A worker at the Ngamia 1 oil rig in Turkana County

                    A worker at the Ngamia 1 oil rig in Turkana County

Kenya’s oil and gas industry received a boost after explorer Tullow Oil said it would spend part of the Sh15 billion ($150 million) earmarked for the region on local development, even as the firm reported losses.


Tullow Oil said Kenya and Uganda would benefit from the expenditure, which includes coming up with a plan on how resources in the two countries can best be developed into sellable commodities.

“The draft Field Development Plan was submitted to the government of Kenya in December and will inform discussions as we progress towards potential Final Investment Decision (FID) of both the Kenya and Uganda upstream development projects in 2017,” said the company when it released its end of year results.

Tullow reported losses of Sh102 billion ($1 billion) after tax for 2015 which is an improvement from a loss of Sh158 billion ($1.55 billion) posted the year before.

The falling price of oil on the international market has been the biggest contributor to the loss.

Oil prices are at the $30 (Sh3,052) per barrel level, which is a 12-year low and has discouraged investment in exploring new territories.

Currently Tullow is drilling the Cheptuket-1 well in Kerio Valley which should be completed by February as it works on how best to utilise its other resources.

In August last year the Kenyan and Ugandan governments agreed that a pipeline would be best suited to transport oil from northern Uganda and Tullow said concerned ministries in both countries are working on the development plan.

“These conditions, which include ensuring that this is the lowest cost route, are being worked on by both governments in conjunction with the Kenyan and Uganda upstream parties,” said the explorer.

Last year, oil firms in Uganda led by Total hinted that they preferred a pipeline going through Tanzania to one going through northern Kenya.

Tullow’s partner Africa Oil is also optimistic that prices of the crucial commodity will improve and has been raising funds for further exploration on its northern Kenya and Ethiopia blocks.

“We are very pleased to have completed the Kenyan portion of our farm-out to Maersk. We feel Maersk will be an excellent partner in terms of technical and financial strength and experience critical to moving the development project forward.

“This transaction puts Africa Oil in the enviable position of not requiring any additional equity financing prior to first oil and will allow us to weather the current difficult oil price environment should it continue into 2016,” said Africa Oil chief executive Keith Hill after the firm completed selling part of its interest to Maersk.

Africa Oil received $427 million (Sh44 billion) from Maersk after selling its stakes on its northern Kenya and Ethiopia blocks.