Money Markets
By REUTERS
In Summary
- Rules which give the investors a 5pc stake is expected to be passed by August along with a revised petroleum bill.
- Oil industry analysts and observers say the law will be a boon for local companies and workers in the near-term.
Kenya has proposed rules requiring oil exploration
firms to give local investors a five per cent stake and use local
suppliers and staff for their services to get a bigger share of earnings
from the new sector.
East Africa has become a hot spot for oil and gas
exploration in recent years, spurred by new finds, but Kenya has yet to
update its legal framework for the sector.
Tullow Oil and Africa Oil have estimated
discoveries of 600 million barrels to the northwest of Kenya, and plan
to submit their development plans to the government by late this year
prior to commercial production.
Boon for local firms
The rules are expected to be passed by parliament
by August along with a revised petroleum bill, said Ministry of
Petroleum and Energy Principal Secretary Joseph Njoroge.
“It is to encourage utilisation of local resources,
equipment, whatever is available locally must take precedence over
foreign, mostly the human capital, (which) we have a lot,” Njoroge told
Reuters.
Oil industry analysts and observers say the law
will be a boon for local companies and workers in the near-term, but
that there would be need for programmes to expand capacity if Kenyans
were to meet all the laid out requirements in the regulations.
The regulations state that within 10 years, oil
companies would be required to source 60 to 90 percent of goods and
services locally, and 70 to 80 percent of their management staff and the
same proportion of technical staff.
“Obviously local suppliers will have a field day if these bills are passed.
‘‘Because the industry will have to go literally
scavenging for any capable supplier,” Mwendia Nyaga, a Nairobi-based oil
and gas consultant said.
“But even after that is done, I doubt that they
will be able to hit the required percentages, so there will still be a
big problem,” he said referring to a dearth of certain skills,
specialised goods and services in the near-term.
Africa Oil said it supported the government’s
effort to maximise use of local resources, citing it was already
offering employment and contracts for goods and services to as many
Kenyans as was possible.
“There is much debate still to be had over whether
strict Local Content Regulations will actually help or hinder achieving
these important shared objectives,” Africa Oil said
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