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POSTPONEMENT

Tullow Oil to delay investment decision in Kenya to next year

In Summary

• The firm blamed the postponement to  slow pace in completion of the Front End Engineering Design (FEED) studies for both the upstream and midstream

TOWERING: Tullow Oil Paipai-1 drill site as seen from the entrance of the drilling camp in Turkana. Photo/File
TOWERING: Tullow Oil Paipai-1 drill site as seen from the entrance of the drilling camp in Turkana. Photo/File

Tullow Oil has delayed the final investment decision (FID) for its Kenya project to 2020, this despite an agreement with Kenyan government to crude processing facility on Tuesday.

The UK oil exploration and development firm had in June last year indicated that it will make a decision to fully invest in oil drilling in Kenya before end of 2019.

In an advance half year financial statement released yesterday, the firm said significant progress has been made so far this year but expects to make a decision next year.

 
 

"Despite this progress, the partners and the government of Kenya are reviewing the most likely timeline to FID which Tullow now expects in 2020," Tullow Oil said.

The firm cited slow pace in completion of the Front End Engineering Design (FEED) studies for both the upstream and midstream for the delayed investment decision.

It said that the he National Environment Management Agency has requested for additional time to consult community, with the Environmental and Social Impact Assessments (ESIAs) to be submitted in the second half of 2019 which is later than anticipated.

"While these activities are progressing well, they are taking longer than originally forecast,’’ Tullow said.

The statement is coming just a day after the Kenyan government signed an agreement with the oil consortium to develop a 60,000-80,000 barrels per day crude processing facility for oil discovered Blocks 10 BB and 13T in South Lokichar Basin.

Tullow Oil and and its partners first discovered crude oil in the Lokichar basin in 2012, which it estimates contains an estimated 560 million barrels in proven and probable reserves.

The Tuesday deal was hailed as a major milestone towards full-scale oil production in 2022.

 
 

According to the company, the Early Oil Pilot Scheme(EOPS) launched by President Uhuru Kenyatta June last year, production was increased from 600 barrels to 2,000 barrels in May.

It added that over 150,000 barrels of oil have been safely delivered to Mombasa so far and it expects the first export cargo to be sold and lifted in the third quarter of 2019.

Tullow Plc is expecting to report revenue of around $900 million (Sh90 billion) and gross profit of around $500 million (Sh50 billion) in the first half up to June 30, 2019.

Tullow expects its revenue and free cash flow to be heavily weighted to the second half of the year due to the Group’s lifting schedule and the phasing of both tax payments and rebates.

It will announce final half year results on July 24.