Kenya is on the warpath with Tullow Oil over the firm’s decision to exit the country.

Members of Parliament have called for a forensic audit of the company’s books of account over questionable expenditures.

Tullow Oil is accused of using derailing tactics in the implementation of the country’s oil project as it seeks to exit the project and country, which has prompted investigations into the firm’s decision to invoke force majeure.

At the same time, legislators are questioning the $2.04 billion compensation bill the British exploration firm is demanding from the government as expenditure in the country since it discovered crude in 2012.

Despite ordering the petroleum cost recovery audit that was undertaken by audit firm Swale House Partners, the government has refused to make the report public, only maintaining that the auditors found that Tullow spent $1.6 billion while exploring oil over a six-year period.

“Parliament must scrutinise all the expenditures to ascertain they are genuine because it’s our duty to protect Kenyan taxpayers,” David Gikaria, chairman of parliamentary Energy Committee, told The EastAfrican.

The woes facing Tullow, the operator of the Kenyan project on behalf of joint venture partners Total, Africa Oil and the Kenya government, have deepened after Total refused to commit its share of budget for the current financial year. Tullow is the majority shareholder in Blocks 10 BA, 10 BB and 13T in the South Lokichar Basin with a 50 per cent stake, with Africa Oil holding 25 per cent.

The EastAfrican has established that Tullow declared force majeure on the Kenyan project without consultations with the Ministry of Petroleum, and the government is seeking explanations on what informed the company’s decision.

The parliamentary energy committee is also carrying out an independent probe and has accused the company of “dishonesty” over its operations in the country including failure to explain expenditures of the recently expired Early Oil Pilot scheme and how revenues accrued from the scheme were shared.

Last week, the committee summoned Tullow Oil officials led by Kenya country manager Martin Mbogo seeking to unravel the firm’s muddled operations that are shrouded in secrecy but failed to get satisfactory answers.

“Tullow has not been honest and wants to run away from its responsibilities. Invoking force majeure throws Kenya’s project off track and only defers the country’s dreams of commercial oil exportation,” said Mr Gikaria.

In May, Tullow invoked force majeure on the Kenyan project, meaning the company is unable to continue performing its contractual obligations.

Kenya’s Petroleum Ministry Principal Secretary Andrew Kamau said the government is not convinced by Tullow’s decision and has demanded a detailed report.

“We want Tullow to tell us the thinking behind it and what it means for project oil Kenya,” he told The EastAfrican.

Tullow’s invocation of force majeure puts Kenya’s plans to become an oil exporting nation in limbo.

Kenya is already behind schedule for most of the milestones, including signing of the final investment decision that was slated for this year — which now looks highly unlikely — and securing of funding for the crude pipeline, something that further shrouds the viability of the Kenyan crude project.

It has emerged that Total’s refusal to commit more money into the Kenyan project and standoff over total expenditures is part of the reason the firm opted to put a break on the Kenyan project to avoid further expenditures at a time when its parent company is facing mounting challenges not only in Kenya but also in Ghana and Guyana.

Though Tullow’s expenditures are cost recoverable when Kenya starts commercial exportation of crude, the firm is desperately seeking a route out of Kenya through disposing its entire stake rather than commit more funds.

The company’s planned exit, however, is being complicated by a valuation of the Kenyan assets that are estimated to be worth between $1.2 billion to $2 billion.

In April the firm managed to exit Uganda after reaching an agreement with Total that saw it transfer its entire interests in Blocks 1, 1A, 2 and 3A and the proposed East African Crude Oil Pipeline at a cost of $575 million.

The deal in Uganda lifted the spirits of Tullow in a year that is has taken a severe battering due to the Covid-19 pandemic that crashed crude oil prices and resulted in the firm posting a $1.7 billion loss in the year ending March, cutting its workforce by 20 per cent and gravitating towards going bust with its share price at the London Stock Exchange on a free fall.

The firm’s share price, which nosedived to a low of $20 in April, is on a slow recovery trading at $30.6 on July 1.

 

Source: East African

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