Kenya earned $1.915 million (Sh247.9 million) in royalties for crude oil exported from the Turkana under a scheme that was meant to test the global appeal of the commodity.
Tullow Oil revealed that the payments were made last year, with block 10BB being the highest at $1.103 million (Sh142.83 million), followed by $674,000 (Sh87.2 million) for block 13T at and $138,000 (Sh17.8 million) for block 10BA.
Tullow, jointly with former partners Africa Oil and Total, exported 350,000 barrels of crude oil and made $4 million (Sh516 million at current exchange rates) from the sale of the shipments between 2019 and part of 2020 under the Early Oil Pilot Scheme (EOPS).
Royalties are cash payments that oil exploration firms pay governments for the extraction of oil or gas. The terms of the royalties are described within our PSCs and can vary from project to project within one country.
The scheme started in June 2018 and ran for two years, and was meant to test the competitiveness of the Turkana crude oil in the global market, as Kenya geared to start commercial production.
The crude oil was exported to India and China and was widely expected to lead to commercial production within two years.
The royalty fees represent nearly half of the revenues that Tullow booked from the sale of the crude oil. Kenya is keen to earn billions of dollars from crude oil exports, but this plan has been delayed for over four years.
However, Kenya has since failed to start commercial production after the Turkana oil project faced hurdles, notably a lack of investors to fund the project, delays in approving the plan on how to develop and operate the oilfields and the exit of Tullow and its two partners.
The disclosures show that the royalty payments made to the Government of Kenya represented 7.31 percent of the $26.17 million that Tullow paid last year as royalty fees in all countries where it is exploring or commercially producing crude oil.
Tullow had targeted to start commercial production by 2020, but this was later pushed forward to 2024 and then to next year amid difficulties in getting an investor to finance the project and delays in getting the government’s approval.
Additionally, the company was hit by the twin exits of Africa Oil and Total in May 2023, with the duo unconditionally ceding their combined share of 50 per cent in the project.
The two cited concerns on the commercial viability of the Turkana oil, saying that relinquishing their share in Kenya would allow them to shift their oil interests to other regions.
Tullow then exited the project last month, under a deal where it will receive payments from Gulf Energy in three tranches, with the last payment due on or not later than June 2033.
The British firm ended interests in the Turkana oilfields months after revealing a Sh18.86 billion ($145.4 million) write-off in the year ended December 2024. The firm had also been forced to write off Sh2.32 billion ($17.9 million) in the year ended December 2023.
Kenya targets to approve the Field Development Plan by the end of next month but this has been thrown into doubt following the change in ownership.
