Kenya to Raise $1 Billion in Debt Next Year for Oil Project

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By Verity Ratcliffe and David Herbling

(Bloomberg) —

Kenya plans to raise $1 billion of debt to buy a stake in an oil project operated by Tullow Oil Plc and its partners.

The fundraising is likely to happen next year as Tullow, Africa Oil Corp. and TotalEnergies SE have until December to submit a plan to develop the resource before their production sharing agreement with the government expires, Leparan ole Morintat, chief executive at National Oil Corp. of Kenya said in an interview.

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National Oil Corp. will commence the fundraising to take up the back-in rights as soon as the field development plan has been submitted, Morintat said in Dubai.

The $3.4 billion project will be a game changer for East Africa’s largest economy that is a net fuel importer. Once complete it will include a pipeline to the coast for exports and an estimated output of 120,000 barrels a day, with expected gross oil recovery of 585 million barrels over the full life of the field. 

The debt will be used as an equity injection in Kenya’s oil company to fund its portion of the project, which includes a heated pipeline. 

Strategic Partners

Tullow and its joint venture partners are also seeking strategic investors for the Kenyan project. The national oil company is currently in talks with energy giant Saudi Aramco as well as other firms as it searches for a non-equity strategic partner for its downstream business.

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“We are looking at signing a public-private partnership deal from a national oil corporation,” Morintat said. “Depending on how much capital outlay they are going to put in we can agree on the duration and terms and the kinds of security they want.” 

The state-owned firm already has a memorandum of understanding with Aramco “to guide on negotiations,” according to Morintat. It is also talking to other players, but favors state-owned national oil corporations where government-to-government deals can be signed, he said.

If a partner isn’t secured, they will still go ahead but with expensive local capital, Morintat said.

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