Kenyan Petroleum Act

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The Petroleum (Exploration and Production) Act was last revised in 1986 and is the fundamental law governing upstream activities in Kenya.[1] It states that all petroleum is vested in the government which is consistent with the 2010 Constitution.[2]

Petroleum Act as framework for Kenya's Productions Sharing Contracts

Together with the Income Tax Act, regulations made under the Petroleum Act and the Environmental Management and Coordination Act (EMCA) of 1999, the Act provides the legal framework for Production Sharing Contracts (PSCs) between potential investors and the Kenyan state.[3] It sets out certain obligations to the contractor that are dealt with in more detail in Kenya's model PSC.[4]

Under the Petroleum Act, the Minister of Energy has the power to divide potential areas for oil and gas findings into blocks.[5] The Minister also dictates who may engage in petroleum operations.[6] Furthermore, the Petroleum Act permits the government to conduct petroleum operations either through an oil company established by the government for that purpose (such as the National Oil Corporation of Kenya (NOCK)) or through private contractors that are licensed by the government.[7]

Review of the Act

The new Energy Bill, which, as of November 2013, has still to be ratified by the Kenyan government, would revise the Petroleum Act of 1986.[8] On its homepage, the government states that it aims at aligning the Act with current international practice and that it is supported in its efforts by the African Development Bank and World Bank.[9]

Shortcomings of the Petroleum Act of 1986

According to a scoping study by Sustainable Integrity, the current Petroleum Act has several shortcomings. One critique, for instance, is that the Act only recognises the owners of private land as entitled to natural resource wealth.[10] As pastoralists in Turkana County do not own the land, they are therefore excluded from compensation for damages caused by oil explorations.[11]

External Links

EI Sourcebook: The Petroleum (Exploration and Production) Act, Revised Edition 1986

References

  1. The Deloitte Guide to Oil and Gas in East Africa ”. Deloitte, retrieved 25 October 2013.
  2. Kenya Kaplan & Stratton”. Freshfields Bruckhaus Deringer, retrieved 25 October 2013.
  3. Overview of Petroleum Exploration in Kenya”. Ministry of Energy, 25 February 2013.
  4. Kenya Kaplan & Stratton”. Freshfields Bruckhaus Deringer, 21 October 2013.
  5. Kenya Kaplan & Stratton”. Freshfields Bruckhaus Deringer, retrieved 25 October 2013.
  6. Kenya Kaplan & Stratton”. Freshfields Bruckhaus Deringer, retrieved 25 October 2013.
  7. Kenya Kaplan & Stratton”. Freshfields Bruckhaus Deringer, retrieved 25 October 2013.
  8. Kenya’s Energy Bill Delays Oil Licensing Round”, E&P Energy, 18 October 2013.
  9. Projects under the department of petroleum energy”, Ministry of Energy and Petroleum, retrieved 12 November 2013.
  10. "Kenya Petroleum Sector Scoping Study" Sustainable Integrity, April 2013.
  11. "Kenya Petroleum Sector Scoping Study" Sustainable Integrity, April 2013.