Tullow frustrated by FID decision on Kenya, tax hitch in Uganda

Britain’s Tullow Oil said Wednesday that it has delayed the final investment decision (FID) for its Kenya project to 2020 and has not yet sealed a tax deal in Uganda that is vital for the progress of its plans there with Total , it said on Wednesday.

The company had previously aimed to give the final go-ahead by the end of 2019 for its onshore Kenyan oilfields, which are expected to produce up to 100,000 barrels per day.

Tullow said in a trading statement that it expected its first-half gross profit to be $500 million, yielding pre-dividend free cash flow of about $100 million that would rise to $450 million for the full year, excluding $200 million due to be paid on closure of the Uganda deal.

“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 firm said today in a statement.

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.

“Tullow and its Joint Venture Partners, have, so far, been unable to finalise this agreement with the Government of Uganda. We continue to work constructively with our Joint Venture Partners and the Government of Uganda to agree a way forward and the consequent timing of FID. Nevertheless, although negotiations continue, Tullow is currently considering all options in pursuing the sale of its interests in Uganda,” it said.

However, the company said that the Joint Venture Partners would 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.