State rekindles search for oil and gas after Tullow Oil setback

The government is ramping up its efforts to tap into the country's oil and gas potential, aiming to move past the challenges associated with the long-anticipated Tullow Oil project.

According to official documents reviewed by The Standard, the government has outlined a strategic focus on advancing the oil and gas sector to achieve energy security and promote inclusive green growth.

As part of this initiative, the State plans to acquire geoscientific data to facilitate a renewed search for oil and gas nationwide. 

The government will also conduct extensive geological surveys over 3,600 square kilometres to identify promising hydrocarbon reserves.

Additionally, the government will complete evaluations of gas potential in petroleum Blocks 9, L4, and L8, which span Marsabit, Garissa, Lamu, and Kilifi counties.

“The sector will also acquire geo-scientific data over a 3,600 km² area to assess oil and gas potential in various blocks, including Blocks 9, L4, and L8,” states a government document.

Concurrently, Kenya is reactivating its ambitions to become an oil producer. A critical step in this direction involves completing land acquisition for the development of oil fields in South Loichar.

This expansive plan includes securing land for essential infrastructure such as water supply and crude oil pipelines, alongside reviewing the South Lokichar Field Development Plan. 

This move aims to advance the development of oil fields in the region, bringing the long-awaited production closer to fruition.

These initiatives follow years of anticipation and setbacks, particularly concerning the stalled Tullow Oil project. 

Kenya's aspirations for oil exports faced a significant blow two years ago when the French giant TotalEnergies and Canada-based Africa Oil Corp withdrew from the long-delayed Turkana oil project.

British oil producer Tullow announced at the time that its two minority partners in the Turkana project had exited the oil blocks in the South Lokichar Basin, leaving the London-listed explorer solely responsible for the investment.

The departure of TotalEnergies and Africa Oil from Project Oil Kenya coincided with the withdrawal of an Indian firm that had been in discussions to join as a strategic partner, effectively halting negotiations with Tullow.

Indian Oil (IOC) and ONGC Videsh were expected to acquire a 50 per cent stake in the Lokichar oil fields and take over operations from Tullow, guiding the project through to commercial production.

This fallout has left the project in limbo and undermined Kenya's prospects of becoming a commercial oil-producing nation. 

A deep-pocketed strategic partner would enable Tullow and its partners to cushion its risks for the multi-billion-shilling project that includes setting up a crude pipeline and processing facilities for the oilfields.

The setback was a huge blow to Kenya’s oil dream given that over a decade has passed since Tullow Oil made Kenya's first oil discovery in the South Lokichar sub-basin of Turkana County.

Despite more than ten years of development, the oil project remains uncommercialised.

Tullow Oil, which currently operates the project, held a 50 per cent stake, while Canada's Africa Oil Corp and French Total Energies SE each maintained 25 per cent.

The future of Kenya's Turkana oil project has largely hinged on Tullow and its partners securing a strategic investor, a move they have consistently emphasized as essential. 

This would pave the way for the planned development of a pipeline and oil processing facility in the Turkana oil basin, entailing a $3.4 billion (Sh465.8 billion) investment for upstream activities.

The failure to secure a strategic investor, coupled with the exit of minority shareholders, now threatens to further delay Kenya's hopes of harnessing the petro-dollars necessary for economic growth. 

This project’s uncertainty could hinder the potential fiscal windfall associated with new oil revenues, which could assist the Kenya Kwanza government in enhancing development and improving the living standards of Kenyans through better access to crucial services like roads, healthcare, food security, and education.

The government says it’s now focused on diversifying its energy sources, enhancing energy security, and unlocking the economic potential of its hydrocarbon resources.