London-listed independent Tullow Oil is in talks to sell part of its 50pc stake in Kenya's South Lokichar oil project to Indian state-run firms ONGC Videsh and IOC.
The Kenyan government hosted a meeting between the three oil companies in Nairobi on 29 July and the negotiations are at an advanced stage, according to the energy ministry's principal secretary Andrew Kamau. "Indian companies have modern oil extraction technologies that will surely help to develop the Lokichar oil fields,'' Kamau told Argus. "We shall certainly give them the green light," he said.
Tullow wants to reduce its stake in the project to be more in line with a company of its size. The firm has made it clear that securing new strategic partners is critical for reaching a final investment decision. It said last month that it is confident of making substantial progress on that front in the second half of this year.
Tullow and its existing joint venture partners — TotalEnergies and Canada's Africa Oil — reworked the development plan for the South Lokichar project last year to target more resources and raise the crude production plateau to 120,000 b/d. The previous plan envisaged 60,000-80,000 b/d in the first stage, potentially rising to 100,000 b/d in later phases. The changes to the plan — which incorporated data from an early production pilot scheme — have resulted in lower unit production costs but have raised the overall capital expenditure estimate to $3.4bn from $3bn.
"This plan has restructured a commercially difficult project into an investible opportunity," Tullow chief executive Rahul Dhir said at the firm's 2021 results in March.
The $3.4bn investment includes developing the South Lokichar fields and linking them to Kenya's Indian Ocean port of Lamu via a heated pipeline. The early production pilot scheme — which involved trucking oil from South Lokichar by road to Mombasa for onward export — ended in June 2020.
News of Tullow's progress in finding new partners for the project comes as Kenya prepares to go to the polls to elect a new president to replace Uhuru Kenyatta on 9 August.
