Kenya’s first oil export to be airlifted by September

Significant progress has been made over the first six months of the year in Kenya on both the Early Oil Production Scheme (EOPS) and the Foundation Stage of Project Oil Kenya.

In May 2019, EOPS production was increased from 600 bopd to 2,000 bopd and the reservoirs, wells and associated facilities have been performing well. Over 150,000 bbls of oil have been safely delivered to Mombasa so far and Tullow expects the first export cargo to be sold and lifted in the third quarter of 2019.

The Joint Venture Partners and the Government of Kenya have concluded negotiations around key fiscal and commercial principles for Project Oil Kenya with agreements between the parties documented in various Heads of Terms which were signed by the Joint Venture Partners and the Government of Kenya in Nairobi yesterday.

This is a material and encouraging step forward which gives all parties confidence that the development project will be robust at low oil prices. In addition, the completion of the FEED studies for both the upstream and midstream, together with recent market soundings provide increased confidence in the project’s capital expenditure estimate and construction timetable that is expected to see first oil three years after the Final Investment Decision (FID).

The Government of Kenya continues to make good progress, both in acquiring the land for the upstream and pipeline and securing water rights for the upstream. While these activities are progressing well, they are taking longer than originally forecast.

The National Environment Management Agency has requested that additional community consultation take place for the Environmental and Social Impact Assessments (ESIAs) which will now be submitted in the second half of 2019 which is later than anticipated.

All parties continue to work well together across all development workstreams and significant progress has been made so far this year. However, despite this progress, the Partners and the Government of Kenya are reviewing the most likely timeline to FID which Tullow now expects in 2020.

In Uganda, following meetings in January 2019 between the CEOs of both Tullow and Total and H.E. President Museveni of Uganda, where principles for the tax treatment of the farm-down to CNOOC and Total were agreed, the Joint Venture Partners have worked to finalise an agreement based on these principles.

Tullow and its Joint Venture Partners, have, so far, been unable to finalise this agreement with the Government of Uganda.

The Joint Venture Partners continue to work towards reaching FID for the development project in the second half of 2019 with the project’s technical aspects now completed. The Tilenga Project ESIA has been approved by the National Environment Management Agency and the Kingfisher ESIA public hearing is ongoing.

Geotechnical and geophysical surveys for the East Africa pipeline (EACOP) have been completed for the entire route across both Uganda and Tanzania. There are ongoing EACOP discussions between the Joint Venture Partners and the Governments of Uganda and Tanzania regarding key commercial agreements which are required prior to FID.