- Sep 28, 2008
Friday, January 24, 2020 - 12:00 AM
Shares in Tullow Oil slipped on reports the Irish-founded exploration company could exit its interest in Kenya.
Tullow and French oil major Total are looking to reduce their stakes in Kenya’s first oil development, according to banking and industry sources. Tullow — which has not commented on the talk — could, via the sale, exit the project completely amid uncertainty over its launch.
The two oil and gas producers have, according to the sources, hired French bank Natixis to run the joint sale process for Blocks 10 BA, 10 BB, and 13T in the South Lokichar Basin.
Tullow, which operates the project, last year indicated it intended to sell up to 20% of its 50% stake in the blocks.
However, the sources said it is now willing to sell the entire stake after disappointing exploration results in Guyana and production problems in Ghana that prompted the ousting of its chief executive and wiped out nearly half of the company’s market value.
French oil major Total, meanwhile, aims to sell up to half of its 25% stake in the Kenyan project, said the sources.
The entire project is valued at between $1.25bn to $2bn, but it is hard to be precise because the development has yet to receive a final investment decision.
Tullow this month said it was still targeting such an investment decision by the end of 2020, with production starting in 2022, describing the timeline as “challenging”.
The fields already produce about 2,000 barrels of oil per day as part of an early production system.
The oil is trucked from Turkana to the port city of Mombasa. A first cargo of 250,000 barrels was shipped on a tanker last August.
The project partners have also agreed with the Kenyan government to develop a crude oil pipeline from Lokichar to Lamu on Kenya’s coast.
Tullow and Toronto-listed Africa Oil, which holds a 25% stake in the blocks, first discovered crude oil in the Lokichar basin in 2012.
Tullow estimates the fields contain 560m barrels in proven and probable reserves and expects them to produce up to 100,000 barrels per day from 2022.
Tullow’s share price fell 64% last year on the back of disappointing drilling results, cut production forecasts, and an end to dividend payments.