RE: What if ???30 Mar 2025 20:29
Kenya:
Discussions with the Government of Kenya (GoK) on approval of the Field Development Plan (FDP) have been ongoing since its submission on 10 December 2021. An updated FDP was submitted on 3 March 2023 and is being reviewed by the GoK before ratification by the Kenyan Parliament. Energy and Petroleum Regulatory Authority (EPRA), the regulator, has engaged third-party consultants to review the revised FDP and the current review period was extended to 30 June 2025. The review of the FDP by EPRA is progressing, and Tullow is in discussions to respond to commercial and technical queries raised as part of the review. The Group expects a production licence to be granted once the reviews are completed.
On 22 May 2023, Africa Oil Corporation (AOC) and Total Energies (TE) gave notice of their respective withdrawal from the Blocks 10BA, 10BB and 13T Production Sharing Contracts (PSCs) and the Joint Operating Agreements (JOAs), effective 30 June 2023, quoting differing internal strategic objectives as reasons. The withdrawal is ultimately subject to the GoK's consent, at which stage the withdrawal will be considered completed and Tullow will have full assignment of rights and liabilities under the JOA. Pending GoK approval, per the terms of the agreement, the participating interest (PI) vests in trust for the sole and exclusive benefit of Tullow, which is the only remaining Joint Venture Partner.
In the Tullow management's view, in light of public statements and announcements made by AOC and TE to this effect and in accordance with the terms of the JOA, it is considered that the ownership of the 50% held by AOC and TE was irrevocably passed to Tullow on 30 June 2023. From the date, Tullow has the right to benefit from the PI and will also be liable for all costs incurred going forward (except those for which the withdrawing parties remain liable for). Tullow has also obtained an external legal opinion, which substantiates the above position, however, subject to customary conditions of Tullow having the financial and technical capacity as required under the Petroleum Act. Tullow has submitted an application to GoK to obtain its approval to execute the transfer of the 50% interest and is still in discussions with EPRA/GoK to address certain commercial and technical points raised in 2H 2024 as part of the approval process.
To achieve a Final Investment Decision (FID), securing a strategic partner who will bring requisite commercial and technical abilities is a key milestone. Considering the delay in securing a farm-down offer and time taken to secure GoK approvals for transfer of the additional 50% interest, an impairment trigger was identified for 31 December 2024 reporting.
In line with the accounting policy, recoverable value was determined using a discount cash flow model.
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