Kenya Election: What Now for Petroleum Bill, New Projects?
Kenyan incumbent President Uhuru Kenyatta won his second term in office last week, beating long-time political rival Raila Odinga and giving a signal to the oil and gas industry in the country that little change in policy or leadership is on the horizon.
Odinga lost with 44.9 percent of the vote, compared to Kenyatta’s 54.3 percent, after residents went to the polls on August 8. Claims of election fraud were dismissed by the country’s elections commission.
At the center of Odinga’s opposition campaign was Kenyatta’s inability to pass the new Petroleum Bill and a fierce disagreement between Kenyatta’s administration and the Turkana region over oil revenues. The Petroleum Bill, originally expected to be signed into law by Kenyatta in 2016, was not signed after Turkana leaders demanded a 10 percent share of oil revenues, up from the national government’s proposal of 5 percent for the community and 20 percent for the county government. The national government is to retain 70 percent of the revenue share in the draft bill, according to the Daily Nation.
That bill was tabled, pending national elections. After Kenyatta’s win, the original draft of the Petroleum Bill is expected to come back to the table, providing much-needed clarity to the country’s emerging oil and gas sector.
The Petroleum Bill is expected to update and align the country’s regulatory frameworks. If passed, it will establish a new regulatory authority for upstream activities create a new production sharing model.
The Upstream Petroleum Regulatory Authority will be responsible for the development upstream infrastructure, advising the current Energy Cabinet Secretary Charles Keter and monitoring oil and gas production.
Finalizing a bill will be key, not just for regulatory stability, but regional stability as well. Already, Tullow Oil reports the company is unable to access some oil assets in the region as Turkana citizens protest the bill.
Infrastructure Projects Plow On
While Kenyatta’s critics argue the president has pushed forward with too many infrastructure projects, accumulating too much debt and increasing inflation, there is no doubt Kenya is on track to create a world-class infrastructure system.
The Madaraka Express, a $3.2 billion, 840-kilometer railway, opened the first phase in early 2017, a 470-kilometer link between Mombasa and Nairobi. The railway is Kenya’s biggest infrastructure project since gaining independence, and Kenyatta’s administration argues it will be vital for growth and jobs despite the high cost of construction.
Also this year, Kenyatta personally launched the construction of the Kisumu oil jetty, expected to be completed in October. Keter claims the jetty will ease demand on the Mombasa-Nairobi pipeline and also facilitate trade of petroleum products in the region.
And in an effort to rapidly monetize the 750 million barrels of recoverable oil reserves discovered since 2012, the government is pushing ahead with construction of a crude oil pipeline after talks with Uganda to coordinate on a pipeline fell through. Tullow Oil has already completed engineering studies and is in the FEED contracting phase. Construction of the 865-kilometer pipeline running from the Turkana region to the Port of Lamu is estimated to cost $2 billion.
Infrastructure has been a key focus of Kenyatta’s administration, and many projects — especially those criticized by Odinga, such as continuing the railway — are likely to continue moving forward.