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Tullow Says Oil Trucking On Hold Until Kenya Repairs Damaged Roads

Tullow oil PLC said Wednesday that trucking of Kenya’s crude from Turkana to Mombasa will remain suspended until sections of roads severely damaged by heavy rains are repaired.

Kenya’s early oil pilot scheme (EOPS) program, in which Tullow uses a fleet of 100 specialized tankers to lift 2,000 barrels per day over the 1,000 kilometres was put on hold after adverse weather in the fourth quarter of 2019 posed security risks.

“Trucking remains on hold until all roads are repaired to a safe standard,” Tullow said in its trading update.

The suspension derails the Ministry of Petroleum’s shipment target of 500,000 barrels of oil. In December, Tullow said only 150,000 barrels of oil had been ferried to Mombasa for pre-shipment storage.

Tullow said it expects to report a $1.5 billion  writedown after lowering its long-term oil price assumptions by $10 to $65 a barrel.

“Write-offs include Jethro, Joe and Carapa well costs in Guyana as a result of drilling results and Kenya Block 12A, Mauritania C3, PEL37 Namibia and Jamaica licence costs due to the levels of planned future activity or licence exits,” it said.

A final investment decision for Kenya is still pencilled in for the end of this year, but that target is “challenging”, Chief Operating Officer Mark MacFarlane said.

JPMorgan analysts said in a note: “Looking forward, alongside the CEO and other organisational changes we anticipate through 2020, we look for greater clarity on realistic timeframes to progress in both Uganda and Kenya, which hold the key to medium term growth potential.”

Tullow and the Kenyan government are using the early shipments to test the market and to provide invaluable data and experience to be used in driving the oil business at the development stage.

Trucking of crude to Mombasa was launched by President Uhuru Kenyatta in June 2018 but the project has faced many hurdles including protests by local community demanding security be beefed up over banditry and allocation of jobs and tenders in the oil operations. The protests forced Tullow to suspend trucking for a month.