Kenya will decide whether to pursue or drop the Turkana oil project by September as the State moves in to resolve Tullow Oil’s proposed plan to commercialise the blocks.
Energy Cabinet Secretary Davies Chirchir said the government is currently reviewing the Field Development Plan (FDP), paving the way for a decision from the Cabinet and Parliament between next month and September.
Tullow Oil submitted the revised FDP to the energy regulator in March, offering hope for an end to delays in the commercialization of the oil in blocks 10BB, 13T and 10BA in the South Lokichar Basin.
An FDP details how a company intends to develop an oilfield including production forecasts and costs. It also contains the plan on how to develop critical infrastructure for the transport, refining and storage of the oil.
“By the end of the August-September period, we should have made a final decision on the FDP (from Cabinet and Parliament) and therefore give Tullow the green light to proceed,” said Mr Chirchir.
“But if it turns out that we will have volumes of product in the market that cannot profitably amortise the infrastructure to be built, then it does not make economic sense and so the project dies.”
Kenya had given Tullow a deadline of December 2021 to present a comprehensive investment plan for oil production in Turkana or risk losing concession on the exploration fields. The firm successfully sought an extension to the deadline.
Delays in submission of the FDP and a lack of an investor to bankroll the project have derailed Kenya’s efforts to realise the oil dream, more than a decade since Tullow discovered the oil reserves.
Tullow has for years been looking for a strategic partner to cushion its risks for the multi-billion project that includes setting up a crude pipeline and processing facilities for the oilfields.
Oil India and ONGC Videsh— the overseas investment arm of the Oil and Natural Gas Corp of India— are in talks to buy an undisclosed stake whose value remains unclear in the three oil blocks that are wholly owned by Tullow.
Mr Chirchir disclosed that the State has also been in talks with the Indian government to help close the deal, adding that Tullow needs at least $3.5 billion to get the Turkana oil project to a financial close.
Tullow was last month dealt a blow after Total and Africa Oil, who held a combined stake of 50 percent in the oil project, exited piling pressure on Tullow to finance the project and move it to the production stage.
Africa Oil said it was shifting focus to other projects across the continent that are more economically viable while Total had since last been exploring ways of monetizing its stake in the Turkana oil project.
