Expectations high over Kenya oil

Saturday August 31 2019

An oil tanker carrying 200,000 barrels of crude

An oil tanker carrying 200,000 barrels of crude oil is berthed at Kipevu Oil Terminal in Kenya's port city of Mombasa August 26, 2019 just before it was flagged off by President Uhuru Kenyatta on the inaugural shipment of crude oil by Kenya. PHOTO | NMG 

NJIRAINI MUCHIRA
By NJIRAINI MUCHIRA
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Kenya this week started oil exports, flagging off the first consignment of 200,000 barrels of crude oil valued at $12 million.

It was sold to Chinese company ChemChina in a competitive bidding process, marking another development in Kenya’s controversy-ridden quest to benefit from the resource discovered in 2012.

Though the government said ChemChina won the bid after offering the best price of $60 per barrel, it refused to disclose the other seven bidders and what they quoted.

Kenya shipped 200,000 barrels yet the initial plan was to export 400,000 barrels in the maiden shipment, raising questions about the government’s a hurry to send the crude to the international markets.

In Uganda, where oil was discovered in 2006, the government has opted to first invest in infrastructure like a pipeline and a refinery to facilitate commercial production.

At the flagging off ceremony in Mombasa, leaders from different regions of the country pleaded for a share of the revenues, an indication of high expectations especially from Turkana and West Pokot counties around the mining areas and the coastal counties of Mombasa, Kwale and Lamu, through which it will be exported.

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President Uhuru Kenyatta, however, failed to provide the assurance on how government intends to share out the revenues to be accrued under the early oil pilot scheme and even when Kenya commences commercial production in 2024.

“We will ensure that Kenya’s natural resources are utilised in a manner that yields maximum dividends today, but without compromising the interest of future generations,” said the president.

Analysts contend that one of the inescapable challenges in modern governance of the extractives sector is expectations management.

There are expectations crude oil export revenue will deliver substantial social, economic and infrastructural improvements.

“These expectations, whether realistic or not, need to be managed in order to avoid any negative consequences,” said Thuo Njoroge, an adviser at The Africa Utility Forum.

Although Kenya settled the issue on revenue sharing with the enactment of the Petroleum Act, 2019, the failure by the government to reveal details of contracts signed with companies involved in the project has raised suspicion.

The Petroleum Act provides the national government is entitled to 75 per cent of the oil revenue, county government 20 per cent and the local community five per cent.

Notably, the law only recognises Turkana County where the crude was discovered, meaning the rest of the country will be hoping to benefit from the 75 per cent allocated to the national government.

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