KENYA: Government Has Until November to Review Project Kenya Field Development Plan
Project Oil Kenya leading joint venture has said it is waiting for the Government of Kenya to review field development plan submitted 10th December 2021 before the JV can undertake the final investment decision. According to the company approval of the FDP will help the JV decrease uncertainties in the project including obtaining financing for the project get an understanding of the government deliverables.
“These items require satisfactory resolution before the Group can take FID. Due to the binary nature of these uncertainties the Group was unable to either adjust the cash flows or discount rate appropriately. It has therefore used its judgement and assessed a probability of achieving FID and therefore the recognition of commercial reserves,” the company says in its latest financial statement.
According to the Irish explorer there have been ongoing discussions with Government of Kenya on the approval of FDP and securing government deliverables since 1 Jan 2022 with the government expected to continue the FDP review not later than 6th November 2022.
“Following the recent elections, Tullow and its joint venture partners will work with the new government to progress the project which has the potential to make a significant contribution to the Kenyan economy through taxation, revenue sharing, employment and local content,” the statement reads.
The FDP contains detailed information on the Turkana Oil project, including the number of wells, the size of land required for the project, the construction design, the designated petroleum waste disposal facilities, among others. It depicts the design of the project, and essentially the resulting impacts on the environment, climate, and surrounding communities.
Once the FDP is approved the plan together with the Production Sharing Agreement will be sent to Parliament within 30 days as per the Petroleum Act section 31 for ratification with the process expected to take 60 days. Parliament can however refuse to ratify the PSC and the FDP sending it back to the cabinet secretary with reasons for refusal for reconsideration
Tullow also says the delay in review and the subsequent delay in obtaining a production license the company has in line with its accounting policy, performed a value in use (VIU) assessment of its Kenya asset following identification of triggers for impairment reversal resulting in a net present value (NPV) significantly in excess of the book value of $255.2 million.
Meanwhile the group reports that continues to progress with the farm down process with approvals being sought.
“A process to secure a strategic partner for the development project in Kenya is ongoing and Tullow is confident that substantial progress will be made before the end of the year.”
In 2022 the company has aside a capex of $5 million and exploration spend of $45 million in Kenya.
Tullow has a 50% stake in the project with TotalEnergies and Africa Oil each holding 25% interests.