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Tullow Oil: Water Deal Key To Kenya Project Could Slip To Q3

Kenya Lokichar basin

A deal between Tullow Oil and local Kenyan authorities that would allow the oil company to pump water for the wells and that would be crucial to the final investment decision for Kenya’s first and currently only oil project could be pushed back to the third quarter, Martin Mbogo,

Managing Director at Tullow Oil Kenya, told Reuters on Friday.

Tullow Oil had hoped that the water deal could be reached by the middle of 2019, but now it is looking more realistic that the agreement will be reached sometime in the third quarter, Mbogo told Reuters.

“(It’s) one of those things we absolutely need before we can get to FID,” the manager noted.

Commercial quantities of crude oil in Kenya were discovered in 2012 in the South Lokichar Basin in the north. Tullow Oil, which discovered the resources, has continued its exploration and appraisal drilling campaigns in Kenya.

In early June last year, Kenya sent the first trucks transporting crude oil from the oil-rich but landlocked northern region of Turkana to the port of Mombassa, for the country’s first oil exports as part of a pilot export scheme.

Last week, Tullow Oil said in its 2018 results release that the “Kenya development plan is progressing well, and the project continues to target a Final Investment Decision (FID) in late 2019 and First Oil in 2022.”

Related: Rising Energy Demand Could Be A Boon For The Philippines

“In 2019, several critical tasks must be completed to reach a Final Investment Decision by year end. These tasks include completing commercial framework agreements with the Government of Kenya and finalising FEED studies in the first quarter of 2019 and concluding agreements over land title and water supply with the Government of Kenya and submitting both the upstream and the mid-stream ESIAs in the second quarter,” Tullow Oil said last week.

According to its Kenya managing director, there has been progress on the land acquisition issue, but that progress has been slower than expected.

Referring to the Early Oil Pilot Scheme (EOPS) that started in June 2018, Tullow said that the trucks are currently transporting around 600 barrels per day (bpd), and the volume is expected to rise to 2,000 bpd once the EOPS is fully operational in April 2019. So far, more than 70,000 barrels of oil have been transported to Mombasa.

“A maiden lifting of Kenyan crude oil is expected in mid-2019. Tullow has begun to market Kenya’s low sulphur oil ahead of this first lifting with initial market reactions being very positive,” the company said.  

By Tsvetana Paraskova for Oilprice.com

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