Kenya to auction 17 new Oil Exploration Blocks in 2017

The Ministry of Energy and Petroleum has in a gazette notice said it has created an additional 17 new exploration blocks to the existing 46 blocks that had earlier been vacant in the country’s first competitive round.

Petroleum Exploration Block Map of KenyaThe 17 new blocks have been carved out of the 46 blocks as well as relinquished acreage located in all the four sedimentary basins. The 63 blocks are divided into: 37 blocks located in the Lamu basin, 14 in the Tertiary Rift Basin, seven in the Anza basin and five in the Mandera basin. The exercice was carried out by the ministry in conjunction with the Survey of Kenya.

The new gazette notice which provides locations including longitude, latitude, size and new maps annuls earlier boundaries existing in the previous notice that had 46 blocks.

In the new gazette notice the cabinet secretary however used powers conferred by section 7(1) of the Petroleum (Exploration and Production) Act, 1986 even as the new Bill currently before the Senate continues to be reviewed.

The new Production sharing contracts will however fall under the The Associated Model Production Sharing Contract(PSC) Bill 2015 also before the Senate that has seen various amendments that tip the scale in favor of the Kenya Government over Oil Companies.

“Kenya is looking at replacing the sharing proft of petroleum from one based on the daily rate of production (DROP) combined with windfall profit tax imposed when oil prices are higher, to one based on the measure of profitability (R-factor) is innovative and one needed,” says Berryl Asiago an Energy lawyer an expert on International energy law.

According to Oxfam the 2015 Model Production Sharing Contract will see Kenya reap an additional $500 million over the next 25 years.

“The inclusion of a paid income tax increases the government by roughly 10%. It could add billions of dollars to government coffers over the lifecycle of a project. The additional revenue however also constitutes a significant extra burden on the contractor,” says the report.

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