No oil cash for wealth fund in revised Bill

Cash generated from Kenya’s oil production will not be used for the sovereign wealth fund if a Bill on sharing crude oil money is adopted.

The revised version of the Petroleum Bill, 2015 shows that the national government will be allocated 75 per cent oil royalties, with counties getting 20 per cent of the cash and local communities where crude production will be undertaken taking five per cent.

This is a departure from the earlier version of the Bill that provided at least five per cent of oil royalties for the sovereign fund.

Kenya estimates its crude oil reserves to be about one billion barrels – which experts say is enough to make the export business viable—and expects to start crude exports in 2022.

The Treasury last year drafted the National Sovereign Wealth Fund Bill indicating that dividend income from State corporations and proceeds from privatisation of government corporations would build the fund ahead of oil production.

The cash was to help set up the fund whose operations were initially set to rely on revenues from oil that Tullow Oil Plc and Africa Oil expect to start pumping after seven years.

The sovereign wealth fund will shield the economy from cyclical changes in commodity prices, build savings for future generations and be used to invest in infrastructure.

George Wachira, the director, Petroleum Focus Consultants in a previous publication cited the sovereign fund as an ideal instrument for ring-fencing Kenya against the potential impacts of fluctuating oil revenues.

“When correctly implemented, the fund invests pre-determined amounts of revenues for use during ‘rainy days’ and also to benefit future generations,” he said.

“The fund levels the impacts of oil price volatility through planned long term investments. In so doing, the fund protects macro-economic stability, while safeguarding the significance of the other economic sectors.”

The omission of the fund in the Petroleum Bill comes months after Parliament ignored a proposal for allocation of part of revenues from mining to the sovereign wealth fund when they were discussing the Mining Bill.

Commission on Revenue Allocation chairman Micah Cheserem had strongly lobbied to have half of royalties earned from mining activities allocated to the sovereign wealth fund, but his advice was omitted in the Bill passed by the National Assembly.