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Audit firm to monitor oil companies’ financial records

An oil rig at Ngamia 1 in Turkana County. FILE
An oil rig at Ngamia 1 in Turkana County. Interested audit firms are required to submit their EOI documents to NOCK by August 20. FILE 

The government is set to recruit an audit firm to monitor financial records of oil and gas exploration companies operating in Kenya, an indication of a move towards commercial exploitation of the resource.

Through the National Oil Corporation of Kenya (NOCK), the government has issued a call for Expressions of Interest (EOI) from audit firms to carry out the work, moving towards exploitation of the country’s oil reserves that are estimated at over 300 million barrels so far in Turkana County.

The audit reports will be necessary when determining compensation to be paid to oil firms to cover their costs of exploration.

“The main purpose of the audit is to carry out the exercise on behalf of the government as set out in the Production Sharing Contracts and Petroleum Exploration and Production Act.

‘‘The objectives of the audit would be among others to examine and verify all charges and credits relating to petroleum operations and records necessary to audit and verify the charges and credits,” said Nock in its tender notice.

Additionally, NOCK stated that there was growing need to monitor operations of international oil companies operating in Kenya given the heightened level of exploration activity.
Interested audit firms are required to submit their EOI documents to NOCK by August 20.

The call for the services comes a week after British exploration company Tullow Oil announced that the reserves in Turkana surpass the threshold needed for commercial exploitation after striking additional deposits in Etuko-1 well.

Once Tullow confirms the actual quantity of oil through appraisal drilling, a team of independent auditors are expected to review its activities to determine the amount of crude to be allocated to cover its costs.

Exploration cost

The exploration cost is to be recovered in the first fiscal year of production. Also to be recovered by the contractor is the capital expenditure incurred at each area of development, the rate being 20 per cent annually.

NOCK, a wholly owned state corporation, is mandated to stabilise the petroleum supply market by participating in all aspects of the petroleum industry namely upstream, mid-stream and downstream activities.

It is proposed to be a part of the proposed inter-ministerial committee called National Fossil Fuels Advisory Committee (NAFFAC), whose mandate will involve among others negotiating with investors on the terms of the licence of the petroleum and coal blocks for exploration, production and development and advising the Energy Secretary on all petroleum and coal exploration matters.

The audit function in the oil production process is enshrined in the Petroleum exploration and production Act, which allows the government to audit the books and accounts of the oil companies it has entered into contracts with within two calendar years of the period to which the books relate, and shall complete that audit within one calendar year.