Tullow Oil reveal crucial water deal could slip into Q3

Tullow Oil
Tullow Oil's operation in Kenya.

A Tullow Oil executive has said a deal with local authorities in Kenya that would allow the company to pump water to pressurise oil wells may be delayed to the third quarter of the year.

Tullow, with partners Total and Africa Oil , is working towards a final investment decision (FID) by year-end  with partners Total and Africa Oil. They had hoped the water deal would be reached by mid-year, Tullow’s Kenya Managing Director Martin Mbogo said.

Kenya’s onshore fields in Turkana province have been estimated by Tullow to hold 560 million barrels of oil and are expected to produce up to 100,000 barrels per day from 2022.

Clarity on the acquisition of land around the oil fields and tariffs for the 820km pipeline to the Indian Ocean are crucial to allow the company to reach a final investment decision on the $2.9 billion project 

Despite slower than expected progress on the land issue, the Kenyan government recently gazetted land it wants to buy in order to lease it to the oil partners.

Next week’s International Petroleum Week event in London will provide an opportunity for meetings to explore whether buyers are willing to pay a premium to Brent crude for Kenyan oil following on from approaches to potential buyers of the low-sulphur crude by the government and Tullow over the last few days.

The Kenyan government has an option to buy up to 20 per cent in both the fields and the pipeline. Tullow expects it to exercise this at least in part before the final investment decision and Kenya has considered floating its national oil company as holder of such a stake on the Nairobi and London stock markets. 

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