KENYA: Kenyans Could Wait Longer for First Oil as JV Partners Seek an Extension of the Field Development Plan Review Period
Project Oil Kenya leading joint venture has called for an extension to the period earlier set for review field development plan submitted on 10th December 2021 saying this will allow for continued constructive discussions with the Energy and Petroleum Regulatory Authority of Kenya and the Ministry of Energy and Petroleum.
In its latest operations update the JV operator Tullow Oil said the extension will also allow the process to secure a strategic partner for the development project in Kenya which it says is in progress.
The JV had earlier called on the Kenya government to fast-track the process as an 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 judgment and assessed a probability of achieving FID and therefore the recognition of commercial reserves,” Tullow Oil said in its September 2022 financial statement.
Tullow had lamented that a delay in review and the subsequent delay in obtaining a production license the company had in line with its accounting policy, performed a value in use (VIU) assessment of its Kenya asset following the identification of triggers for impairment reversal resulting in a net present value (NPV) significantly in excess of the book value of $255.2 million.
According to the Irish explorer, there had been ongoing discussions with the 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.
If granted this would mean that Kenyans will have to wait a little bit longer before cashing in on the oil reserves in the South Lokichar basin with the project expected to take three years since the announcement of the final investment decision.