Kenya earns Sh503m from foreign oil exploration firms

Petroleum PS Andrew Kamau. PHOTO | DIANA NGILA 

By NEVILLE OTUKI, notuki@ke.nationmedia.com

In Summary

• Kenyan oil reserves are estimated at about one billion barrels — which experts say are commercially viable for exports.

Kenya has earned Sh503.2 million from oil exploration works by foreign firms ahead of small-scale crude exports next year.

Documents from Auditor-General Edward Ouko show that the government earned Sh503,260,733 last year as dues from exploration, offering a peek into the early benefits of the fledgling sector.

Kenyan oil reserves are estimated at about one billion barrels — which experts say are commercially viable for exports.

British explorer Tullow Oil and its partner Africa Oil struck Kenya’s first oil in the northwest town of Lokichar in 2012 that was followed by more recent finds.

The country plans to export its first consignment of 2,000 barrels a day by June next year through road and rail.

The Auditor-General says in his documents that the Sh503.2 million was earned through royalties.

But Petroleum PS Andrew Kamau said Kenya lacks a royalty payment  system and would not adopt it.

Instead, Kenya has product sharing agreements with oil and gas explorers, which outline how revenues would be shared when production commences.

“The cash (Sh503 million) came from surface fees and training levies,” said Mr Kamau on Friday.

Surface fees are annual payments that explorers make to the government per square kilometre of their exploration oil blocks.
Kenya has licensed 44 out of 63 oil blocks for exploration.

Besides Tullow, other firms are conducting separate exploration works in different parts of the country, including Lamu and Mandera basins.

The revelation of the cash collection is likely to trigger a wave of claims from communities and counties in which exploration works are ongoing, eyeing a piece of the pie.

READ: Kenya to export 2,000 barrels of crude by road

The sub-counties where oil exploration is undertaken are supposed to earn five per cent of State revenues, according to the Petroleum Bill 2015.

The Bill also entitles county governments with crude deposits to 20 per cent of the state revenues from the black gold.

The cash to local community is expected to be spend on projects such as hospitals, schools and other social amenities.

The Petroleum Bill provides for the creation of a sovereign wealth fund — a government-owned investment vehicle —  to hold at least five per cent of the oil revenues.