Kenya’s big oil hopes to delay over Tullow loss
Oil explorer Tullow yesterday said Kenya’s hopes of exporting oil in large quantities will be delayed further after announcing a full-year loss of $1.7 billion (Sh174.1 billion) down from profit of $85 million (Sh8.7 billion) in 2018.
The key issues in Kenya, Tullow said, was getting access rights to land and water and the long-form commercial agreements with the government.
“This slow progress means that the target of reaching Final Investment Decision (FID) by year-end 2020 becomes more challenging,” said Tullow in a statement.
The company last year fired 35 per cent of her workforce including Kenyans and sent home its former chief executive for overstating its outlook and ramping up debt as its stock plunged to a 16-year low.
Tullow Kenya is in the process of selling some of its assets in Kenya before FID. It said that reducing equity is a portfolio management activity and that it does not plan to exit Kenya.
The explorer, however, said that it remains fully committed to Kenya, and the board has approved the requisite 2020 budget targeting FID at the end of 2020.
Tullow’s debt, however, dropped to Sh200 billion from Sh300 billion the previous year after the company sold assets to keep off lenders.
Tullow Kenya will focus its capital expenditure (Capex) on those critical path items necessary to get the project to FID.
Some of the critical path activities 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.
Tullow reiterated that Project Oil Kenya (POK) is commercially viable and is underpinned by substantial underlying reserves.
In May 2019, the Early Oil Pilot Scheme (EOPS) production reached 2,000 barrels of oil per day (bopd).
Production performance tested during EOPS demonstrates that the reservoir remains consistent with expectations, and no further reservoir data is expected to be required to de-risk the project.
The first export of oil from East Africa, a cargo of 240,000 barrels, was flagged off from the port of Mombasa by President Uhuru Kenyatta in August 2019.
Following adverse weather in the fourth quarter of 2019, which caused severe damage to roads used by the crude export tankers, EOPS was suspended. Trucking operations remain suspended until all roads are repaired to a safe standard.
“There is enough Oil in Kenya, and the business fundamentals remain intact: recent independent reserves audits demonstrate that we have substantial underlying reserves and resources base in East Africa,” said Tullow.
Throughout 2019, more than 95 per cent of Tullow’s reserves and resources have been independently audited, and the results underpin the quality of the asset base.