(Ecofin Agency) – Ongoing discussions between Tullow Oil and Kosmos Energy suggest a merger which could shake up the West African energy sector and offer a revival to Tullow, in difficulty with major setbacks in Kenya and Ghana.
Tullow Oil, once one of the leaders in exploration in Africa, has seen its ambitions in Kenya collapse. In recent years, the company has recorded a $440 million writedown on its African assets, mainly linked to its Lokichar project, the commercial production of which remains uncertain. Earlier this year, a further reduction of $18 million on its assets in Kenya made the situation worse.
The high cost of investments necessary to develop an export infrastructure there and the construction of an oil pipeline estimated at nearly $3.4 billion have forced Tullow to look for partners, but so far, the operation has been unsuccessful. .
In Ghana, the situation is hardly more favorable. Despite an increase in production in the Jubilee field, the decline in yield from the TEN project continues to weigh on the company’s performance. In 2024, Tullow’s overall revenues have so far fallen 12% from the previous year, and debt remains high at $1.4 billion, limiting the company’s ability to invest in new projects .
Faced with these challenges, Kosmos Energy appears to be a strategic partner. Showing more robust performance thanks to its diversified assets, Kosmos plays a key role in the development of gas in West Africa. The company is notably a major player in the Yakaar-Teranga project in Senegal, which is expected to produce liquefied natural gas (LNG) from next year. With stronger technical and financial capacity, Kosmos could provide Tullow with the means to stabilize its operations and fully exploit the potential of their combined assets in Ghana and Senegal.
The proposed merger would create a major regional player with a combined production of around 120,000 barrels of oil equivalent per day (boepd). It would also bring strategic synergies focused on West Africa.
A key merger for the gas segment in West Africa
In Senegal, the 25 Tcf of proven reserves from the Yakaar-Teranga field could become a growth engine for the Senegalese economy, while diversifying the revenue streams of the merged entity. For Tullow, this merger could represent a major opportunity. By integrating Kosmos’ resources and expertise, the company could consolidate its finances by pooling investments and operational costs, restore market confidence, eroded by years of underperformance, and regain a leading role in the energy exploration and production in sub-Saharan Africa.
This alliance comes at a critical time for the oil industry, faced with the challenges of the energy transition and the volatility of crude prices. By joining forces, Tullow and Kosmos could stabilize their operations while repositioning West Africa as a key player on the global energy scene, through the gas opportunities that will open up for the pair.
Olivier de Souza
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| 28/11/2024 – Ghana: mixed results for Tullow crude production in October |
03/19/2024 – Tullow Oil records $18 million writedown on its oil assets in Kenya
