Kenya’s oil and gas industry is in a state of transition, as its major oil and gas development — Blocks 10BB and 13T in Turkana — has been put on hold, with Tullow Oil submitting a notice of force majeure to the Kenyan Ministry of Petroleum and Mining, citing complications from COVID-19.
Meanwhile, Uganda’s Lake Albert Project is moving ahead, with Total announcing plans to acquire Tullow Oil’s stake in the project. The massive development in Uganda, which is set to include a pipeline and refinery, could easily have an impact on regional oil and gas developments and opportunities.
In a webinar, Kenyan energy industry leaders shared strategies and thoughts on how Kenya’s oil and gas sector can deal with the implications caused by COVID-19.
According to Dr Elly Karuhanga, “Force Majeure are reactive for companies, it is something that is beyond their means or the problem there are facing. So, it is unfortunate that this has happened in Kenya, but it is also unfortunate that Tullow had to exercise this in their business. When you think about the reasons they faced, they had no alternative.”
In East Africa, Kenya has the most natural resources and is the most explored country in the region. In order to have a knock-on effect and attract investors in this climate, East African countries need to keep exploring and looking at other projects. In Kenya, there are offshore blocks operated by Eni and hopefully, with a great oil flow, they will help the economy.
For companies like Baker Hughes, transition into deep-water explorations is expected to be less difficult, because it is already involved in offshore projects across Africa and has actively interacted with Eni in Kenya.
“For us, it is more about, how do we get our local partners in Kenya who have been involved in the onshore activities, to then up to their game a little bit to meet the offshore requirements and that’s going to take a lot of back and forth, integration, cooperation to get them to a point where the skillset of that personnel and the equipment that they have and intend to acquire will be able to meet the requirements of deep-water play,” says Toks Azeez, Sales and Commercial Director for Sub Saharan Africa at Baker Hughes.
Speakers encouraged synergies and regional collaboration to overcome the challenges faced by the oil and gas industry. Local companies, as well as countries, need to come together to find a solution to them. According to Mwendia Nyaga, CFO of Oilfield Movers, “Companies can scale up from the location at which they are based and start working in other places. For me, it is cooperation, synergizing and not over complication.”
African governments are advised to think about the long-term effects COVID-19 has on oil and gas projects as well as how to regain investors’ appetite, “You should always look at fiscal incentives that allow fair and equitable taxation on revenues, but allow an investment environment that is lucrative, because every dollar in our industry can go anywhere in the world. East Africa, big companies and the small-medium sized oil and gas companies, will look at the investment climate as to where they get greater bang for their buck and that will mean that if the East African region does not have favourable fiscals then the dollars will go elsewhere, where you will get better bang for your buck, so there is a balance. When the government is looking at this to be able to enable an environment where investment will be made, knowing that the risk is carried by the investors initially,” says Brian Muriuki, MD & Country Chair of Royal Dutch Shell Ghana.
Doris Mwirigi, COO of Energy Solutions Africa closed by sharing her belief that the oil and gas industry is in a transition, seeing that oil prices are slowly recovering to pre-COVID-19 prices.
“In Kenya, we are already at the forefront in terms of green energy and if you look at it, we are still very dependent on fossil fuels. So, you find that we are ahead in terms of green energy, however, I am still an oil girl and believe that oil and gas will recover, and in any case, as you can see globally, the oil prices are coming up and if you look at the equity market the oil prices are good for oil companies, so I think oil and gas will still play a major role in the oil and gas mix and we will be here,” she says.
Mwirigi also touched on the involvement of women and how the EqualBy30 initiative will empower more women in the oil and gas sector, “When you talk about adding women, it should not be just about diversity, but a business decision because companies headed by women do better. So, it’s not even a cry for help or diversity but business sense.”