Tullow Oil pays State Sh49.6m licence fees


Tullow Oil pays State Sh49.6m licence fees

Martin Mbogo
Tullow Oil Kenya managing director Martin Mbogo speaks at a media briefing in Nairobi on February 19. PHOTO | SALATON NJAU 

London-based Tullow Oil Plc paid the Kenyan government Sh49.6 million in licence fees and infrastructure improvement payments last year, down from Sh64.6 million paid in 2017.

This is according to a disclosure in the multinational’s consolidated report for the year ended December 31, 2018, which reveals payouts made to various governments in accordance with the UK’s Reports on Payments to Governments Regulations 2014.

The sum paid to Kenya is a three-year low. In 2016, it rose to Sh61.4 million with a further increase in 2017. However, the amount is expected to rise in future when commercial oil production starts.

The firm had disclosed in January that it plans to invest Sh7 billion in its Kenyan operations this year as it steps up preparations for commercial production starting 2022.

“The group’s 2019 capital expenditure is expected to total approximately $570 million (Sh57.5 billion), comprising … Kenya pre-development expenditure of circa $70 million (Sh7 billion),” Tullow said in a January trading update.

The additional capital will be spent on developing wells in Turkana where the multinational discovered an estimated 1.2 billion barrels of oil reserves.

Tullow is also expected to later in the year announce investments related to the large-scale commercial exports of about 80,000 barrels per day (bpd) projected in 2022 upon construction of the pipeline linking the Turkana oilfields to Lamu port.

The firm is favouring a price of $50 per barrel to make a good return even though a price of $34 will still be a viable case for business, according earlier estimates by Tullow Oil Kenya Managing Director Martin Mbogo.

So far, about 75,000 barrels of oil have been accumulated at Mombasa port but this is not yet sufficient for export, with Tullow keen on accumulating a vessel size quantity of at least 200,000 barrels.

Petroleum PS Andrew Kamau said in February Kenya had reached out to 18 global oil refinery firms in search for buyers of the early Turkana crude oil exports targeted for the second quarter of the year.

A team from Tullow Oil and the Kenya government met the bidders in London during the International Petroleum Week where sector players meet and exchange ideas on the market.

Early exports are intended to test the international markets’ reception to Kenya’s crude ahead of full commercial production.