NAIROBI, KENYA, FEBRUARY 9 — Kenya’s crude oil could hit the global commercial market in the next four years, Tullow oil has hinted as it continues to intensify its operations in the country.
The London-listed -Africa-focused oil and natural gas producer has set Kenya’s first oil for between 2021 and 2022, in the wake of increased activities at its current Turkana drilling sites.
Tullow which entered Kenya in 2010 has drilled a total of 21 appraisal wells in the South Lokichar basin with more activities ongoing on its 48,000 square kilometres of acreage in the Northern part of the country.
“Tullow has also conducted extended well tests, water injection tests, well interference tests and water-flood trials, all of which have proved invaluable for planning the development of the oil fields. The appraisal campaign has firmed up the Group’s resource estimates and improved Tullow’s understanding of the subsurface at the key producing fields,” the company said in its financial statement.
This comes as the company bounced back to profitability reporting an operating profit of $22 million (Ksh2.21 billion) for the year ended December 31, compared with a loss of $755 million (Ksh76.01 billion) in 2016, helped by higher production and cost cuts.
Tullow’s net debt fell 27 per cent to $3.5 billion (Ksh352.4 billion) as higher revenue allowed the company to end 2017 with $543 million (Ksh 54.7 billion)of free cash flow.
Tullow Executive Vice President for East Africa Mark MacFarlane said the company remains focused on its Kenya operations with the South Lokichar basin appraisal programme having confirmed material oil resources to support substantial oil production, and an export pipeline to the Kenyan coast pending a Final Investment Decision (FID) which is planned for 2019.
Initial injectivity testing has started at Ngamia-11 and oil production and water injection facilities are being constructed in the field ready to commence production, injection in the first quarter of 2018, Tullow reported on Wednesday.
The company is holding about 40,000 barrels from an initial drilling which are stored at its Turkana fields for a pilot scheme.
“Oil produced is being initially stored until all necessary consents and approvals are granted and work is completed for the transfer of crude oil to Mombasa by road,” MacFarlane said.
The government signed an Early Oil Pilot Scheme agreement with Joint Venture Partners (Tullow Oil, Africa Oil Corp and Maersk Oil) on March 14, 2017 allowing all EOPS upstream contracts to be awarded.
It is anticipated that the Front End Engineering Design and baseline Environmental and Social Impact Assessments (ESIA) for the foundation development will commence in the second quarter of 2018, with FID targeted for 2019 and First Oil for 2021-22.
“ The proposed development plan reflects the partnership’s desire to sanction the project in a manner that is commercially robust, ensures the earliest possible FID and First Oil and supports the required infrastructure given the location of the South Lokichar basin some 750 kilometres from the Kenyan coast,” MacFarlane said.
The company is targeting East Africa – Uganda but particularly Kenya – as its next major frontier after developing two large fields in Ghana earlier this decade.
Tullow had previously estimated reserves of 750 million barrels in Turkana, according to a different metric including possible future upside potential.
In terms of Kenya’s best-case future potential, Tullow increased the upper range on Wednesday from around 1 billion barrels to 1.23 billion.
Tullow said it has proposed to the Kenyan government to start developing the basin’s Amosing and Ngamia fields and construct a processing facility with a capacity of 60,000 to 80,000 barrels per day, which would be exported via pipeline to the coastal town of Lamu.
Tullow, which holds 50 percent of the Kenyan development, will seek to reduce its stake once a FID decision is reached, the company said this week. Toronto-listed Africa Oil has a 25 per cent stake in the Lokichar development.
The Kenyan project is expected to cost $1.8 billion (about Ksh181.2 billion) while the pipeline construction is expected to cost $1.1 billion (about Ksh110.7 billion).