18 March 2019

Kenya: Reforms in Kenya Energy, Oil Sectors

Kenya has overhauled the regulatory framework of the energy and petroleum sectors with the enactment of two laws that put emphasis on the management of oil resources and increasing electricity connectivity.

This past week, President Uhuru Kenyatta assented to the Energy Bill 2017 and Petroleum Bill 2017, which stakeholders say offers a sound regulatory regime for the development of the sectors, particularly in relation to upstream development of oil and gas.

Kenya also moved to protect infrastructure in the sector with the imposition of penalties of up to $100,000 or a jail term of 15 years for sabotage. This will ensure facilities like pipelines are protected as the country gears up for commercial production of crude in Turkana County.

Now the government must publish the commencement dates of the new laws, with the rollout of the new regulatory framework expected to take up to three years.

Brian Muriuki, Kenya Oil & Gas Association chairman, said that the important thing now is putting in place strong governance structures to attract investors to the sector.

Among the crucial aspects of the new laws is the expansion of the mandates of the Energy Regulatory Commission, which will be transformed into the Energy and Petroleum Regulatory Authority, a powerful agency policing the whole spectrum of the sector from downstream to upstream.

The new petroleum law also outlines how crude oil revenue will be shared, with the national government allocated 75 per cent, county government 20 per cent and the local community five per cent.

"It is a major achievement for Kenya to agree on revenue sharing early on in the development stages. The challenge however is whether the communities have the ability to manage the resources," said Greg Coleman, Echo Energy Plc chief executive.

However, there are concerns that some of the new agencies created in the Energy Act could lead to duplication of mandates across state utility firms.

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