British oil explorer Tullow Oil has written off a further Sh18.8 billion ($145.4 million) from its Kenyan assets, signalling deepening pessimism at the company over its prospects of advancing the Turkana oil project to commercial exploitation.
The impairments reflect uncertainty about the company receiving and finalising an acceptable offer from a strategic investor, obtaining financing for the project, and getting the government to deliver on the required infrastructure and fiscal terms to make the project viable.
Tullow mainly attributed the latest write-off to a delay in getting approval from the government for its field development plan (FDP) for the Turkana oil find.
It also cited a pending approval by the government of the transfer of a 50 percent stake in the Turkana Blocks 10BB and 13T in Lokichar that was previously in the hands of former joint venture partners Africa Oil Corporation and TotalEnergies.
The company, however, considers itself the effective owner of the stake, which, pending the government approval for transfer, is currently vested in trust for the sole and exclusive benefit of Tullow.
Following the write-off, Tullow’s financial report for the year ended December 2024 now puts the book value of its Kenya holdings at $103. 2 million (Sh13.3 billion), down from $248.6 million (Sh32.1 billion) at the end of 2023.
“Considering the delay in securing a farm-down offer and time taken to secure government of Kenya approvals for the transfer of the additional 50 percent interest, an impairment trigger was identified for December 31, 2024 reporting,” said Tullow.
“Hence the recoverable amount based on risked net present value has been revised to $103.2 million and a further impairment of $145.4 million has been recognised in the year ended December 31, 2024.”
The latest revision of the company’s recoverable assets adds to cumulative write-offs over the years of $1.08 billion (Sh139.6 billion). However, should the underlying issues causing the impairments be resolved, the company would write back this value onto its books.
At the moment though, the impairments are indicative of the struggles the company has faced in commercialising the oil deposits which it discovered in 2012 after exploratory drilling, including failure to get approval for its FDP.
The FDP outlines the company’s plans to develop the oilfield, manage the impact on the environment and society, and give forecasts for production and costs.
Tullow submitted its first FDP in December 2021, but that was later amended to align it to lower global crude prices, and a 14 percent upward revision of recoverable reserves in Turkana, which raised the production capacity of the oil field from 70,000 barrels to 120,000 barrels per day.
The company, together with its JV partners, then submitted a final FDP in March 2023 for approval by the Energy ministry, but this was sent back for improvement.
Tullow—now the sole owner of the prospect— presented a revised FDP in March 2024 to the government, but this one was also rejected on concerns about the gap between Tullow’s asset value and the estimated Sh469 billion required to fully commercialise the Lokichar prospect.
The government then gave Tullow a six-month extension (until December 2024) to address the gaps in the new FDP, with the company now saying that this deadline has been extended to June 2025.
Ideally, Tullow requires all the underlying issues to be satisfactorily resolved before making a final investment decision on the Kenya project.
MPs also waded into the delays in progressing the Turkana project to its commercial phase, giving the Ministry of Energy and Petroleum, the Energy and Petroleum Regulatory Authority (Epra), and Tullow a deadline of June to finalise the FDP.
The National Assembly’s Liaison Committee, in its report on the 2025/2026 Budget Policy Statement, also asked the parties to fast track the onboarding of a strategic investor.
In the meantime, the Ministry of Energy has started laying the groundwork for the exploitation of the oil resources. In February, the ministry started the process of recruiting a consultant to draw up a resettlement and compensation plan for people displaced by the construction of an oil pipeline from Turkana to Lamu.
The resulting legal framework will guide engagements between the government, communities, and oil firms when there is a need for compulsory acquisition of land for pipeline development.
