Tullow re-engineers Kenyan project to fit low oil prices

Oil explorer Tullow Oil says it will deploy the 11 months left on its extended exploration license to optimize the project to fit low oil prices in the international market.

In a statement issued on Wednesday, the company says the lower than expected crude prices have forced the company to redesign operations in Kenya in a means to reach greater efficiency.

“The original development plan was meant to work at oil prices of at least Ksh.5500 ($50) per barrel. The world has significantly changed in 2020 with continued low oil prices of less than Ksh.4950 ($45), and hence, there is a fundamental need to redesign the development so that we can deliver an economic project at ‘lower for longer’ oil price world,” the company stated.

The revaluation of the project will include the acceleration of the recovery performance above the current production of 72 barrels of oil per day by drilling on the most productive parts of the oil fields.

Further, Tullow is expected to review the project costs with view of allocating more resources across the 11 months as it retains its final investment decision (FID) for late 2021.

Tullow however states the scale of Kenya’s oil resource is substantive enough to support full-scale commercial development.

Kenya’s gross stock of crude reserves is estimated at 1.5 billion barrels.

Moreover, Tullow notes it has the required balance sheet to deliver on its 2021 objectives but is in negotiations for fiscal support from government including compensation for capital deployed in over six-years of exploration works in Turkana.

“On Kenya development, we are confident, particularly in light of the licence extension discussion, allows us the time to complete the redesign work. We are continuing to work with GoK in seeking the much needed fiscal package, as per the agreed Heads of Terms, to deliver an investable project and an FDP by end 2021,” said Tullow Oil Plc Chief Executive Officer Rahul Dhir.

In August, the company withdrew a force majeure notice– a disclaimer indicating it couldn’t owner its contractual obligations ending speculation on the viability of Kenya’s oil project.

Subsequently, the government extended Tullow’s exploration term to December 2021.

Tullow however will continue farming down- reducing its stake in the project as it looks to firm up its equity with an eye on supporting potential commercial development.