Kenya to audit Tullow Oil after seven years of exploration exercise

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Kenya is seeking to recruit a company to audit the costs billed by Tullow Oil in their exploration and production of crude oil in northern Kenya since the year 2010.

The audit is expected to be used to inform the revenue sharing deal between the government and Tullow Oil.

The consulting firm is expected to carry out a comprehensive independent audit in blocks 10BB and 13T to confirm the bill presented by Tullow Oil.

The firm will also advise on the tax eligibility and potential future uplift costs as well as backdate all costs to the exploration stage.

The consultancy will run for a period of six months.

The independent audit is financed by the World Bank’s International Development Assistance with the aim of strengthening the government’s capacity to manage the petroleum sector and accruing wealth.

Over the next three years, Tullow Oil plans to produce and export 2.4 million barrels of oil.

According to Tullow’s regulatory filings, Lokichar basin with proven reserves of 750 million barrels of crude oil is estimated to have a 25-year production lifespan, with an output of 80,000 barrels of oil per day.

The colossal cost incurred by Tullow Oil in exploration and production which runs into billions of shillings will be billed and recovered from crude oil sales.

Production sharing contracts signed between the government and oil explorers stipulate that those who strike commercial oil deposits are entitled to fully recover their costs over the production cycle.

Kenya’s interest in the two Lokichar blocks 10BB and 13T stands at 20 percent and 22.5 percent respectively.

As at last year, Tullow Oil said it had invested over 150 billion shillings since it started exploring for crude oil in Kenya since the year 2010.

The figure raised eyebrows as the government has not been auditing its books to verify the claims.

Back in 2013, the Ministry of Energy had opened the search for a consultant to audit the financial operations of explorers who have made commercial oil finds.