New oil explorers to wait for licensing law

PHOTO | FILE Oil exploration at Ngamia-1 in Turkana county. Some 46 blocks in Kenya have been gazetted and licensed to various oil and gas explorers.  NATION MEDIA GROUP

In Summary

• The delay has stalled the gazettement of new oil rigs, blocking oil exploration firms from submitting applications for licensing
• Upstream (oil and gas exploration) activity is regulated by the Petroleum (Exploration and Production) Act which dates back to 1984 and has been reviewed only once in 1986

Oil

By IMMACULATE KARAMBU
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Firms interested in starting oil exploration in Kenya will have to wait until a new law to guide “upstream activities” is in place.

The commissioner for petroleum at the Ministry of Energy and Petroleum, Mr Martin Heya, yesterday said the draft Petroleum (Exploration and Production) Act is expected to be presented to the Cabinet next month, four months after the initial target of June.

The delay has stalled the gazettement of new oil rigs, blocking oil exploration firms from submitting applications for licensing.

“We are revising the legal and fiscal framework and we are at an advanced stage. New blocks will be issued under a revised legal framework,” Mr Heya said.

About eight new blocks are expected to be gazetted. Some have been carved out of blocks given up by oil exploration firms such as Tullow Oil Plc and Anadarko Petroleum.

There are 46 blocks in Kenya that have been gazetted and were licensed to various oil and gas explorers as at the end of last year.

GOVERNMENT AUDIT
Sources within the Energy Ministry say the government is also keen on carrying out an audit of the process that was relied on in issuing blocks in the past with a view to crafting new procedures.

Since the discovery of oil in Ngamia-1 well by Tullow Oil Plc last year, Kenya is emerging as a possible oil producer, causing increased interest in the country’s blocks by international firms.

So far, oil has been discovered in three wells by British explorer Tullow in significant quantities.

Though Tullow, in its half year report, indicated that the local discoveries meet the threshold for commerciality, the government has called for further drilling before the country can start production.

Upstream (oil and gas exploration) activity is regulated by the Petroleum (Exploration and Production) Act which dates back to 1984 and has been reviewed only once in 1986.

Review of this law that is being undertaken by the Energy Ministry hopes to incorporate measures to deal with issues affecting the upstream sector, including aligning the management of the sector to the devolved government system and increasing the government’s share of revenue from oil and gas exploration and production.