After 14 years at the heart of Kenya’s oil exploration, Tullow Oil has officially left the country, after finalising the sale of its assets to Gulf Energy Limited.
In a press release issued on Friday, September 26, the British-based oil company announced that it had received the first tranche of $40 million (Ksh5.2 billion), under the terms of the Sales Purchase Agreement (SPA) with Gulf.
The SPA dictates that Tullow would receive $120 million (Ksh15.5 billion) for 100 per cent of all its working interests in the country.
With the payment set to be in three batches, Tullow should expects the second batch of Ksh5 billion by June 2026 or upon government approval of the Field Development Plan (FDP) by Gulf.
The third payment of Ksh5 billion, which will be paid in instalments between 2028 and 2033, will largely depend on oil prices.
Other conditions in the SPA would see Tullow retain royalty payments, subject to certain conditions, and a no-cost option to re-enter the project with a 30 percent stake in the event a third party joins in later.
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.
“After 14 years in Kenya, Tullow leaves behind strong assets, and we are delighted to pass the baton to Gulf Energy, a capable Kenyan company, in the lead up to first oil, making Kenya an oil-producing country. We are very grateful for the support and co-operation extended to TKBV by various stakeholders in the Government of Kenya,” he noted.
Tullow Oil in Kenya
Tullow first came into the country in 2011 to spearhead oil exploration efforts after oil was discovered in Lokichar, Turkana.
At the time, the exploration was done to make Kenya an oil producer and exporter.
However, since then, 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 pressing problem for decades.
A past proposal by Tullow Oil aimed at connecting Kenya’s export pipeline to South Sudan’s oil output did not materialise.
Also, Tullow Oil had planned to make Kenya’s first commercial export of oil in 2028 through an FDP, which the firm submitted to the government for review and approval. However, this hit a snag after its two strategic partners opted out of the deal.
The FDP outlined how Tullow intended to develop the oil fields, forecasts for production and costs, as well as how it planned to manage the impact of the project on the environment and society.
The plan was based on a life of field resource of 585 million barrels gross, initial plateau production of 120,000 barrels of oil per day, and capital investment of USD 3.4 billion(Ksh442 billion) for the first oil.
However, Tullow Oil ended a decade-long quest to develop discoveries in April when it announced the potential sale of the inland fields covering the oil assets to Gulf Energy.
