Serrari Group

In a move of strategic importance, the Kenyan government is actively considering the purchase of up to a 20 percent stake in the Turkana oil project, with the outcome depending on a review of the project’s revised development plan and the availability of funds.

The Energy and Petroleum Regulatory Authority (Epra) director-general, Daniel Kiptoo, revealed that the government is yet to decide whether to exercise its back-in option, as per the production-sharing agreement.

Government’s Right to Back In

The production-sharing contract provides the government with the option to acquire a 20 percent stake in the Turkana oil project. However, this right can only be exercised once the field development plan is approved, marking the transition from exploration to development.

Crucial Decision Awaits

The project’s destiny hinges on the ongoing review of the field development plan (FDP). When this review concludes, the government will make a decisive move regarding its role in this significant energy project.

Ownership Structure

Tullow Oil, a British company, currently holds a 100 percent stake in blocks 10BA, 10BB, and 13T in the South Lokichar Basin in Turkana. This change occurred following the exit of its joint venture partners, TotalEnergies and Africa Oil Corporation, who previously held 25 percent stakes each in these blocks.

Mr. Kiptoo emphasized that the government can exercise its back-in right either directly or through an entity like the National Oil Corporation of Kenya (Nock).

Government’s Intentions Evident

Highlighting the government’s interest in reacquiring a stake in the venture, the National Oil Corporation of Kenya (Nock) has recently engaged a consultant with a specific mandate to facilitate the government’s involvement in the project.

Financial Considerations and Future Prospects

The financial implications of this buy-back option are substantial and will significantly influence the decision-making process. With the government likely investing billions of shillings, the outcome of Epra’s review of the field development plan will be pivotal in deciding whether to proceed.

As the FDP review continues, Tullow faces challenges in securing well-capitalized investors to partner with for the project after the exit of its joint venture partners, signaling shifts in the region’s oil industry dynamics.

The decision on the government’s buy-back stake in the Turkana oil project holds the potential to reshape the project’s future and significantly impact Kenya’s energy sector.

Photo (By Seth Olale)

By: Montel Kamau
Serrari Financial Analyst
5th November, 2023

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