It could be that Tullow Oil Plc, the company at the center of Kenya’s much-hyped oil fortune, is a fraud. Chances could also be that the British oil explorer is just not lucky and trading in the world of oil and gas exploration has not been impressive.
The sharp drop in the global prices of crude oil has cast a dark shadow on Tullow’s financial prospects. The result has been a violent shake-up of its C-suite, which has resulted on a bloodbath at its counter at the London Stock Exchange.
Shareholders have lost Sh180.6 billion in paper wealth in a period not spanning over three months. The shock waves have gone beyond the Atlantic, hitting Kenyan shores hard, with Tullow’s local subsidiary, Tullow Kenya, announcing lay offs.
Tullow should have the muscles to put 300 employees on the chopping block anywhere they operate across the world.
Tullow Kenya Managing Director Martin Mbogo said the restructuring is within the Tullow Group and informed by the firm’s announcement in December that its global oil production and associated revenues in 2020 and beyond would would fall short of the targets.
“In Kenya, the team will be reduced and will only be focused on the critical path activities that will allow us to continue to target FID (Final Investment Decision) at the end of 2020,” said Mr Mbogo.
Tullow may just rise from financial mess and guide Kenya into the long-awaited economic bliss that comes with being an oil producer and exporte.
People are disgruntled, have lost faith and have taken to social media to rail at the Tullow project, calling it a scandal. May be the oild had no commercial value after all, they claim.
Infact nearly nine years after Kenya’s 2012 announcement that it had struck oil, the dream seems to be slipping away by the day. For thirty years in the oil business Tullow has been more than just an explorer but an alchemist of sorts turning impossibilities into possibilities.
Where big boys as Shell, BP, Exxon, Total and Chevron only found traces of oil in Turkana, Tullow found relatively high deposits of the mineral.
Tullow said that the oil finds could be monetised, catapulting Kenya into the big league of oil-exporting countries but experts now cast doubt on the size of the country’s oil reserves, and poor global prices of oil is another addition to the gloom.
The government and Tullow will have to decide how commercial oil production will continue. There is no infrastructure in place to aide extraction of oil on a large-scale basis, and the project lacks the vision on how to realize the oil wealth.
The situation is now made worse by the bullish firm that traces its roots in Ireland, Tullow is in financial shambles and that is making the situation worse.
At the time Kenya struck oil, Brent crude oil, a type of sweet light crude oil was averagely $111.67 (Sh11,200) per barrel which is 159 litres of crude oil. Today, that price per barrel has dropped to under $60 (Sh6,000).
The Kenyan economy had banked hopes on mining and oil resources, which would fasten economic growth once full-scale exploitation commenced according to a 2014 Treasury document.