Tullow’s Ksh.29.1 billion assets under threat over Kenya’s stand
Tullow Oil says it could book a damage charge of Ksh.29.1 billion on its Kenya assets if indecisions over oil production in the country are not resolved.
According to the reports released by Tullow, there will be a reversal of previously recognized damage if the indecisions around the project are resolved.
“Should the uncertainties around the project be resolved there will be a reversal of previously recognised impairment. However, if the uncertainties are not resolved there will be an impairment of over Ksh 29 billion,” Tullow said in a release for its full-year results Wednesday.
Kenya had set a December 2021 deadline for Tullow to present a comprehensive investment plan for oil production in Turkana or risk losing concession on two exploration fields in the area.
If it gets the nod from State and Parliament, this will pave the way for the planned development of a pipeline and oil processing facility in the basin that includes Ksh388.1 billion investment for upstream activities.
Kenya first announced discovery of oil in Block 10BB and 13T in Turkana in March 2012.
The project had anticipated that oil production will contribute around Ksh.154 billion in revenue once the Early Oil Pilot scheme moves to full field production in the next three years, according to Tullow Oil Kenya Managing Director Martin Mbogo.
“We are hoping to get to an investment destination by the second half of next year which is 2020 it will take us about 36 months to put the infrastructure in place. So if we keep to that timetable we will be in a production phase on full field basis,” said Mbogo.
Kenya had then (2019) eyed to start exporting 80,000 barrels of oil per day by 2022, which would translate to about more than 30 million barrels a year.
Tullow Oil computed anticipated revenues using a price of $55 (Ksh.5,500) per barrel. Currently, Brent Crude is going for Ksh.14,833.35 per barrel.
“We will be pushing 80,000 every day of the week, assuming the price of $50 per barrel – today it is upwards of $60 a barrel – and that number will get to $1.5 billion,” added Mbogo.
The target has not been materialized with the firm attributing production delays to several factors, including unfavorable global oil prices, approval delays for land and water rights, a tax dispute, and COVID-19 menace.
The British oil firm in June last year, posted a pretax profit of Ksh.1.02 billion amid the high costs of fuel in Kenya.
In a statement, the Group CEO, Rahul Dhir attributed the performance to strong operational performance in the first half of the year and a transformational debt refinancing positioning Tullow on a firm footing to deliver its business Plan.
“In Kenya, the revised development plan creates a robust project that has the potential to deliver material value to the Government of Kenya and other stakeholders. Through our operations, Tullow continues to deliver Shared Prosperity and to be an engine for economic and social change in the developing economies in which we work,” said Dhir.
A multinational oil and gas exploration firm said its long-awaited revised development plan for oil production in Turkana creates a robust project that has the potential to deliver material value to the Government of Kenya and other stakeholders raising the project’s gross budget to about Ksh.373.6 billion.
The company, which entered Kenya in 2010, said it has recommended changes to its initial design to incorporate a bigger processing facility and oil pipeline.