By GEORGE NGIGI
In Summary
- Tullow Oil paid $6.3 million (Sh538 million) for what it classified as “other taxes”, which include value added tax, pay-as-you-earn, withholding tax and other government payments of $950,000 (Sh85 million), which include land rentals and training allowances.
British exploration firm Tullow Oil paid to the
government more than half a billion shillings in taxes last year,
signalling a cash windfall that could come with discovery of commercial
deposits.
In its annual report released last week, Tullow
Oil said that it paid $6.3 million (Sh538 million) for what it
classified as “other taxes”, which include value added tax,
pay-as-you-earn, withholding tax and other government payments of
$950,000 (Sh85 million), which include land rentals and training
allowances.
The firm spent $28 million (Sh2.4 billion) on
local suppliers and it expects the amount to rise to $800 million in the
next phase of its investments.
“The challenge for Tullow is to manage this
expenditure in terms of transparency, supplier due diligence and
standards, while maximising local content,” said the company in the
report.
The amount spent in the country is, however,
dwarfed by that spent in Uganda and Ghana, which are already involved in
commercial production of Oil.
Tullow paid Sh14 billion ($175.4 million) to the
Ugandan government in taxes with Sh12 billion being corporate tax and
Sh47.4 billion ($557.8 million) to the taxman in Ghana. This underlines
the magnitude the commercial viability of the oil find in Kenya could
have on the government revenues and local business activity.
Last year, the banking sector contributed Sh35.6 billion to the taxman.
Tullow has a total of 59 employees in Kenya, with
51 being locals compared to 281 in Ghana and 177 in Uganda. In what will
further heighten speculation of the commercial viability of the wells
in Kenya, Tullow Oil is set to bring its board of directors for a visit
in Kenya.
The company raised issue with water availability
stating that they have already started assessing sources of water for
mining should they reach the commercial development phase.
“We are mapping local water sources through a
hydro-geological survey which will establish a baseline of water sources
in the region,” said the firm.
Last month, Tullow said it had achieved close to commercial quantities of oil in Twiga South-1 well.
Last month, Tullow said it had achieved close to commercial quantities of oil in Twiga South-1 well.
In February this year, the company said it had
“successfully completed (tests) with a cumulative flow rate of 2,812
barrels per day…the first potentially commercial flow rates achieved in
Kenya.”
At the Ngamia-1 well in Block 10BB in Kenya, the
first of six drill stem tests have now been completed but further tests
are ongoing to determine commercial viability.
The International Monetary Fund has projected that
Kenya is likely to start producing oil in six to seven years. Last
year, the company experienced two oil spills in the country, which were,
however, classified as insignificant.
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