Turkana oilfields development and operating plan approval faces fresh delays following the sale of the project to Gulf Energy, further deferring Kenya’s ambitions of earning petrodollars.
Energy Cabinet Secretary Opiyo Wandayi on Tuesday said that the approval could be delayed if Gulf Energy decides to submit a fresh plan instead of the one that Tullow presented for consideration last year. Crafting a development plan for oilfields is a complex and lengthy process.
“Gulf Energy has the option of using the field development plan (FDP) as is with the technical amendments as agreed with GoK, which will of course be vetted before the consent for takeover.”
Parliament had set a June deadline to decide on the FDP that Tullow submitted but this was thrown into doubts after the British firm sold the project to Gulf Energy for $120 million (Sh15.4 billion at current exchange rates), ending a 13-year unsuccessful bid to tap the oil reserves and make Kenya an exporter of black gold.
Approval of the FDP is key to getting a deep-pocketed investor to de-risk the project and allow for the start of commercial production of oil on blocks 10BA, 10BB, and 13T in South Lokichar, Turkana County.
Tullow had targeted to start production of oil last year, but the plan derailed due to delays in getting regulatory nod for the FDP.
The government rejected Tullow’s FDP and directed the British firm to plug financial and technical gaps. Tullow then submitted a fresh plan and was expecting to get a decision from the government next month.
Tullow suffered a blow in May 2023 following the twin exits of Total and Africa Oil. Withdrawal of the duo added to the woes that Tullow faced in the Turkana oil project amid struggles to get investors to provide billions of shillings needed to move the project to the next phase.
Total and Africa Oil cited concerns on the commercial viability of the oil blocks, but the takeover by Gulf Energy offers hope that Kenya could become an exporter of crude oil.
Under the Petroleum Act, Gulf Energy can make changes to the FDP that Tullow submitted to avert fresh delays on the final decision. Gulf Energy must, however, seek approval from the Ministry of Energy.
Gulf Energy last month agreed to fully acquire Tullow’s assets in the South Lokichar basin, ending the British firm’s tumultuous venture to start commercial production of crude oil.
The deal will see Gulf Energy pay three installments of $40 million each, with the first payment due upon approval of Tullow’s FDP but not later than June 2026, while the last tranche will be made latest in September 2033.
Tullow, however, retains a back-in right for a 30 percent participation in potential future development phases at no cost.
Since discovering oil, Kenya has not been able to commercialise it partly due to lack of funds to finance the capital-intensive project.
Tullow targeted to start commercial production by 2020 but would later be pushed forward to 2024 as the company struggled with the twin problems of a lack of an investor to fund the project and delays in getting approval of the FDP.
The Ministry of Energy says that Kenya needs $3.4 billion (Sh441.08 billion at prevailing exchange rates) to develop infrastructure like crude pipeline and storage tanks in the South Lokichar basin.
