final Investment Decision (FID) at the end of the year.

“Tullow Kenya will focus Capital Expenditure (Capex) on only those critical path items necessary to get the project to FID,” added the operator in statement.

“Some of the critical path activities towards achieving FID will include submission of the Field Development Plan (FDP), securing Environmental and Social Impact Assessment (ESIA) licences for upstream and midstream, work with the Government to secure access rights to land and water, and project financing among others.”

Nevertheless, the much anticipated decision on the commercialization of Kenyan oil fields remains in doubt with the company informing of slower progress in on some work streams such as access rights to land and water and the long-form commercial agreements to be entered with government.

Further, the trucking of crude oil from Turkana to the port of Mombasa under the Early Oil Pilot Scheme (EOPS) remains suspended since the 2019 fourth quarter as roads in the northern county remains impassable.

Already, the shipping of Kenya’s second ever batch of crude oil into the international market is set to falter with the Ministry of Petroleum having scheduled the second batch for export within the first quarter of the year.

Tullow’s FID remains the subject of a successful EOPS with the process being deployed to evaluate the value of Kenyan crude on the international market.

In August last year, the government announced the successful sale of 240,000 barrels of Kenyan crude to Chinese firm ChemChina Limited for a fee of Ksh.1.2 billion ($12 million) setting of a fever pitch amongst Kenyans on the petrodollar prospects.

The Turkana batch earned top market valuation in the international market by tapping a purchase cost equitable to the premium Brent Crude.

Events in the aftermath of the first sale have however been dull to prompt questions on the authenticity of both the Kenyan oil project and that of Tullow.

Tullow’s prospects in the country however remain bound within the confines of its Group operations with the company reporting unimpressive earnings for the year ending December 31, 2019.

Earlier on Thursday, Tullow reported a Ksh.174.3 billion ($1.7 billion) loss for the year from a Ksh.8.7 billion ($85 million) profit after taking in Ksh.205 billion ($2 billion) write offs and impairments.

The firm which dismissed its Chief Executive Officer and Exploration Chief in late 2019 over poor exploration returns further saw a dip in its free cash flows to Ksh.36.4 billion ($355 million) from Ksh.42.1 billion ($411 million) in 2018.

Tullow Group has suspended its dividend pay out to shareholders and plans on reducing its headcount by 35 per cent in costs saving measures aimed at raising Ksh.20.5 billion ($200 million) in the next three years.

The company has further reduced its capital expenditure for the year to Ksh.35.9 billion ($350 million).

Locally, Tullow has already announced a plan to layoff part of its 650 staff head count pressured by the registered financial constraints.

The firm has already deployed capital expenditure in excess of Ksh.200 billion ($1.95 billion) in its exploration activities, a sum which it is reported to claim on government even as the project’s contracts remain hidden away.