Kenya seeks 25 per cent stake in oil production ventures

Kenya rigThe new proposal the government has put forward could deter potential oil producers, according to Rajesh Shah, an oil and gas expert at PricewaterhouseCoopers. (Image source: elFrank70)Kenya plans to utilise its current natural resources exploration boom by acquiring a 25 per cent stake in the production activities of oil and gas companies working in the country

The proposal, brought forward by Kenya's energy minister, Kiraitu Murungi, is among many that the Kenyan government have devised in the past month.

This is also a more competitive licensing process and an increase in costs for petroleum explorers.

Rajesh Shah, an oil and gas expert at PricewaterhouseCoopers, said it was not made clear whether the new proposal would deter potential producers because contracts are based on one-on-one negotiations between companies and the Ministry of Energy.

"It depends on how it's structured and how it's sorted out," Shah said.

"I think people will get wary if it's getting something for nothing. If there's a fair share of whatever somebody has spent, I think people will be pragmatic and see it as something reasonable."

Kenya's current oil contracts mean the National Oil Corporation of Kenya (NOCK) holds a 10 per cent stake in the production business once commercial quantities of oil or gas are discovered.

NOCK contributes 10 per cent of production costs and receives 10 per cent of profit.

The government has now intervened and wants companies to give NOCK a 10 per cent stake in the first instance, increasing to 25 per cent once production has begun, Murungi said. 

Other gas discoveries have also been made in Africa, such as in Tanzania and Mozambique and oil discoveries have been made in Uganda.

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