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Tullow scales up plans for delayed Kenyan oil project

Highlights

Sees production plateau hitting 120,000 b/d

Revised plan 'technically, commercially and environmentally robust'

Actively seeking strategic partners before embarking on FID

Africa-focused Tullow Oil and its partners in the Turkana oil project in Kenya have significantly increased their resource and production estimates following a reassessment of the much-delayed oil development.

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The oil project, located in the South Lokichar basin in northern Kenya, will now have a production plateau of 120,000 b/d, based on the revised development plan, making it "commercially, technically and environmentally" more enhanced, Tullow and Africa Oil said in separate statements Sept. 15.

That compares with previous guidance of 80,000 b/d, by incorporating the output data of more oil fields and drilling wells.

The partners now expect gross recovery of 585 million barrels of oil over the full life of the field.

Last year, Tullow decided to rethink the project to make it more viable from an economic perspective, after it had suspended a key farm-down process on its Kenyan assets.

In an interview with S&P Global Platts, Tullow CEO Rahul Dhir said the project was now "more compelling".

"[There is] more oil in place, a higher plateau of production, lower unit costs and a better environmental footprint," Dhir said.

"So, it is a much more attractive project, and we are now in the process of trying to find some strategic partners for the project. We have worked very hard to rework the Kenya oil project to make it much viable at low oil prices."

Seeking strategic partners

Tullow and Africa Oil said they were focused on finding strategic partners for the project, and a final investment decision has again been pushed back until this is secured.

A draft version of the final development plan has been submitted to Kenya's Ministry of Energy and Petroleum for review, and the partners hope to incorporate their feedback and plan to submit a final FDP by the end of 2021.

"Compared to the previous field development plan, we have a more economically robust project, which I am confident is more attractive to potential new partners," Africa Oil President and CEO Keith Hill said in a statement.

Tullow said the project will now include the Ekales field in the first phase of production, and it is also incorporating production data from the Early Oil Pilot Scheme (EOPS), in which 450,000 barrels was produced from the Amosing and Ngamia fields.

"As such, the first phase will now include the Ngamia, Ekales, Amosing and Twiga (NEAT) fields and will target 390 million barrels of oil of the overall 585 million barrels of oil," Tullow said.

Dhir said the technical data from the EOPS was "a game changer" which prompted the partners to "redefine the resource base" of the project.

"The phasing of the project is very much the same. But what we have done is [we] added the Ekwale field to first phase," Dhir said.

The partners also said they will be optimizing the number of wells to be drilled, and it will be changing the producer to injector ratio from 2:1 to 1:1 leading to "improved pressure support and higher resources recovered from the reservoir".

An exploration and appraisal plan are also being put in place to ensure the remaining five discoveries are efficiently developed.

Pipeline, environmental focus

That also means the project's planned export pipeline to the port of Lamu on the Indian Ocean will have to reshaped.

The facility design will now have a capacity of 130,000 b/d and an increase in the pipeline size to handle the increased flow rates.

The project is now estimated to cost around $3.4 billion, up from its previous estimate of $3 billion.

"The increase in capex from the previous design is due to a bigger facility processing capacity, additional wells to be drilled and larger diameter crude oil export pipeline, which delivers 30% increase in resources whilst lowering the unit cost to $22/b (previously around $31/b)," Tullow said.

"The revised concept also allows greater flexibility in adding additional fields into production without significant modifications to the project's infrastructure," the company said.

The partners also said they have made a few modifications to improve the environmental and social aspects of the project.

"Carbon emissions will be limited through a combination of heat conservation, use of associated gas for power and reinjection of excess gas into the reservoir," Tullow said.

Many oil and gas projects, especially those in East Africa have attracted the growing attention of global environmental groups, claiming that they will harm the climate, local communities, water supplies, and biodiversity.

There are also opportunities to use the Kenyan national grid that is substantially powered by renewables and options to offset remaining emissions, Tullow said.