British oil explorer Tullow Oil is engaged in a fierce battle with the Kenyan government over the demand for Ksh 204 billion as compensation for it's 6-year exploration works in the Turkana oil fields.
On its part, the Ministry of Petroleum maintains that the bill was exaggerated and could not be justified, the Business Daily reported.
Normally, oil firms structure their deals such that they recover their costs over several years once production and commercial sale of the oil kicks off.
The country had been trucking 2,000 barrels of oil daily from the oil fields of Lokichar to the defunct refinery in Mombasa for export, in what is meant to be a precursor to commercial production which was slated for 2022.
A first export cargo of 250,000 barrels was shipped on a tanker in August 2019.
However, doubts now linger over the viability of the entire project, bearing in mind that Tullow Oil's latest demand comes a month after it announced plans to send several of its employees in the Kenyan unit packing.
Back on February 4, the UK oil firm issued a redundancy notice, stating that it had to review business operations to ensure resources are allocated in the most efficient way possible.
''Due to this review, it has become necessary to restructure the company with some roles becoming unnecessary,'' Tullow Oil Kenya managing director Marin Mbogo statement read in part.
Further fueling doubts into the viability of the Turkana oil explorations deal is the fact that the British firm cut its 2020 project expenditure by nearly 50%.
In its budget outlay for 2020, the firm set the capital expenditure for its Kenyan operations at Ksh4.06 billion, a reduction of 43% compared to last year.
In 2018, Tullow’s outlay amounted to Ksh17.6 billion, while 2017 saw it spend Ksh22.5 billion.
Tullow's actual investment has been a subject of controversy, with government recently forced to enlist the services of an audit company to help ascertain the true value of the investment.
Tullow's recent financial woes were compounded by its string of bad luck in Ghana and Guyana where it came up empty on its oil ventures after a massive capital outlay.
These coupled with plans to sell its stake in the Kenya project, is likely to pour cold water on the hyped government of Kenya oil export project.
The London-listed firm, last year, indicated it intended to sell up to 20% of its 50 % stake in the blocks.
However, it was reported that the firm is seeking the lumpsum payment as a form of commitment from the Kenyan government following its 6-year exploration in Turkana.
