Why Tullow Oil has fired local staff and shut down rigs at Lokichar

TURKANA, KENYA: Tullow Oil has over the last one year substantially reduced its number of employees in Kenya.

This has been through failure to renew contracts that were up for renewal in the course of the year as well as actual layoffs, where employees were sent home after being given a send-off package.

Insiders say the company could have pushed out about 50 per cent of its employees but the firm, while confirming it had scaled down its personnel said the number of employees sent home was about 20 per cent.

All these were done in a hushed manner. Other than employee layoffs, the firm has also slowed down on giving jobs to local firms that have been supplying it with different products and services.

The reduced number of employees and scaled down operations could be taken to mean a number of things, including preparations by the firm to exit the Lokichar project through a farm down that Tullow Oil, has in the past alluded to.

Both the Ministry of Energy and Petroleum and Tullow, however, said the scaling down of personnel has been informed by a transition from a fast-paced and expansive exploration phase to preparing for the critical development phase, which though intensive does require heavy human resource presence.

The ministry pointed to the cyclic nature of the industry, which is marked by periods of high activity following by periods lull.

PS Kamau attributed this to reduced works at the wells. The firm drilled four exploration wells and another six appraisal wells in 2017 and has no plans to drill in 2018.

“There are no wells to be drilled in 2018. Tullow Oil and its joint venture partners will mostly be undertaking appraisal and extended well tests. These do not require a lot of human resources,” said Kamau.

“In 2017, the firm drilled ten wells, this year they will not be drilling any, so they do not need a lot of people. I do not think there is cause for alarm.”

Tullow Oil Country Manager Martin Mbogo also clarified that the reduction in human resource had not been significant. He added that the firm had reviewed its needs over the next phase and decided to let go some of its workers while reassigning others.

“Given our transition from exploration and appraisal to the preparation for the development phase, we have reviewed the resource requirements for our Kenya business, as this next phase of the business requires different skill sets and experience,” he said.

“We started the transition into the development phase late last year and this did result in some reduction of people in both the UK and Kenya.

A number of those people have been redeployed in other parts of Tullow. There will be numerous multi-sector jobs created in Kenya upon successful sanction of the oil development plans.”

More exploration

A source familiar with the operations however said firm had a programme to drill more exploration and appraisal wells in Lokichar in 2018, a continuation of the 2017 programme.

It, however, did away with these plans at its joint venture partners – Africa Oil and Maersk Oil (stake later taken up by Total Oil) – declined to finance them. The firm has in the past hinted at a possible farm-down at the Kenyan oil blocks as the project moves to commercial development.

Analysts have also in the past noted that at 50 per cent, the stake by Tullow Oil is high and the firm could in the future look at reducing this, even if it will remain the operator.

Mr Mbogo said the reduction in human resource is not an indicator of a farm down. He confirmed plans to sell some of its stake in the licences but added that a decision as to when this will take place is not known.

“The review of Tullow’s organisation structure was solely prompted by the change of business needs during the move into the development phase.

While Tullow has consistently stated it could consider a farm down in the future, there are no current timelines for this,” said Mbogo.