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Government delays issuing oil exploration licences

31 January 2014, 08:08

 Nairobi - Kenya will delay licensing new oil exploration blocks until a new law regulating the sector that is being sent to parliament by June is in force, a senior official said on Thursday.

Oil discoveries in Uganda and Kenya by Britain's Tullow Oil and gas deposits found off Tanzania and Mozambique have turned east Africa into a frontier for hydrocarbon exploration.

Energy and Petroleum Principal Secretary Joseph Njoroge said seven new blocks will be up for licensing once the new energy law is in place.

"We are still working on the Energy Act," he told Reuters.

"We want first of all to get the policy and the Act in place which will happen before the end of this financial year, that is before June. And then from there we will be able to know how to move," Njoroge said.

Oil discoveries in Kenya by Tullow and its partner Africa Oil Corp in the northwest of the country have increased inquiries from others seeking exploration blocks.

In an update this month, Tullow and Africa Oil doubled the estimate of their discoveries in the South Lokichar basin to 600 million barrels.

Consultants Hunton & Williams and Challenge Energy - employed by help review the law - have recommended the Act includes clearly defined policies for upstream, midstream and downstream sections to avoid overlaps and reduce inefficiency.

It is also expected to provide guidance on natural gas exploitation, not adequately covered under existing law.

The government has said in the past that some companies licensed to prospect for oil and gas were reluctant to do so due to concerns over the lack of a legal and fiscal framework to commercialise natural gas discoveries.

The new law will also allow for the creation and management of a sovereign wealth fund for petroleum revenue, and specify how revenue will be shared between national and local governments and communities where discoveries were made.

Kenya has previously said it will introduce licensing rounds with an auction-style format and move away from a first-come, first-served basis to award exploration blocks.

- Reuters


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