Tullow focuses on East Africa in oil search bid
What you need to know:
- Oversupply hurts returns for companies.
- Falling global crude prices forces firms to cut down capital outlays.
Tullow Oil will concentrate its exploring activities to East Africa as falling global prices of crude forces the London-listed company to significantly scale down this year’s budget.
The company, which is searching for oil in northern Kenya will now spend $200 million (Sh18.2 billion) for all its operations across the world down from $1 billion (Sh99 billion).
“The reduced exploration programme will predominately focus on a number of high-impact, low-cost exploration opportunities in East Africa,” Tullow chief executive Aidan Heavey said in a statement released on Thursday.
Crude prices currently stand at $50 a barrel, a six year low, having fallen sharply following oversupply.
The company said results for the Epir-1 well are expected later this month.
“The Engomo-1 well, testing the Turkana West Basin, has commenced drilling. The Lekep-1 well, testing the Kerio Valley Basin, is expected to be drilled in the second half of 2015 along with multiple appraisal wells in South Lokichar as work progresses on the East Africa development plan.”
On oil production, the firm will shift focus to West Africa where it expects to deliver around 100,000 barrels of oil per day by the end of next year to generate long term cash for the business.
Tullow and its partner Africa Oil Corporation of Canada are known to be behind the oil discoveries in Kenya.
The amount of resource discovered to date since March 2012 is estimated to be above 600 million barrels which industry analysts say meets the minimum threshold for commercial exploitation.
Talks on development and production of the Kenyan oil are ongoing between the government and players in the upstream sector.
Analysts have, however, cautioned that the country can only produce oil at a profit if the price of crude is at a minimum of $70 per barrel.
