BUSINESS and FINANCE, POLITICS and GOVERNMENT

Tullow Oil Cannot Break Even With $25 a Barrel

Tullow oil Plc has indicated that it will not break even with cost of crude oil stagnant at $ 25 a barrel across the world. Kenya is on oil exploration mission in the northeastern provinces and the current global oil price decline is not helping matters.

Tullow Oil Plc the company that is tasked with oil exploration in Kenya has said that it will not be able to produce enough oil to pay their exploration costs and leave the country after the stipulated time if the global oil prices remain at twenty-five dollars a barrel. Even at the price, the company said that it would only recover operational expenditure, cost of investment, and transportation cost. This means that the prices of oil should be high for Kenya to make profit as well as the company to return cost of investment.

Breakeven price is very important because it acts as a determinant for any producer if they can stay in a market or sink. According to reports, the price of crude has fallen to the lowest since 2003. International energy agency and World Bank indicates that the prices could persist this year because of oversupply of the commodity in the market. A reduction in demand by china and continues to rock oil producing countries and the entry of Iran into the market shows that the supply will continue to rise sharply.

Financial experts indicate that the twenty-five dollar a barrel is a thin margin that the company can use to transport the oil from northern region to Lamu port. Although the current crude oil prices are affecting the rate at which Kenya is conducting its oil exploration is viable and the country projects that it is going to make profit at some point. Tullow Plc considers Kenya’s oil resilient resource and that the product could, help the country achieve its target goals.

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