Tullow Oil Says it Will Fail to Meet Contractual Obligations in Kenya

Tullow Oil Says it Will Fail to Meet Contractual Obligations in Kenya

Tullow Oil has declared force majeure on its main licences in Kenya according to a statement from Africa Oil Corp

“Tullow and its partners have called Force Majeure because of the effect of restrictions caused by the coronavirus pandemic on Tullow’s work programme and recent tax changes. Calling Force Majeure will allow time… for the Joint Venture and Government to discuss the best way forward,” Tullow said.

Force majeure clauses are contractual clauses which alter parties’ obligations and/or liabilities under a contract when an extraordinary event or circumstance beyond their control prevents one or all of them from fulfilling those obligations.

June 2019, the Kenyan Government, Tullow Oil, Total and Africa Oil Corp signed agreements for the development of a 60,000-80,000 barrels per day crude oil processing facility for oil discovered in Block 10 BB and 13 T in the South –Lokichar Basin.

Tullow has a 50 percent stake in the Blocks.

Tullow hoped to reach Final Investment Decision (FID) in 2020, after a number of delays, but with the announcement, this unlikely and could likely lead to the closure of its Kenyan operations.

However, the latest developments warn that all information surrounding the force majeure is forward-looking and therefore involves discussions around predictions. 

“Forward-looking information includes but is not limited to the Company’s position that the operating environment, adversely impacted by the COVID-19 Pandemic, will improve the potential outcome of discussions between Africa Oil, its partners, and Government of Kenya. There is no certainty such discussions with the Government of Kenya will result in a satisfactory outcome and may result in the Company’s Kenyan project being significantly modified or ceased in its entirety,” read the statement.

April, Tullow sold its entire stake to Total in their joint onshore oil fields in Uganda for $575 million (€531.6million).