Following Tullow Oil’s May announcement that it would declare force majeure on its Turkana oil development in northern Kenya, hopes for a final investment decision in 2020 have been considerably dimmed. FID had previously been pushed back from 2019 to 2020.
Besides the low-price oil environment and the impacts of the Covid-19 pandemic, Tullow is also looking to farm-down its stake in the project as it has been hit hard over the last year with production issues arising on its Ghana project and less than stellar drilling results in Guyana, resulting in a greatly devalued share price leaving the company with less expendable cash. Tullow has also faced in-country challenges such as environmental, community and security concerns, as well as the impacts of January flooding on the roads meant to support the early oil production pilot scheme.
Speaking during the “Moving Kenya Forward: Oil Production and New Exploration Under COVID-19” webinar hosted by Africa Oil & Power, several regional industry experts cast doubt on the FID on the Turkana project being reached this year.
Commenting on the topic, Brian Muriuki, Managing Director & Country Chair, Royal Dutch Shell Ghana, said “we are still waiting to see government response to the force majeure, but there will be clock stopping, commercial and technical. Clearly everything will shift including FID and project execution.”
Toks Azeez, Sales and Commercial Director for Sub Saharan Africa, Baker Hughes, concurred. “We have to recalibrate our plans including very detailed discussions and negotiations with Tullow. FID was meant to come by the end of this year but perhaps it will be next year in light of this force majeure.
Doris Mwirigi, Chief Operating Officer, Energy Solutions Africa says the implications for the Turkana project depend on the clause that Tullow is invoking. “We are waiting to hear government’s response and what Tullow actually cited as their circumstances and what the clause is in the PSC.”
Hon. Dr. Elly Karuhanga, Chairman, The Uganda Chamber of Mines & Petroleum believes it will be difficult to reject the force majeure in any case “as times are difficult even without Covid and low oil prices,” referring to other on-the-ground challenges in the region. “Kenyans should remain hopeful though as the oil is in the ground there,” he added.
Source: Petroleum Africa