Tullow Oil, the renowned British oil and gas company, is set to exit the Kenyan market after announcing plans to sell its oil assets to another company – Gulf Energy Ltd – after the stalling of Kenya's dream to join oil exporters.
The British company announced on Tuesday, April 15, that it will sell its assets for approximately Ksh16 billion (USD 120 million) in a move necessitated by Tullow Oil's need to reduce its debt.
In the new deal, Tullow is set to receive payments in instalments of Ksh5.3 billion, totalling Ksh15.9 billion. One key benefit for the British company in the deal is it will be entitled to future payments based on royalties from oil production.
Further, Tullow will have the option to take part in future developments in Kenya without incurring extra costs.
Tullow's decision to pull the plug on Kenya could have a considerable impact on the country's aspirations of becoming an oil superpower, particularly with the Lokichar Basin in the north of the country seen as a key source of oil.
Full production of oil in Kenya has not been achieved, mainly because the country lacks the necessary infrastructure. For instance, a steady pipeline to transport oil from Turkana to the coast for export has been a biting problem for decades.
Tullow's exit can also be attributed to the Ksh19 million loss it incurred during its operations in Kenya. The company has been the sole owner of the Lokichar oilfield since 2023, after previous partnerships with other oil giants.
The move to handle operations alone likely played a part in the company's heavy losses, which would have otherwise been spread across its three previous partners.
Notably, before exiting the Kenyan market, Tullow had engaged in talks with Indian state-owned companies to acquire the assets, but the talks fell through.
Losses are not the only reason Tullow is selling its Kenyan assets. According to Market Screener, the company has a broader strategy to streamline its portfolio. In March, Tullow also agreed to sell its interests in Gabon for Ksh39 billion in cash.
With a new oil producer taking over in Kenya, it could potentially have positive ramifications for the country as far as the future of oil production is concerned.
Among the key challenges to overcome will be to establish proper infrastructure, which could potentially see Kenya become an oil-exporting nation in the near future.
