Inside Politics

Tullow Oil Kenya to resume exploration

Tuesday, August 25th, 2020 00:00 |
Tullow Oil to resume exploration.

Joint venture partners on Tullow Oil Kenya-operated blocks 10BB and 13T have withdrawn a force majeure it issued to government, paving way for resumption of exploratory activities in the South Lokichar basin scheme.

Tullow Oil,  which is prospecting oil in the blocks temporarily ceased operations on May 15, citing the impact of the Covid-19 pandemic on its operations.

Other reasons given by the multinational oil and gas exploration company were restrictions on domestic and international travel, and tax changes that adversely impact the project economics.

A statement sourced from the Website of Africa Oil Corp, Tullow’s operating partner, said the lifting was occasioned by the easing of Covid-19 pandemic restrictions which has enabled the company to continue with the project.

“The lifting of Force Majeure notices has been facilitated by the improvement in Covid-19 pandemic restrictions worldwide, and the resumption of local and international flights, allowing the restart of the various work streams under the project,” the statement said.

Africa Oil Corp was, however, guarded on the extent of the tax discussion with the government, only indicating that discussions were ongoing.

Way forward

“The joint venture partners are also continuing their dialogue with the Government of Kenya to determine the best way forward for this strategic project, including discussions regarding how the incentives previously granted by the government to the Project shall be facilitated,” said Africa Oil Corp.

In June, Tullow asked for a more stable fiscal framework if Kenya is to harness its potential as a budding oil exporting economy after the government started charging a 14 per cent Value Added Tax (VAT) on goods imported or purchased locally by the firm.

Tullow had been exempt from the charges under an existing special operating framework agreement, provided the goods were for direct and exclusive use in the implementation of its oil project.

“We had a special operating framework that made the project economic. These changes to the law undo the framework and we need to understand the government’s point of view,” Tullow had said then.

The London Stock Exchange-listed firm is still pressing ahead with plans to sell a 20 per cent stake in the South Lokichar project to concentrate on developing the Amosing, Ngamia and Twiga fields.

Four billion

The entire South Lokichar basin is believed to hold up to four billion barrels of oil resources, while the project, in stage one development, targets the Amosing, Ngamia and Twiga fields within the basin that are estimated to contain up to 560 million barrels of oil resources.

A pre-commercial early production facility for the South Lokichar oil project was commissioned in June 2018 and it reached 2,000 barrels per day (bpd) production capacity in May 2019.

Earlier, scheduled to come on stream in 2023, the South Lokichar project is expected to produce up to 80,000bpd of crude oil in stage one.

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