British oil and gas giant, Tullow Oil, has officially ended its operations in Kenya after signing a major deal to sell all its business interests in the country for Ksh15.6 billion (USD 120 million). This marks the end of the company’s over 10-year journey of oil exploration and development in the South Lokichar Basin.
The company’s assets in Kenya will be taken over by Auron Energy E&P Limited, a company linked to Gulf Energy Ltd, following a finalized sale and purchase agreement between the two parties. This deal involves Tullow’s Kenyan subsidiary, Tullow Kenya BV (TKBV), which holds all its local assets and operations.
As part of the transaction, Tullow will hand over its entire working interest in Kenya, which includes an estimated 463 million barrels of contingent oil resources located in the Lokichar Basin.
Payment Plan in Three Phases
The total payment of Ksh15.6 billion will be made in three parts:
- The first payment of Ksh5 billion (USD 40 million) will be made once the transaction is officially completed.
- The second installment, also Ksh5 billion, will be paid by June 2026, or once the Kenyan government gives the green light for the Field Development Plan (FDP).
- The final payment, again Ksh5 billion, will be made gradually between 2028 and 2033, depending on global oil prices.
Additionally, Tullow will earn royalties from any future oil production in Kenya and has secured a no-cost option to rejoin the project with up to a 30% stake if a third-party investor comes onboard in the future.
Regulatory Approvals Pending
Although the deal has been signed, it still needs to pass through regulatory checks, including approval from the Competition Authority of Kenya. Also, Tullow Kenya must be fully separated from its parent company before the deal can be finalized. The first payment is expected to be processed later this year.
Why Tullow is Leaving Kenya
According to Tullow Kenya Managing Director Madhan Srinivasan, proceeds from the sale will mainly go towards reducing the company’s debt and improving its financial stability.
Tullow’s decision to exit the Kenyan oil sector follows a significant Ksh19 million financial loss it faced during its operations. The company became the sole owner of the Lokichar oilfields in 2023 but has struggled to make commercial oil production viable.
Kenya’s Oil Dreams in Jeopardy
Tullow’s departure could deal a blow to Kenya’s long-term ambition of becoming a leading oil-producing nation. The Lokichar Basin, located in northern Kenya, had been seen as a promising site with major oil potential.
However, full-scale oil production has never been achieved due to infrastructure challenges, including the long-standing lack of a pipeline to transport oil from Turkana to the coastal ports for export.
The exit now raises fresh concerns about the future of Kenya’s oil industry and whether new investors can succeed where Tullow could not.
Image caption: Workers walking past oil storage tanks at Tullow Oil’s Ngamia 8 drilling site in Lokichar, Turkana County.
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