Tullow Oil has signed a landmark agreement to sell its entire Kenyan assets to Gulf Energy Ltd in a deal valued at Sh15.6 billion (approximately $120 million), marking its exit from the country after more than a decade of exploration and setbacks.
The transaction involves three structured payments of Sh5.2 billion each, with the first due on completion or upon approval of the Field Development Plan scheduled no later than mid‑2026 while the final tranche is spread over five years starting in 2028 and contingent on oil price benchmarks.
The deal transfers complete ownership of Tullow Kenya BV which includes the South Lokichar oilfield in Turkana County to Gulf Energy, along with full liability for both past and future obligations tied to the assets.
Tullow retains the right to receive royalty payments based on future production as well as a 30 percent cost‑free stake in any subsequent development phases prior to government participation.
The agreement comes amid a series of operational challenges that frustrated Tullow’s ambition to bring Kenya into the league of oil-producing nations.
Despite discovering commercially viable reserves over a decade ago, delays in regulatory approvals, infrastructure constraints particularly the lack of a heated crude pipeline to the coast and partner withdrawals hindered progress.
The company fully wrote off over $145 million in exploration costs in recent financial statements, underscoring how the venture weighed on Tullow’s balance sheet.
For Tullow, the asset sale is a strategic pivot in its broader financial restructuring plan.
Coupled with recent divestments including a $300 million deal in Gabon the sale helps accelerate deleveraging efforts and reposition the company for refinancing, while allowing it to retain upside exposure if Kenya’s oil prospects eventually materialize.
For Gulf Energy, the acquisition presents both opportunity and challenge. As a Kenyan-based energy firm, it brings local presence and financial capability to drive the Lokichar project forward.
However, it must now navigate the same hurdles that previously stalled development securing full regulatory clearance, approving the Field Development Plan, attracting strategic investment, and addressing the infrastructure gap that has rendered commercial production elusive.
The transaction has drawn scrutiny from lawmakers and energy sector watchers who question whether sufficient transparency and safeguards were embedded to protect Kenya’s long-term interests.
Critics point out that the royalty and back-in provisions heavily favour Tullow, while leaving limited clarity on how Gulf Energy will deliver on production targets or benefit local communities in Turkana.
With the first payment expected in 2025 and final documentation anticipated soon, Ghana’s exit opens a critical new phase for Kenya’s oil aspirations.
Gulf Energy now holds the reins in advancing the country’s most promising onshore oil discovery.
Whether it can succeed where Tullow faltered will hinge on its ability to secure approvals, mobilize funding, and deliver infrastructure development under tight timelines.
The deal thus stands as a pivotal moment in Kenya’s energy journey: a blend of bold transformation, local stewardship, and unresolved uncertainty.
Written By Ian Maleve
