Africa Oil and Total will write off billions of shillings invested in the three oil blocks where they exited last month, saving Tullow Oil additional costs amid concerns about the commercial viability of the project.
Tullow Oil, which now fully owns blocks 10BB, 13T and 10BA in the South Lokichar Basin disclosed that the withdrawal of the duo was unconditional and did not come with financial compensation.
Read: Tullow’s partners withdraw from Turkana oilfields
“Tullow is not making or extending any financial consideration following the withdrawal. The exit of the joint venture partners was based on irrevocable and unconditional withdrawal,” Tullow Kenya BV managing director Madhan Srinivasan.
The value of the investments by the two remains undisclosed but Africa Oil says it had written down its intangible exploration assets for the three blocks to Sh8.11 billion ($58.6 million) at the end of last year.
The firm added that it was keen on impairing the value to zero.
Africa Oil and Total, each owned a 25 percent stake in the blocks and have alongside Tullow pumped billions into the project that is billed as Kenya’s most viable dream of becoming an oil exporter.
Total had not responded to queries on the value of its investment in the three blocks where it had acquired the 25 percent stake six years ago by press time.
The British firm had disclosed the book value of its Kenyan assets at $252.6 million (Sh32.4 billion) as of December last year.
Tullow and Africa Oil jointly discovered commercially viable deposits of black gold in the South Lokichar basin in 2012.
The French-owned TotalEnergies bought its 25 percent stake from Maersk Oil in 2017 as optimism about Kenya’s oil dream grew.
Last week’s exit of Africa Oil and Total came amid concerns about the viability of the project whose commercial drilling and production has been delayed amid financing woes facing the partners.
Africa Oil said it dropped the Kenya oil search and was instead shifting attention to regions such as the Orange Basin in offshore Namibia.
“We have taken the decision to exit our Kenya concessions as our strategy has shifted to focus on production and high potential exploration opportunities,” Africa Oil said last week.
Tullow disclosed that it spent more than $1 billion (Sh101 billion) in exploration activities between 2012 and 2018.
The firm had targeted to inject an additional $2.9 billion (Sh293 billion) by the end of last year to commercialise the project.
But the British firm ran into financial headwinds, prompting it to consider selling its 50 percent stake last year.
The joint venture partners had submitted an initial plan in December 2021 but were asked to revise it as a condition for receiving the go-ahead to production.
Tullow is currently in talks with Oil India and ONGC Videsh, to sell an undisclosed stake in the three oil blocks as it awaits a decision on the Field Development Plan (FDP) that it submitted to the government in March.
The government’s decision on the FDP, which will determine if Kenya goes ahead to commercialise the Turkana oil, is expected to be issued next month.
Tullow says inking a deal with a strategic investor holds the future of Kenya’s Turkana oil project.
The firm remains bullish on the prospects of getting a financial partner before the end of this year, which will provide cash to fund the next stage of development and unlock value.
Commercial production from the project is tipped to start in 2026 and is forecast to peak in 2027, at approximately 120,000 barrels per day of crude oil.
Energy Cabinet secretary Davis Chirchir last week told lawmakers that Kenya needs Sh469.5 billion ($3.4 billion) to develop infrastructure at the South Lokichar basin – which has estimated oil reserves of 504 million barrels – before production starts.
Read: Indian oil firms confirm talks to buy Kenya Tullow Oil stake
The billions will fund the drilling of commercial wells, building tankage in Turkana and a refinery or pipeline to Mombasa, ultimately getting Kenyan oil to the global market.
