Kenya has signed a deal with Turkana oil exploration firms that will see them source up to Sh300 billion ($3 billion) funding from international financiers, but Petroleum Secretary John Munyes says the agreement will be kept secret from taxpayers.
Petroleum Ministry bureaucrats cited official secrecy and commercial confidentiality while declining to disclose details of the agreement reached with three oil majors for development of the South Lokichar oil basin.
Mr Munyes said the Heads of Terms (HoT) agreement signed Tuesday with Tullow Oil and its joint partners — Total and Africa Oil — after 15 months of negotiations cover aspects such as cost recovery, fiscal review and tax incentives.
He, however, declined to share copies of the agreement with the media.
Article 35 of the Kenyan Constitution states that “every citizen has the right of access to information held by State ... The State shall publish and publicise any important information affecting the nation.”
“You don’t have to worry about the details of HoT because it has taken good care of Kenyans’ interests,” Mr Munyes told journalists after a brief ceremony in his office attended by representatives of the oil majors.
“It took us 15 months of gruelling negotiations to come up with terms that are agreeable to all the parties.”
The HoTs, also known as letter of intent or memoranda of understanding, is not a legally binding document but signals the general contractual direction that Kenya’s oil production seeks to take.
The document is supposed to set out the preliminary terms of commercial principles reached between Kenya and the oil majors over the development of the Amosin, Ngamia and Twiga oil fields. Officials of the oil majors said they agreed under the HoT that Amosin, Ngamia and Twiga will have a crude oil pipeline with a capacity to pump between 60,000 and 80,000 barrels per day (bpd) to a central processing facility and an export pipeline to Lamu. The infrastructure installed will also be designed to support future oil discoveries.
Mr Munyes said signing of the HoT paves the way for the State to start land acquisition and make arrangements with West Pokot County to deliver water from Turkwel to Turkana for the oil development project.
“I want to assure Kenyans that two years from now, a pipeline will be delivering at least 60,000 bpd of oil to Lamu for export,” he said.
The oil majors will initially rely on the HoT to pitch for the financing of the project before they come up with a legally binding document called the Final Investment Decision (FID).
“We have gone through a difficult period (of negotiation) to reach this significant milestone. The (resulting) HoT is fantastic for Kenya and our joint partners,” said Mr Mark Macfarlane, Tullow’s executive vice-president.
The majors are also supposed to rely on HoT to process front-end engineering and design (FEED) as well as environmental impact assessment before they settle on the contractor of their upstream and midstream infrastructure projects.
Kenyans, especially the Turkana residents, have been keen on exploitation of the resource found in their region. Apart from frequently blocking Kenya’s early oil export bid to Mombasa, it is partly due to sharp disagreement over oil revenue sharing formula that the Petroleum Bill was delayed for close to one year after Parliament passed it.