Tullow oil has halted operations on two oil blocks in Turkana, citing weak operating environment.
The announcement made by Africa Oil Corp “Africa Oil” that Tullow Oil Kenya B.V., in operating Blocks 10BB and 13T in Kenya, indicated they have submitted notices of force majeure to the Kenyan Ministry of Petroleum and Mining on behalf of the joint venture partners in these blocks.
“These declarations are the result of impact of the COVID-19 pandemic on the operations, including Kenyan government’s restrictions on domestic and international travel, and recent tax changes that adversely impact the project economics. These are exacerbated by the recent unprecedented crash in global crude oil prices”, the statement read.
They noted that the declaration of force majeure allows time for an improvement in the operating environment and for the joint venture partners, to discuss with the government of Kenya the best way forward for this strategic project.
In March this year, Tullow Oil demanded for sh204 billion as compensation for its six-year works in the Turkana oilfields from the Kenya government. The Ministry of Petroleum however rejected Tullow’s compensation bill, arguing it was excessive and not justified.
The bill was because oil firms recover their exploration costs over years once production and sale of the commodity start, which in Kenya’s case is planned for 2022, albeit they later pushed it to 2024.
An agreement or commitment from the government was important for it to use the pledge to sweeten the offer for sale of its stake.
Tullow, which has a 50 percent stake in blocks 10 BA, 10 BB and 13T in the South Lokichar Basin.
Boosted by the Early Oil Pilot Scheme (EOPS), last year, local suppliers earned sh3.72 billion ($35.4 million) from Tullow Oil Kenya, a 16 percent rise from the previous period.
The company further paid sh48.3 million ($459,000) as license fees to Kenya for the four blocks it operates.
The company clarified that is no certainty discussions with the Government of Kenya will result in a satisfactory outcome and may result in the Company’s Kenyan project being significantly modified or ceased in its entirety.
In 2014, Africa Oil raised estimates in its northern Kenya exploration block to 1.3 billion barrels from the initial one billion.
Africa Oil Corp. is a Canadian oil and gas company with producing and development assets in deepwater Nigeria; development assets in Kenya; and an exploration/appraisal portfolio in Africa and Guyana. The Company is listed on the Toronto Stock Exchange and on Nasdaq Stockholm under the symbol “AOI”.