Tullow Oil Relinquishes Kenya Royalty Rights For $9 Million Cash Payoff

A version of this article appeared on The Business Daily.

British oil exploration firm Tullow Oil plc (Tullow) has agreed to clear out its residual claims in Kenya by selling its future royalty rights and buyout options to Gulf Energy Limited.

The revised arrangement comes after a year of negotiations following the primary sale of the local asset portfolio. Under the new terms, its wholly owned subsidiary, Tullow Overseas Holdings BV (TOHBV), will receive an additional 9 million dollars.

This upfront cash payment replaces the contingent long-term benefits established under the original 2025 Sale and Purchase Agreement (SPA). The local affiliate of the buying entity, Auron Energy E&P Limited, agreed to settle the consideration by mid-July.

In exchange for the immediate cash injection, the London-listed firm is waiving its quarterly royalty stream of 0.5 dollars per barrel. This calculation was initially tied to 80 percent of total production from the northern blocks.

Furthermore, the divestment terminates the conditional back-in right that previously allowed the explorer to repurchase a 30 percent participating stake. That option would have applied to any potential future development phases within the Lokichar basin.

Chief Executive Officer (CEO) Ian Perks stated that the transaction represents an essential component of their strategy to unlock portfolio value. He noted that accelerating the payment simplifies their international structure, while strengthening the corporate balance sheet.

This current transaction leaves the third phase of the original agreement completely intact. This final segment, known as Tranche C, involves a 40 million dollar conditional payment that remains structured over a multi-year period.

These specific deferred funds are scheduled to be disbursed through quarterly instalments of 2 million dollars starting in late 2028. The disbursements depend heavily on the average price of Dated Brent crude oil reaching a minimum baseline.

The market price must remain at or above 65 dollars per barrel in the preceding quarter for payments to trigger. However, the full amount becomes due as a single bullet payment by June 2033, if conditions are not met.

The initial phase of the exit strategy concluded in September 2025, when the first tranche of 40 million dollars was transferred. The subsequent segment was completed in March 2026, after the project achieved critical operational thresholds.

The total value of the original asset transfer reached at least 120 million dollars. This conclusion finalized the complete withdrawal of the multinational from the block concessions after 14 years of intensive exploration.

Operations began in Turkana County back in 2012, when exploration teams discovered commercially viable crude deposits. The initial master plan aimed at achieving full commercial production by 2020, but multiple logistical issues derailed the timeline.

High development expenditures, specialized infrastructure requirements, and extensive delays hampered the progress of the remote fields. Control of the massive Turkana oil project, including Blocks 10BB and 13T, now rests entirely under domestic management.

Gulf Energy Limited is tasked with executing the upcoming phases of infrastructure development and engineering works. The local firm seeks to navigate the long-standing community concerns regarding resource allocation and regional environmental impacts.