Oil exploration firms default on Sh2.3bn levies


The Petroleum Ministry is on the spot for failing to recover Sh2.3 billion in fines, penalties and levies due from oil exploration companies in outstanding training levies and service fees.

The bulk of the money, Sh1.96 billion, which has been accumulating over the years, has remained unpaid by oil exploration companies since 2011.

The Exploration and Production Act provides for the establishment of the Petroleum Training Levy Fund for training Kenyans on petroleum operations.

The law requires oil, gas and mining exploration companies to pay Petroleum Training Levy to help train Kenyans in a bid to plug a massive skills shortage in the extractive sector.

Auditor-General Nancy Gathungu says Sh1.9 billion is due from eight oil companies that operated 15 oil blocks as at June 30, 2021.

Ms Gathungu says two of the eight contractors with an outstanding amount of Sh99.84 million ($925,751.10) have since relinquished the blocks they had been operating to the government while the remaining six are still active.

“However, the two contractors who relinquished their blocks were discharged before settling the outstanding training levy and surface fees,” Ms Gathungu said.

She said the Fund management did not provide evidence to demonstrate how and when the amount will be recovered.

“Consequently, the recoverability of Sh2,280,948,522 reflected in the statement of financial position as at June 30, 2021, in respect of accounts receivables-fines, penalties and levies-remains doubtful,” Ms Gathungu said in a report tabled in Parliament.

Ms Gathungu also raised the red flag over an expenditure of Sh264 million incurred on training in the year under review.

She said payments of Sh20.9 million were made to various staff members to cover allowances and expenses that did not relate to the Fund and were not in line with the Fund’s objectives.

“The unrelated activities included job description analysis, committee workshops development of internal Audit and Audit Committee Charter, Induction Programme, risk management training and succession management, and organisation structure,” Ms Gathungu said.

She also flagged payment of Sh23.5 million and expensed as training expenses with no indication of when the training was undertaken.

Ms Gathungu also questioned an amount of Sh36.3 million paid to the State Department for Petroleum.

Further, Ms Gathungu said payments amounting to Sh26.3 million made to the State of Petroleum on June 21, 2021, were not traced to the State department’s cashbook.

“Under the circumstances, the accuracy and validity of expenditure amounting to Sh267,788, 525 to the Fund under general expenses in the statement of financial performance could not be confirmed,” Ms Gathungu said.

In 2019, the auditor-general cited the Petroleum ministry for failing to use Sh943.9 million set aside as Training Levy Fund.

The auditor said the State Department of Petroleum had accumulated Sh943,906,947 for training in a local bank account as at June 30, 2018.

“Therefore, contributions to Petroleum Levy Fund have not been utilised in the most effective way,” the audit of the department stated.

The auditors said examinations in 2016/17 and 2017/18 years revealed that Sh320,764,864 was used on training 55 staff drawn from the department.

While the staff were trained in financial and human resources management and oil exploration, some of the trainees had attended similar courses, the auditor said.

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