Tullow to cut down budget for oil search

Tullow Oil Plc has announced plans to reduce its exploration budget as falling global prices of crude oil impact on its operations.

On Wednesday, the British firm said in the period to 2017, it will concentrate on its West African operations where it has discovered oil in commercially viable quantities as it gets ready to start commercial production.

Tullow plans to reduce the net exploration and appraisal capital expenditure to $300 million (Sh26.9 billion) by 2015.

Its capital expenditure budget for 2015 is expected to be about $2 billion (Sh180 billion) subject to approval of the board.

The company, however, said it will be scouting for new exploration blocks in East Africa where recent discoveries of oil in Kenya and Uganda have added to its portfolio for development.

“In light of current oil and gas sector challenges, including the commodity price environment, we are reviewing our capital expenditure and our cost base to ensure that Tullow is well positioned for future success. Our overall exploration spend will be significantly reduced and will focus primarily on East Africa where we have major basin opening potential,” Tullow chief executive Aidan Heavey said on Wednesday.

In particular, the company said it will shun offshore drilling which has in the past reduced its returns.

“Given the current expectations for the oil price, reduced commercial success from offshore drilling and the lack of asset transactions, returns from drilling complex, deep water wells are currently less attractive,” a statement from the firm read.

The East Africa region where Tullow operates will not be affected in the current scaling down plan.

The firm said it will enhance appraisal of existing discoveries in Uganda and Kenya in a bid to boost development of the crude resources.

Together with its partner Africa Oil Corporation, Tullow made the first discovery of oil in Kenya in March 2012.