British oil and gas company Tullow Oil has finally reached an agreement to sell its entire business interests in Kenya, officialy marking its exit from the Kenyan market after over a decade of exploration work in the South Lokichar Basin.
The company is selling its assets to an affiliate of Gulf Energy Ltd in a transaction valued at about Ksh15.6 billion (USD120 million). The deal was confirmed after a sale and purchase agreement between the two parties was signed.
Currently, Tullow's Kenyan operations are held under its subsidiary, Tullow Kenya BV(TKBV). However, under the new deal, all of Tullow's working interests in Kenya will be sold to Auron Energy E&P Limited - an affiliate of Gulf Energy.
The sale will also include all of Tullow’s working interests in Kenya, which account for around 463 million barrels of contingent oil resources.
As far as the particulars of the payment is concerned, Tullow will receive payments in three batches. This will include a payment of Ksh5billion (USD 40 million) payable upon deal completion and another Ksh5 billion due by June 2026 or upon government approval of the Field Development Plan.
The third payment of Ksh5 billion, which will be paid in instalments between 2028 and 2033, will largely depend on oil prices.
As part of the agreement, Tullow is also set to receive royalties based on future oil production. The company also retains a no-cost option to re-enter the project with a 30% stake in the event a third party joins in later.
While a large part of the deal is complete, the sale is still subject to regulatory approvals, including from the Competition Authority of Kenya.
Tullow Kenya must also be fully separated from its parent company, with the deal and first payment expected to go through later in the year.
According to Tullow Kenya Managing Director Madhan Srinivasan, proceeds from the deal will largely go towards reducing debt and strengthening the company's financial position.
The company's exit from Kenya can 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.
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.
