Tullow Oil is facing uncertainty in the progress and investments of its Kenyan oil project due to a prolonged regulatory approval process after the withdrawal of its joint venture partners, the company has disclosed in its full-year financial results.
- •In June 2023, Africa Oil Corporation (AOC) and Total Energies (TE) formally withdrew from Kenya’s Blocks 10BA, 10BB, and 13T in the project.
- •Their departure left Tullow Oil as the sole stakeholder in the project, raising questions about its ability to move forward without strategic partners.
- •Tullow has since applied for formal approval to transfer the 50% ownership formerly held by AOC and TE but its Field Development Plan (FDP) remains under review by the Energy and Petroleum Regulatory Authority (EPRA), which extended the evaluation period to June 30, 2025.
Tullow Oil’s ability to secure a Final Investment Decision (FID) now hinges on attracting a new investor. The company has been in discussions with potential partners, but progress has been slow. Without a new partner, Tullow may struggle to fund the project alone, raising concerns over its commercial viability.
“If an FID is not reached, there could be potential changes in the carrying value in the next financial year due to changes in facts and circumstances that influence the risk factors and thus the overall probability weighting, which drives the recoverable value. This can lead to the recognition of additional impairment of up to US$103.2 million,” the company said.
The company has written off US$145.4 million in exploration costs tied to its Kenya operations, a move that underscores mounting uncertainty over the project’s future. The impairment, part of a US$212.6 million company-wide write-off, reflects delays in securing a Final Investment Decision (FID) and the broader challenges of monetizing the asset.
While the Kenyan government has expressed continued interest in oil development, regulatory hurdles and the shifting global energy landscape pose risks. The prolonged review of the FDP has left Tullow in limbo, as no production license can be issued until the approvals are made.
Additionally, the company views oil price volatility as a pressing factor in the project’s valuation. A US$5 per barrel fluctuation in long-term price assumptions could lead to impairment changes of $18.5 million to $18.4 million, underscoring the sensitivity of the project’s economic viability.
Tullow has stated that should these uncertainties be resolved, the project could see a reversal of previous impairment charges, with an estimated upside of up to $1.075 billion. However, achieving that outcome depends on the company’s ability to navigate the regulatory process and find an investor willing to commit to Kenya’s foggy oil dream. Tullow Oil began their operations in Kenya in 2010.
