Tullow Kenya Managing Director Martin Mbogo speaks on the firm’s future during an interview in Westlands, Nairobi, on February 20, 2020. PHOTO | FILE | NATION MEDIA GROUP An audit of the cost recovery bill presented by Tullow has revealed that at least Sh15 billion claimed does not qualify to be repaid by the Kenyan taxpayer.
Tullow Oil, which recently shocked the Petroleum ministry with a Sh204 billion compensation bill, maintained that the amount was reasonable.
The British oil firm said the Petroleum ministry conducted a cost recovery audit for the eight year period between 2010 and 2018.
The final audit report indicated that the disallowable expenditure is $150 million (Sh15.9 billion) of the gross expenditure of $2.04 billion.
"This represents less than eight per cent of the gross expenditure – reasonable by industry standards," Tullow Oil Kenya Managing Director Martin Mbogo said in a statement.
The cost recovery audit examined all spending by the joint venture and decided what expenditure could be claimed from production revenues. This can only be claimed when production starts.
Mr Mbogo said their partners and the Kenyan government will work together to agree on a final figure to be approved for compensation when Kenya starts commercial oil production.
"The ministry has indicated that it will call meetings to discuss these findings with intent to have complete closure on the matter. During these meetings, the contractor will clarify why some of these findings should be dropped," Mr Mbogo said in an emailed response to the Nation .
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A higher bill will help Tullow Oil get a better price for its shares, which are on sale.
The firm confirmed that it has called force majeure on its licences in northern Kenya, which means that it is unable to continue with its contractual obligation in Turkana oil fields. Tullow Oil is the operating partner on Blocks 10BB and 13T in KenyaA force majeure notice is declared when a company is unable to perform its obligations in a contract due to unforeseen events, such as floods and disasters.In contracts, this is synonymous to filing for divorce or separation. The firm has, however, maintained that the notice does not affect the group’s work programme."Tullow and its partners have called force majeure because of the effect of restrictions caused by the coronavirus pandemic on Tullow’s work programme and recent tax changes," the firm said."Calling force majeure will allow time for the restrictions on the work […]