Tullow pays Kenya suppliers Sh3.7bn boosted by early oil

A Tullow worker checks the seals on a truck before offloading of the crude oil from Lokichar in Turkana last week. Photo | Laban Walloga 

By PATRICK ALUSHULA
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Summary

• Local suppliers earned Sh3.72 billion ($35.4 million) from Tullow Oil Kenya last year, a 16 percent rise from the previous period, on increased early oil pilot scheme.
• Tullow disclosed in its annual report that the payments had risen from Sh3.2 billion ($30.5 million).
• This saw Kenyan suppliers take up 41 percent of the total supplies to Tullow in the year, up from 37 percent in preceding similar period.

Local suppliers earned Sh3.72 billion ($35.4 million) from Tullow Oil Kenya last year, a 16 percent rise from the previous period, on increased early oil pilot scheme.

Tullow disclosed in its annual report that the payments had risen from Sh3.2 billion ($30.5 million).

This saw Kenyan suppliers take up 41 percent of the total supplies to Tullow in the year, up from 37 percent in preceding similar period.

The firm further paid Sh48.3 million ($459,000) as licence fees to Kenya for the four blocks it operates.

“Absolute spend with local suppliers also increased by 16 percent in 2019 due to increased Early Oil Pilot Scheme (EOPS) trucking activities. As the Kenya project is in the development phase, focus has continued on capacity building activities,” Tullow said.

“Shared prosperity is central to our approach to sustainability. It reflects our aspiration to ensure that our operations in our host countries not only bring business benefits to Tullow.”

The first export of oil from Kenya was a cargo of 240,000 barrels in August 2019 after several months of oil trucking from Turkana.

However, EOPS was suspended in the fourth quarter of last year following adverse weather that damaged the roads used by the trucks in transporting the crude.

The latest earnings by local suppliers are, however, below the Sh3.8 billion ($37 million) in 2017 and the Sh7.89 billion ($75 million) paid in 2015.

Tullow says that its total spend on suppliers in Africa amounts to more than Sh210 billion ($2 billion) over the past eight years.

Tullow has been working with local firms to strengthen their capacity to supply to the project that is expected to make Kenya an oil exporter.

More than 300 micro, small and medium enterprises went through general business and sector-specific skills development in areas such as electrical technology, welding and fabrication, motor vehicle mechanical engineering and plumbing.

The oil explorer is seeking Sh204 billion as compensation for its six-year works in the Turkana oilfields but government sees the amount as inflated.

Oil firms recover their exploration costs over years once production and sale of the commodity start, which in Kenya’s case is planned for 2022.