Opinion and Analysis
Opaque deals portend oil wealth wastage
Posted Monday, August 6 2012 at 20:25
Government officials, who are the peoples’ servants, continue negotiating and signing off oil exploration rights without putting the country’s best interests first.
Negotiating for exploration rights without relevant policy directives is tantamount to selling off citizens’ wealth through dictates of foreign investing companies.
This is unjustifiable and smirks of complicity to rob Kenyans, which should not be allowed to continue.
Going by the practise evidenced in other countries, firms that are currently hoodwinking the Ministry of Energy into signing exploration rights will most likely sell the rights to well established firms that have the required capacity for downstream processing.
They will make huge profits from the deals and beat a hasty retreat.
This may sound like a normal business practise, but the question that begs to be answered is: Why can’t we allow for open competition and in the process get better deals?
The argument for a moratorium on oil exploration is grounded in the fact that a competitive process allows players in the petroleum business to express their interest which is evaluated against their experience.
The current practice of selling exploration rights based on negotiations that are not supported by any relevant policy framework is untenable.
The negotiations for selling exploration rights are done without a legal or institutional framework that stipulates expectations from explorations firms.
The framework should define social, environmental, economic, and legal foundations upon which exploration rights are based.
Kenyans stand to lose a lot by allowing the Energy ministry to hurriedly process concessions for oil exploration without putting in place required policies.
The other insufficiently explored window of opportunity for Kenya is tapping wealth from its prospective oil rich neighbours of Uganda and South Sudan. Kenya is endowed with a seaport which the neighbours lack.
Crude oil has no meaningful value unless it can reach the market. Kenya can clinch deals with the two neighbours on transiting crude to the global market. In doing so, two options can be considered.
First, firms can be allowed to construct pipelines passing through Kenya.
The government can then proceed to charge a transit fee for allowing the oil to pass through its territory to the port.
Secondly, companies in both Kenya and the neighbouring countries can reach an agreement to share the cost of setting up pipelines the accruing revenue.