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Kenya ups prospecting fees

10 April 2013, 12:08 Omondi Oloo

Nairobi - Prospecting fees for multi-national firms wishing to explore for oil and gas in Kenya have gone up three-fold, raising fears of a blow to direct foreign investment into the country. 

Kenya’s Ministry of Energy announced global oil firms will now have to part with US$1 million up from US$300,000 to be allowed to prospect, a move which has had an immediate impact as firms such as the Chinese National Offshore Oil Corporation have opted out of Kenya. 

Since the discovery of oil in northern Kenya and gas reserves along the coast, international focus has shifted to the country as an emerging producer, a situation that has several companies clamouring to gain a foothold in the burgeoning industry. 

Energy Permanent Secretary Francis Nyoike remains upbeat and says Kenya still ranks among top exploration hotspots and that the review of the terms of engagement will not harm the industry. 

The country had successfully attracted some of the world’s most renowned oil companies, he added.  “This is the surest move we can make to ensure we discourage speculators,” said Nyoike, adding the government was equally committed to speeding up the re-evaluation of all relevant petroleum statutes in line with industry best practices. 

He says the new charges should not scare off international oil firms, insisting that as East Africa’s economic hub, Kenya welcomes investments in its oil sector.  

Kenya has four petroleum exploration basins — Lamu, Anza, Mandera and tertiary Rift, with a combined surface area of 500,000 square kilometres.  

The country also has natural gas at the Olkaria Geothermal plants.  Nyoike confirmed the new rules would take effect ‘soon’ under Kenya’s Petroleum Exploration and Production Act.

Industry insiders expect the changes to take effect by mid 2013.  James Mwangi of the Kenya Petroleum Dealers Association said the changes were ill timed, warning Kenya risked isolation by global oil companies. 

“The history of coming across dry wells after multi-million dollar engagement with Kenya in the past could have companies decide against exploration,” Mwangi says. 

The changes come ahead of a major global oil and gas conference to be convened in Kenya to explore how East Africa can best harness its natural resources. 

The energy conference, organised by the Expogroup in Nairobi, will also seek to build local expertise.  

Some 1 000 delegates, including engineers, technocrats, environmentalist and entrepreneurs, will meet to explore areas of growth in petroleum technology, exploration, drilling, production and refining.

- CAJ News 

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