Energy ministry to hike exploration license fees

October 25, 2012
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The Commissioner for Petroleum in the ministry Martin Heya said the newfound interest Kenya’s energy sector has gained with the discovery of oil in Turkana and natural gas in the offshore area around Malindi, boosts the country’s potential in exploration/FILE

, NAIROBI, Kenya, Oct 25 – Firms seeking to prospect for oil, gas and other mineral resources in the country will have to part with more in license fees once the Ministry of Energy finalises new energy laws.

The Commissioner for Petroleum in the ministry Martin Heya said the newfound interest Kenya’s energy sector has gained with the discovery of oil in Turkana and natural gas in the offshore area around Malindi, boosts the country’s potential in exploration.

“We are reviewing the energy policy and the enabling Acts, like the Energy Act, Petroleum and Exploration Act and Geothermal Act to align them to the new Constitution,” he said.

The government has 10 to 20 percent participation interest in the Production Sharing Contract (PSC) with exploration firms.

Currently the one-off payment signature bonus is $300,000 per block, which will be reviewed upward along with surface fees that range from $5, $10 and $15 per square kilometre per annum depending on the period of exploration.

“Initially the interest was very low so we had an open door policy on licenses. We could not attract the kind of companies with technical, financial and professional capabilities to look for oil in a serious manner,” Heya said.

Now that Kenya’s geological risk has reduced with the new resource finds, the ministry will soon require exploration firms to compete for blocks.

Kenya currently has 46 blocks, 45 of which are licensed, while one is under the National Oil Corporation of Kenya.

These blocks exist on four sedimentary basins in the country including Lamu, Mandera, Anza and Tertiary Rift that cumulatively cover 485,000 km² .

The East African region as a whole has 500 wells drilled so far, however this is well below the 20,000 drilled wells in West Africa, presenting a major opportunity for explorers in the region.

The petroleum reserves discovered in the East African region (excluding Sudan) are currently estimated to be in excess of two billion barrels of oil in place and four Tcf (trillion cubic feet) of natural gas.

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