Tullow looks to India to rescue Kenya oil dream

Storage tanks at Tullow Oil's Ngamia 8 drilling site in Lokichar, Turkana County. [Kevin Tunoi, Standard]

Tullow Oil is in talks with two Indian firms over the sale of its stake in Kenya's oil project.

The British oil exploration firm said it had held meetings with the Indian Oil Corporation (IOCL) - the country's top crude oil refiner - and ONGC Videsh, the overseas investment arm of Oil and Natural Gas Corp also from India, in Nairobi last week.

"The Kenyan Ministry of Petroleum and Mines hosted a meeting with Tullow, OVL and IOCL in Nairobi last week as part of Tullow's ongoing process to secure a strategic investor for Project Oil Kenya," said Tullow Oil.

"The meeting was positive, and the parties agreed to hold further discussions."

The firm, together with its joint venture partners (Total Energies and Africa Oil), has since last year been looking for a strategic partner.

Each of the firms is expected to cede some stake to the new partner. Tullow holds a 50 per cent stake in the Lokichar blocks, while the other two firms hold a 25 per cent stake each.

In a past interview, Tullow said while it is yet to decide on the stake, it will cede to the new firms, it would be a "material stake."

The new partner is also expected to take over the operatorship - the day-to-day running - of the oil fields from Tullow Oil. Should the Indian firms take over the project, they will play a leading role in raising the $3.4 billion (Sh401 billion at the current exchange rates) that the project needs in its commercial phase.

The money will be used to develop the oil fields, including the construction of an oil processing facility in Lokichar and an 800-kilometre crude oil pipeline to Lamu.

The cost went up last year from an earlier $2.7 billion (Sh318 billion) after the company reviewed and scaled up the project to include a larger processing facility and pipeline.

The new plan, which Tullow said is designed to withstand low crude oil prices following the collapse of prices in 2020, will enable the company to take advantage of economies of scale and lead to lower oil production costs when the project finally starts.