* Kenya making bigger demands on oil and gas explorers
* Planned changes to bring more revenue to state-run oil company
By Kelly Gilblom
NAIROBI, Nov 14 Kenya aims to take a bigger slice of the profits
from its natural resources exploration boom by seeking a 25 percent stake in the
production activities of oil and gas companies operating in the east African
The proposal announced by Kenya's energy minister is one of many the
government has put forward in the past month to increase the state's take from
oil and gas resources, including new capital gains tax rules, a more competitive
licensing process and higher fees for petroleum explorers.
At present most of Kenya's contracts with oil explorers give state-owned
National Oil Corporation of Kenya (NOCK) a 10 percent stake in the production
business once commercial quantities of oil or gas are found. This means that
NOCK contributes 10 percent of production costs and receives 10 percent of
However, the government now wants companies to give NOCK an initial 10
percent stake, increasing to 25 percent once production has started, Energy
Minister Kiraitu Murungi told reporters on the sidelines of an east African oil
and gas conference organised by Global Event Partners.
Rajesh Shah, an oil and gas expert and at PricewaterhouseCoopers, said it
was unclear whether the rule would scare off potential producers because
contracts are based on one-on-one negotiations with companies and the Ministry
"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 exploration boom has been fuelled further by gas discoveries in
Tanzania and Mozambique and oil discoveries in Uganda.
British explorer Tullow Oil and Africa Oil found oil in the
Ngamia-1 well on Block 10BB in March and discovered more a few months later.
In October, Tullow and Africa Oil encountered oil in a wildcat well known as
Twiga-1 on onshore Block 13T, about 30km west of the Ngamia-1 well. The
commercial viability of both finds has yet to be ascertained.
Tullow and Australia's Pancontinental Oil & Gas announced in
September that their licence consortium's operator Apache Corp had found
gas in the shallow offshore well Mbawa-1.
Experts predict that it will be at least five years before any petroleum can
be produced, but in the meantime the government is using its new position as an
established hydrocarbon province to squeeze better terms out of explorers
wanting to drill and produce in Kenya.