Kenya: Turkana Oil Revenues - Great Expectations, First Trouble?
Friday, 15 June 2012
This was bound to happen sooner or later: The Star reports that ‘The Turkana County Council has written to the government demanding that the exploration be halted until an agreement is reached on how to share oil revenue. Turkana County Counci Chairman EliudEkero says in his letter to the Ministry of Energy that the residents should get not less than 25% of the proceeds. "There are issues which as leaders and residents of Turkana, we have to agree on with Tullow and the government so that the exploration exercise can go on smoothly," said Turkana Central MP EkweEthuro.’ The agreement between the Government of Kenya and Tullow Oil foresees that Turkana will receive 15%.

Local authorities have taken a clear stand so far:‘The Turkana South DC Joseph Kanyiri says the government has been holding meetings with communities in the region to educate them on the exploration exercise so that facts about the exercise are not distorted.’Tullow have also engaged the local community on these issues.

As in Uganda, Tullow Oil are dealing with a marginal area where the local community has limited understanding of the technicalities of the oil sector and expectations are enormous.

Understandably, after years of marginalisation by Kenya’s central government, the Turkana have a legitimate interest in seeing revenues from local resource being reinvested locally. When the oil find was announced, public discussions already indicated that there would be a tussle between central and county government over revenue allocations. These are governance issues that are by no means unique to Kenya, but Kenya’s notoriously weak governance can quickly turn this into a risk factor for oil investors.

In Kenya, these difficulties are exacerbated by the transition to a devolved government structure under the new constitution. The uncertainties that necessarily arise during such a transition will be exacerbated by Kenya’s notoriously weak governance: Legal and regulatory grey areas emerge while the different rights and responsibilities of the central and the local governments are being determined. One concern is that unless competently done, the decentralisation will lead mostly to a decentralisation of corruption and mismanagement. The full implementation of the new constitution and the establishment of county governments still requires significant legislative work – and MPs have just voted to extend the deadline for the completion of two bill by several months.

Oil exploration firms sign their agreements with the Government of Kenya, which is also the institution that needs to address the grievances and demands of the local host community.

Uganda’s government has proven a disappointment for the exploration community in its footdragging over regulatory developments and tax disputes. This creates more opportunities for Kenya, especially with regard to exploration firms and other industry operators who have a regional footprint. Tullow Oil and others of course want to pursue their operations without disruption – and they will want to avoid being associated with a violent crackdown by domestic security forces on an unruly host community.

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