Indian Oil Company–ONGC Videsh Limited (OVL) could take up a stake in Tullow Oil’s Kenyan assets, with the British firm hoping to secure strategic partnership this year.

This follows the exit of joint venture partners–Africa Oil Corp and Total Energies, a move said to have given Tullow flexibility in negotiations with strategic partners.

Tullow has since described the recent withdrawal of the Kenya Joint Venture Partners, as “ due to differing internal strategic reasons.

Canadian firm-Africa Oil Corp reportedly dropped from the project on concerns over possibilities of finding an investor who would support commercial exports of Kenya's crude oil, including construction of the 824km Lokichar-Lamu oil pipeline.

Total on the other hand has shifted focus on already producing fields in other markets, with the exits throwing Project Oil Kenya into disarray.

It left Tullow with no option but to assume a 100 per cent equity position.

The joint venture break up came on the back of a slow negotiation process between Tullow and potential investors, where ONGC Videsh and Indian Oil Corp were among potential targets in talks the started in November last year.

The two would then develop cold feet in May this year, leaving Tullow at crossroads on its plans to offload at least $3.4 billion (Sh484.4 billion) stake at the Lokichar oil project.

With the breakup of the JV, ONGC Videsh is reported to be seeking clarity before making an investment decision, with Tullow yesterday confirming talks.

“Tullow confirms that several interest parties including India’s ONGC Videsh Limited have expressed their interest in coming on-board as a strategic partner in the development of our Kenyan asset,” Tullow Kenya BV managing director Madhan Srinivasan, told the Star. 

Tullow assets in Kenya covers blocks 10BB, 13T, and 10BA in the South Lokichar Basin and is operated by Tullow Kenya BV.

“Tullow is however not at liberty to publicly make any further comment as engagements are still in progress,” Srinivasan said.

However, he said the commits to making the necessary public disclosures once specific milestones are achieved.

All prospective strategic partners remain engaged and detailed farm-out discussions continue with a number of companies.

“Whilst the process has taken longer than expected, Tullow remains focused on securing a strategic partnership this year, ” he said.

The latest developments come even as the government continues to support Tullow in search of strategic partners, whilst calling on the private sector to invest in related infrastructure, including the planned crude oil pipeline.

According to Energy Cabinet Secretary Davies Chirchir, the government is in talks with Chinese and Indian investors into putting capital in the project, as it reviews the Final Investment Decision tabled by Tullow,

He said Kenya would continue to back Tullow's push for commercial oil production in Turkana, despite the timelines shift to beyond 2027.

The ministry hopes to have made a decision on the Final Development Plan by end of September, which would then be tabled before Cabinet, and a final vote by Parliament.

This will inform among others, if Kenya will opt for a refinery or construction of the 852 km Lokichar-Lamu pipeline for transporting crude oil from Turkana, to Lamu port for export.

Taking full control creates more optionality, gives Tullow more flexibility in the on-going process to secure strategic partners, creates a simpler Joint Venture Partnership and streamlines project delivery, according to Tullow Oil plc CEO Rahul Dhir.

On Monday, Natiuonal Treasury CS Njuguna Ndungú called on industry players, led by the Petroleum Institute of East Africa (PIEA), to formulate modalities of partnering with the Kenya Kwanza Administration to invest in the oil pipeline.

This is through a Public Private Partnership initiative.

“I envision the government having minority shares to facilitate private-sector-led administration and management of this project to benefit from the efficiencies provided by the private sector. This will have benefits for the region and lower costs,”Ndungú said at a PIEA vent in Nairobi.

The institute is the professional body for the oil and gas industry in the region.

Ndungú called on PIEA to forward incentives it requires to mobilise foreign direct investments in upstream activities to exploit the existing oil and gas reserves within the country, and tap into their immense benefits once exploited.

This, as the country builds up investments in renewable energy.