Following the recently announced withdrawal of TotalEnergies and Africa Oil from Tullow Oil's Kenyan project, two state-owned Indian oil firms are undecided on acquiring stakes in the venture.
ONGC Videsh, the international arm of the state-owned Oil and Natural Gas Corporation, and the Indian Oil Corporation had earlier shown interest in bidding for a stake in the Lokichar oil fields. However, the latter chose not to proceed with the acquisition. Subsequently, Oil India – a state-owned exploration and production company – stepped in. London-based Tullow is seeking to enlist a strategic partner to transition the US$3.4bn project to full commercial production.
Tullow first discovered oil in the South Lokichar Basin of Kenya's northern Turkana region in 2012. The fields are estimated to contain around 460m barrels of crude. Tullow had a 50% stake in the joint venture, with Africa Oil and Total Energies each holding 25%. However, following the withdrawal of these two minority partners due to “differing internal strategic reasons”, Tullow's working interest in these blocks is set to increase to 100%.
ONGC Videsh told Bloomberg that the company requires further clarity following the exit of TotalEnergies and Africa Oil from the Kenyan consortium. A spokesperson from Oil India, on the other hand, said the company is "still evaluating" the idea of acquiring a stake in the project. Another media source suggested that ONGC Videsh is awaiting clarification from Tullow on the equity structure of a block in the Lokichar basin before it will decide to make a bid.
In a statement, Tullow portrayed the exit of its two minority partners in a positive light. The company suggested it could offer more flexibility in securing strategic partners, create a simpler joint venture, and make project delivery more efficient. Despite the prolonged timeline, Tullow said it remains dedicated to securing a strategic partnership this year.
Africa Oil attributed its exit from Kenya to a shift in its strategy to focus on production and exploration in high-potential areas, particularly its Orange Basin portfolio in Southern Africa.
Kenya's aspiration to be a crude exporter has run into opposition from local communities over compensation and land disputes. There are also complications in establishing an export route from the isolated Turkana region, and delays related to the Covid-19 pandemic. In 2021, the joint venture partners revised the project to enhance its technical, commercial, and environmental resilience. An updated field development plan was submitted to the Kenyan regulator in March 2023 but is yet to be approved.
India aims to gain equity stakes in global oil and gas assets via its state-backed hydrocarbon companies.
Meanwhile, work is set to resume on the Mozambique LNG natural gas project, in which Indian energy companies ONGC Videsh, Bharat Petroleum, and Oil India hold stakes of 16%, 10%, and 4% respectively. Located off the coast of Mozambique’s Cabo Delgado province, the project has been dormant since April 2021 due to attacks by terrorist groups. Initially, the TotalEnergies-backed venture aimed to deliver its first gas cargo in 2024, with plans for an annual production of up to 43m tonnes of gas. However, the first gas from the project is now anticipated by the earliest in 2027-2028.
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‘India eyes more equity oil from overseas in strategic energy security push’, S&P Global Commodity Insights, 03 August 2022
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