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Tullow hopeful of Kenya FID this year

The operator remains positive, but the future of Kenya’s first oil development remains very uncertain

Tullow Oil says that FID on the Turkana oil development in northern Kenya is still possible by the end of the year. However, the project’s operator has said it needs to farm-down at least part of its 50pc stake if the project is to proceed and the cash-strapped company could yet exit the project altogether.

Tullow and its partners Total (25pc) and Canadian-registered Africa Oil Corp (25pc) had hoped to take FID by the end of 2019. This was put back due, in part, to a lengthier-than-expected process by the Kenyan authorities. Heads of terms with the government, covering legal, tax, transportation and regulatory issues, were signed in June 2019.

Besides oil production in the remote Turkana region’s South Lokichar Basin, the development includes an 820km pipeline to the coast at Lamu. The total cost could run to more than $3bn.

Tullow spokesman George Cazenove says the company believed the project was making headway and FID in 2020 was possible. “It is progressing. Our two targets are to farm-down our stake and to get FID done by the end of the year. We are on track for both and, while the FID is ambitious, it is doable,” he tells Petroleum Economist . Challenges mount

Making major progress will be challenging. Tullow stated last year it wanted to reduce its stake in blocks 10 BA, 10 BB and 13T to around 30pc, while Total is seeking to reduce its stake by around half. The firms are working with French investment bank Natixis to coordinate a joint sale.

The project’s future has been further complicated by Tullow’s dire financial position, exacerbated by production problems in Ghana and poor exploration results in Guyana. This led to the departure of chief executive Paul McDade and exploration director Angus McCoss in December, and a collapse in the company’s share price. The outcome has been swingeing cutbacks in spending and staff levels globally, including in Kenya where Tullow’s local workforce is being reduced by some 40pc.

“Our two targets are to farm-down our stake and to get FID done by the end of the year. We are on track for both” Cazenove, Tullow Oil

The government, nonetheless, remains upbeat. Petroleum principal secretary Andrew Kamau has said he believes Tullow’s problems outside of Kenya will not adversely affect investment in the project.

However, it is not certain […]

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