Kenya, Tullow in a dispute over compensation bill

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Kenya has rejected Sh16 billion out of the total Sh204 billion offered to the ministry of petroleum as compensation by the British oil explorer Tullow Oil and its partners for the eight-year firm’s work in Turkana County oil fields.

Oil firms were to recover their cost of exploration over the eight years once the production and sale of oil starts in Kenya-which was planned to start in 2022.

The Tullow said that Kenya owes it Sh213 billion and wants to use the pledge to offer for the sale of its stake in the county.

“The ministry audit has suggested that eight percent of this expenditure (around Sh16 billion) does not qualify for Cost Recovery. The partners and the GoK will now work together to agree on a final number,” said Martin Mbogo, the Tullow Kenya Managing Director in an email.

The exploration bill been has been something that has been raising the eyebrows of many over the years following delays by the government to hire a firm to audit the cost.

Kenya planned to begin commercial oil production in 2022, but due to certain factors, including the Tullow recent declaration of force majeure on the contract, have increased uncertainty on the project. 

 Kenya and Tullow could now be forced to go for arbitration in the UK following their lack of agreement on the compensation.

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Anthony Kiratu is the Founder of Finsolutions. He is a financial analyst with over 5 years experience in research, investment advisory, valuation and financial modelling. Anthony is a member of the Institute of Certified Investment and Financial Analysts and Institute of Certified Public Accountants of Kenya. He is passionate about development of African Capital Markets through training of investors and dissemination of information for sound financial and investment decision making process. He is also a part-time lecturer in the Certified Investment and Financial Analyst course in the subjects of International Finance, Portfolio Management, Equity Investment Analysis, and Fixed Income Securities. Email: anthony@finsolutions.co.ke Contact: +254 780216631

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