Kenya’s Gulf Vitality can pay Tullow Oil $9 million (Sh1.16 billion) for the British agency to surrender rights to future royalties of $0.5 (Sh65) per barrel and repurchase of shares within the Turkana oil venture.
Tullow states in new filings on the London Inventory Trade (LSE) that it has agreed to an extra cost of Sh1.16 billion in alternate for the rights that might have enabled it to financial institution future tens of millions in royalties as soon as the Kenyan crude oil venture reaches full manufacturing.
After promoting its Kenyan property to Gulf for at the very least $120 million (Sh15.6 billion) in three staggered funds, the British agency was entitled to royalty funds and had the appropriate to a 30 % participation in potential future improvement phases at no further price.
Ceding these rights signifies that the corporate will make a clear break from the Turkana venture, the place it first found oil in 2012.
“This transaction is one other essential step in our technique to ship worth from our portfolio and strengthen the stability sheet. By accelerating the receipt of $9 million from the sale of the shares in Tullow Kenya B.V., we’re securing near-term money proceeds and simplifying our portfolio,” stated Ian Perks, the chief govt officer of Tullow.
The Kenyan oilfields haven’t been introduced into full manufacturing, as any export route would require constructing tons of of miles of a heated pipeline to the coast.
The British agency has already acquired the primary two tranches of the staggered cost. The primary cost was made on September 25, 2025, and the second on March 9, 2026.
The second tranche was due both upon the approval of a discipline improvement plan (FDP) for the venture. The FDP was accepted in February after it was ratified by the Ministry of Vitality and Parliament.
An FDP outlines how an oil firm intends to develop a petroleum discipline and handle the influence on the setting and society. It additionally offers forecasts for manufacturing and prices.
The third and last $40 million tranche shall be paid in quarterly instalments of $2 million (Sh258.7 million) beginning in September 2028, offered that the value of Brent crude oil averaged $65 per barrel within the previous quarter.
Ought to the combination quantity of the tranche not have been cleared by June 2033, the stability shall be settled in a bullet cost whatever the prevailing value of oil.
Securing the upfront cost in alternate for future royalties removes uncertainty over money flows for Tullow, provided that the venture has confronted lengthy delays and is topic to the volatility of the oil market.
Tullow found commercially viable oil within the Lokichar basin in 2012 and had aimed to start out business manufacturing in 2020. The goal would later be revised as the corporate struggled to discover a deep-pocketed strategic investor to derisk the venture, earlier than the eventual sale to Gulf.
It additionally didn’t get approval for its discipline improvement plans for the venture, partly because of the issue in securing a strategic investor after the exit of its three way partnership companions TotalEnergies and Africa Oil in 2023.
The pair, who held a 25 % stake every within the venture, stated that they left the venture as a consequence of “differing inside strategic causes”, leaving Tullow as the only real proprietor.
Earlier than promoting its stake to Gulf, Tullow had cumulatively written off greater than Sh140 billion in recoverable property from the Kenyan venture, underlining the delays in transferring into business manufacturing and securing a strategic funding.
After securing the stake, Gulf is now hoping to start business oil manufacturing by the top of this yr on Turkana oil blocks T6 and T7.
The corporate’s FDP exhibits that 600,000 barrels of oil shall be extracted and exported per thirty days—or 20,000 barrels per day— within the first section of the venture operating from 2026 to 2032. The second section, from 2032, will see manufacturing enhance to 50,000 barrels a day or 1.5 million per thirty days.
Gulf has already secured an onshore oil rig for $15 million (Sh1.9 billion) from Nice Wall Drilling Firm within the United Arab Emirates (UAE) on a long-term lease for the Turkana venture.
