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New Rules to Guide Use of Cash from Natural Gas

Discussion in 'International Forum' started by Smatta, May 12, 2010.

  1. Smatta

    Smatta JF-Expert Member

    May 12, 2010
    Joined: Nov 5, 2008
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    Even as Kenyans await the results of tests on the natural gas discovered in Isiolo, the country is drafting laws to regulate the sharing of revenue due to be generated from its production.

    The drill stem test - on traces of gas found by China National Offshore Oil Corporation (CNOOC)'s Boghal-1 well in northern Kenya to ascertain if it can be commercially exploited - are expected to take about a month once they commence in June.
    Although the well, the country's 32nd, yielded no oil, Energy Minister Kiraitu Murungi remained optimistic.

    "God is not that unfair so as to allow oil to be discovered in Uganda, South Sudan and gas in Tanzania and forget that we are here in Kenya; we have high hopes and expectations," Mr Kiraitu said on Tuesday.
    The Chinese firm, with its partners, Africa Oil, Lion Energy and China Petroleum Corporation (CPC), has completed an exploratory well, which is 5,085 metres deep - the deepest ever drilled in Kenya's exploration history.
    "I am happy to report that the well has encountered gas shows in four zones," the minister told delegates at the inaugural Eastern Africa Energy conference in Nairobi.

    Another firm, US second largest natural gas producer Anadarko, which early this year discovered gas in Mozambique, is also exploring for oil and gas in the country.
    CNOOC is one of the largest state-owned oil companies in China as well as the largest offshore oil and gas producer.
    It is authorised to cooperate with foreign partners for oil and gas exploitation in its mother nation's offshore areas.
    The issue of gas exploration is said to have featured in the talks between Nairobi and Beijing in the just-concluded visit to China by President Kibaki.

    Significantly, the Chinese Government gave Kenya a Sh1.2 billion grant -free money - during the visit, the bulk of which will be used in the development of a second port at Lamu and the construction of a rail and road corridor from the Coast to Isiolo - the town where the gas signs have been discovered.
    But as the gas tests are awaited, the government is laying ground rules to avoid the 'resource-curse' situation where oil discoveries have driven a number of African countries into civil wars and political instability.

    "As a country, we have already begun to take appropriate measures for transparent and accountable oil and gas fiscal management systems even before we make any commercial discovery," said Mr Kiraitu.
    To achieve this, it has enlisted the services of an international consultancy firm to review and put in place robust oil and gas policies, which will ensure equal distribution of revenues accruing from petroleum production taking into account the interests of host communities.
    Some of the existing laws will also be reviewed with the Petroleum Exploration and Production Act, which was enacted in 1994 and revised in 1986, singled out.
    The Act, together with the Model Production Sharing Contract, will be reviewed by next year to conform to the current international best practices.
    The country's oil and gas exploration surface area covers about 400,000 square kilometres subdivided into 38 exploration blocks.

    I think its too early to start drafting the guides of how the money from the gas should be used. Hope we discover oil, it will be of so much benefit to Kenyans.