A Tullow Oil exploration rig in Turkana. FILE PHOTO | NMG
Nairobi
A deal with local
Kenyan authorities that would allow Tullow Oil to pump water to
pressurise oil wells, crucial for a final green light for the country’s
only oil project, may be slightly delayed to the third quarter, a Tullow
executive said on Friday.
Tullow, with partners Total
and Africa Oil , is working towards a final investment decision (FID) by
year-end and said last week it had hoped to conclude the deal on water
supply with the authorities in the second quarter.
“I
would probably realistically put it more for Q3 in terms of landing that
agreement,” Tullow’s Kenya Managing Director Martin Mbogo told Reuters,
referring to the deal organising the way Tullow can tap a body of water
straddling two counties in northwestern Kenya.
“(It’s) one of those things we absolutely need before we can get to FID.”
Onshore fields
Tullow
estimates that Kenya’s onshore fields in Turkana province hold 560
million barrels of oil and expects them to produce up to 100,000 barrels
per day from 2022.
Another milestone to pass is land
acquisition for infrastructure around the oil fields and the 820 km
pipeline to the Indian Ocean for which it plans to send out construction
tenders within weeks.
The government recently gazetted land it wants to buy in order to lease it to the oil partners.
Having
clarity on land acquisition and pipeline tariffs is crucial to reach a
final investment decision on the $2.9 billion project which Tullow wants
to make money at $50 a barrel.
“There is good but slower than expected progress on the land issue,” Mbogo said.
Potential buyers
This
week, the Kenyan government together with Tullow approached potential
buyers of Kenya’s low-sulphur crude, including Asian refiners like
India’s Reliance, independent oil groups and majors such as Royal Dutch
Shell .
There will be further such meetings during
International Petroleum week in London next week to see whether buyers
are willing to pay a premium or discount to Brent crude for Kenyan oil.
The
government has an option to buy up to 20 percent in both the fields and
the pipeline, which Tullow expects it to exercise at least in part
before the final investment decision.
Kenya has mooted
floating its national oil company as holder of such a stake on the
Nairobi and London bourses. The oil ministry was not immediately
available for comment on this.
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