TotalEnergies, Africa Oil Exit Kenya Oil Project, Tullow Left All Alone

TotalEnergies, Africa Oil Exit Kenya Oil Project, Tullow Left All Alone
TotalEnergies and Africa Oil have decided to withdraw from Tullow's oil project in Kenya's South Lokichar Basin.
Image by carloscastilla via iStock

TotalEnergies and Africa Oil have decided to withdraw from the 10BB, 13T, and 10BA blocks in Kenya’s South Lokichar Basin.

Tullow Oil said that its subsidiary, Tullow Kenya, which is the operator of its Kenyan licenses, would increase the working interest in the blocks from 50 to 100 percent.

The company added that the partners withdrew from the South Lokichar Basin project due to “differing internal strategic reasons”.

Tullow is optimistic regarding the decision by TotalEnergies and Africa Oil since it believes that “owning 100 percent of the project creates more optionality, gives Tullow more flexibility in the ongoing process to secure strategic partners, creates a simpler Joint Venture Partnership, and streamlines project delivery”.

It added that the prospective strategic partners for the development of the project had been informed and that they “remain engaged” and that “detailed farm-out discussions continue with several companies”.

Tullow did recognize that the process has taken longer than expected but remains optimistic that it can secure a strategic partnership during 2023.

The company noted that project progress continues. The updated Field Development Plan (FDP) was submitted to the Kenyan regulator in March 2023 and is currently under review.

Following the withdrawal of the minority partners, Tullow’s net project 2C contingent resources are expected to increase from 231 mmboe to 461 mmboe, taking the company’s total contingent resources from 605 mmboe to 836 mmboe. Net capex guidance for 2023 in Kenya will increase from around $10 million to around $15 million, less than five percent of the company’s capex.

In a separate statement, Africa Oil stated that the withdrawal was unconditional and irrevocable and that it requested from the Kenyan Ministry of Energy and Petroleum to transfer all its rights and obligations under the PSCs to Tullow.

According to Africa Oil, the carrying value of the Kenyan intangible exploration assets was written down to $58.6 million on December 31, 2022, and the company will further impair this value to zero.

“We have taken the decision to exit our Kenya concessions as our strategy has shifted to focus on production and high potential exploration opportunities, including our Orange Basin portfolio where we are now appraising the exciting Venus discovery, offshore Namibia,” Africa Oil President and CEO Keith Hill said.

“Africa Oil is proud to have played a central role in discovering the oil fields in Kenya’s South Lokichar Basin. We continue to believe these discoveries will form the basis of a significant oil-producing province in the coming years with strategic value for the country,” Hill added.

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