Tullow Oil, a British oil exploration company, has written off Sh18.8 billion ($145 million) from its Kenyan assets, citing significant hurdles in the long-delayed Turkana oil project. The announcement highlights the mounting challenges facing Kenya’s ambition to become an oil-exporting nation.
The write-off stems from a combination of government approval delays, a lack of investor interest, and uncertainty surrounding critical infrastructure needed to commercialize the oil reserves in Turkana, a remote region in northwestern Kenya.
Tullow Oil has been a key player in the region since commercially viable oil reserves were discovered in 2012, with initial estimates pegging production capacity at 70,000 barrels per day (bpd).
A 2024 audit by British petroleum consulting firm Gaffney, Cline & Associates revised this figure upward to 120,000 bpd, raising hopes that Kenya could begin exporting oil by 2028. However, the latest setback has cast doubt on the project’s timeline and feasibility.
This is not the first time Tullow Oil has faced financial setbacks in Kenya. In March 2024, the company wrote off $17.9 million from its Kenyan assets due to uncertainty over the sale of its stake to a strategic investor and the commercial exploitation of the Turkana oil deposits, according to a report by OilPrice.com.
That impairment was the first since 2020, when Tullow wrote off $410 million. The company had hoped to reverse these impairments if its updated Field Development Plan (FDP) was approved by the Kenyan government.
However, the government rejected the latest FDP in July 2024, citing the plan’s failure to address the financial gap needed to fully commercialize the reserves, given Tullow’s limited asset value.
The rejection forced Tullow to write off the entire $242.2 million book value of its Kenyan assets. The company has been reporting a negative book value over the past four years, with its 2023 book value standing at -$359.4 million, raising concerns about its financial stability. A negative book value indicates that a company’s liabilities exceed its assets, a potential sign of insolvency.
One of the most significant barriers to the Turkana project is the lack of infrastructure, particularly the proposed 825km Lokichar-Lamu oil pipeline. According to Offshore-Technology.com, the pipeline, which would transport oil from Turkana to the port of Lamu on Kenya’s coast, was expected to commence operations in 2026.
The pipeline, with a maximum diameter of 20 inches, is to be operated by Tullow Kenya in partnership with Africa Oil and TotalEnergies. However, the project has stalled, with the Kenyan government yet to formally approve the withdrawal of TotalEnergies and Africa Oil from the venture, further complicating Tullow’s efforts to secure funding.
The Kenyan government’s slow approval process has drawn sharp criticism from observers. On X, user @cultured_kenyan suggested that the government may have demanded kickbacks. Others, like @Count_Murage, pointed to a broader pattern of government inaction, arguing that “after corruption, lack of government support and commitment leads to stagnated economic growth and development.”
The Tullow Oil write-off comes amid broader challenges in Kenya’s energy sector. A PBO has recently shown that Kenya has the highest household electricity prices in East Africa, at Sh33 per unit, compared to Sh22 in Uganda, Sh11 in Tanzania, and just Sh0.80 in Ethiopia, according to the Parliamentary Budget Office. High electricity costs have long been a concern for Kenyan manufacturers, with the Kenya Association of Manufacturers (KAM) noting in 2017 that the high cost of power—$15 cents per kWh compared to $0.4 per kWh in Ethiopia—drives up production costs, making Kenyan goods less competitive regionally.
Additionally, Kenya’s energy policy decisions have raised eyebrows. A report has revealed that (EPRA) forced geothermal power producers to reduce electricity output by 512 GWh between June and December 2024 to accommodate power imports from Ethiopia.
This move has sparked debate about the government’s commitment to local energy production. Furthermore, the government recently canceled the Kenya Pipeline Company’s plan to build a cooking gas facility in Mombasa, opting instead to hand the project to Nigerian firm Asharami Synergy under a 31-year lease, a decision that has drawn scrutiny for its lack of transparency.
What’s Next for Tullow and Kenya’s Oil Ambitions?
Tullow Oil’s latest write-off has reignited concerns about the viability of the Turkana oil project, which was once hailed as a game-changer for Kenya’s economy. The project’s projected output of 120,000 bpd would more than double Tullow’s entire global production, making Kenya a critical part of the company’s portfolio. However, without a strategic investor, government approval, and the necessary infrastructure, the path to commercial production remains uncertain.
As Tullow searches for a way forward, the Kenyan government faces mounting pressure to address the structural and bureaucratic issues that have stalled the Turkana project. Without swift action, Kenya’s dream of joining the ranks of oil-exporting nations may remain just that—a dream.
