Days after Lamu’s block L4 operator Zarara Oil and Gas a subsidiary of Midway Resources announced that their drilling phase had been completed, Kenyan contractor who provided various services and equipment are in panic as they fear the license holder could take off without paying.
OilNews Kenya has learnt that the contractors under their umbrella body Oil and Gas Contractors Association of Kenya met in a Nairobi hotel on Wednesday morning to deliberate on various measures they should take to hasten payments. Further we can report that the contractors might be headed to court to prevent any equipment on site from leaving Pate Island until their invoices are paid.
According to sources who did not want to be named Zarara Oil and Gas owes Kenyan contractors millions of dollars with many of the suppliers yet to be paid since drilling works commenced in 2017.
The fears were heightened by the announcement that the operator plans to plug and abandon the well leaving less hope that a planned Pate 3 well, located 5 kilometers away and which was to be drilled from the same well pad, is still in consideration.
When sought for comment the contractors’ association says it fears that a growing precedence where international companies leave the country without paying local contractors may recur.
“Midway resources International owe local contractors millions of dollars in unpaid invoices for goods and services rendered to their Pate Island Operations. This has caused undue frustration to the local contractors in addition to increasing the cost of doing business. Members of the oil and gas contractors’ association fear that once the well is plugged and abandoned, they will not get paid their outstanding amounts, causing further problems to the nascent oil and gas sector in the country which relies on exploration and drilling companies to honour their payment obligations,” Kenya Oil and Gas Contractors Association said in an Email response.
When reached for comment Zarara Oil and Gas adds that it will continue to hold discussions with the contractors to update them on the progress in clearing these debts and has urged the contractors to give the company time to honor the payments adding that their concerns were ‘being addressed.’
At the same time another Kenyan company Gas & Oil Exploration Consultants Limited (GASOILEX) which had earlier threatened to stop drilling works over unpaid commission fees by the drilling company Sakson Drilling & Oil Services has also threatened to seek justice in the courts
GASOILEX says Sakson Drilling & Oil Services owes it over $176,500 in commission of total costs from the project and mobilization fees after helping it to win the drilling bid.
Zarara is also embroiled in a legal tussle with Chinese geophysical services company BGP over the non-payment of Kshs. 90 million after the contractor offered seismic services in Lamu county in which the company acquired 374km of seismic lines in 2012.
To date a number of international operators and contractors have disappeared with millions owed to Kenyan contractors including: Africa Geophysical Services and Atlas Development and Support Services.