Tullow job cuts in Kenya deepen oil export doubts

A costly clause may expose the government to expenses incurred by the firms during stoppages and other delays.

The production sharing contract between the government and Tullow has never been disclosed, leaving many guessing what level of wealth to expect from the project.

Tullow’s latest job cuts announcement in Kenya has deepened doubts on the viability of the country’s oil exploration.

The job cuts plan, coming shortly after the firm announced the sale of its entire stake in Kenya and plans to cut its capital investment in the Kenya project, is likely to pour cold water on the project, which was hyped by the government as among Kenya’s key economic breakthroughs.

The firm, which has been the principal operator of Project Oil Kenya, with Total Oil and Africa Oil as its joint partners, has been facing financial constraints that may now see the group’s workforce cut by approximately a third globally, with potential office closures in Dublin and Cape Town among a number of measures to reduce costs and overheads.

Tullow has nearly halved its capital spending in Kenya to Ksh4.06 billion ($40.6 million), down from the Ksh7 billion ($70 million) spent in 2019.

The move reflects the firm’s global reduction in expenditure by half to around $75 million and cancellation of its $100 million dividend plans with fears that even more radical measures may be announced alongside the full-year results expected on March 12.

It is not clear how many staff Tullow will lay off in Kenya, where its staff count stands at 650, but the latest $800 million write-off on its exploration costs in Kenya and Uganda after lowering its forecast for long-term crude oil prices and the sale of its entire stake speaks volumes.

The government has however maintained a brave face even as Tullow’s actions paint a gloomy picture.

Petroleum Principal Secretary Andrew Kamau told the Sunday Nation that there was nothing to worry about the company’s actions as they are normal business practices.

“I guess it makes sense in this phase of the project where negotiations on legal aspects, land, water and the sourcing for funds may not need a 100 per cent workforce. I am not speaking for Tullow though, what I know is that we are on track, with the project management contract tenders of the upstream already out as we move toward the final investment decision and full field development,” Mr Kamau said.Analysts however see the latest developments […]

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