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British Firm Tullow Oil says it is working with potential strategic investors to reduce its stake in the multi-field $3.4 billion (Sh396 billion) Lokichar oil project co-owned by TotalEnergies and Africa Oil.

According to Rahul Dhir, the chief executive, of Tullow Oil plc, the Kenyan team worked closely with Joint Venture Partners to revise the project development plan which focused on more resources, higher production and significantly reducing the project unit costs.

“This plan has restructured a commercially difficult project into an investible opportunity. We are working with potential strategic partners to reduce our stake in the project to be more in line with a company of our size,” said Dhir, ahead of its Annual General Meeting (AGM).

The oil prospector, Dhir said, was making good progress with the farm down, working closely with the Ministry of Petroleum and Mines to secure approval of the field development plan (FDP).

Long-term value

“We believe that project oil Kenya can generate material, a long-term value which will complement our portfolio in West Africa and diversify our business,” said Dhir.

The multi-billion project’s FDP was submitted for approval in December 2021. The FDP was part of the ministry’s requirements to extend Tullow’s exploration licences in 2020.

Part of the licence extension obligated the Joint Venture (JV) Partners- Total Energies and Africa Oil- to submit a field development plan for the 10BB and 13T licences, including the additional exploration and appraisal opportunities within the 10BB and 13T licences, as well as the exploration and production plan for 10BA which has already been submitted.

The original project, which was to produce 80,000 barrels per day (bpd) was delayed because of commercial anxiety from TotalEnergies and Africa Oil, amidst the collapse of oil price and the impact of Covid-19 pandemic, leading them to focus on improving the project’s economics.

According to Upstream Energy Explored, the new, higher-cost scheme will tap 585 million barrels of oil 30 per cent more than originally planned, while the capacity of the 825-kilometre oil export pipeline to Lamu port on the Indian Ocean has been expanded to handle 130,000 BPD and its diameter consequently increased from 18 to 20 inches.

If sanctioned this year, the first oil could flow either in 2025 or 2026. Tullow has been developing the project in phases, with the Ngamia and Amosing fields accounting for 50 per cent of the project’s overall resources.

This initial phase also includes the Ekales and Twiga fields, boosting the overall resources to be tapped in this stage to 390 million barrels from 273 million barrels previously.

Development wells

Earlier in January, the oil and gas prospector indicated it will spend $5 million (Sh568 million) on its Lokichar Oil project this year.

The partners have optimised the number of development wells and increased production. The project’s upstream facilities have also been increased in size to handle the bigger volumes of oil and water.