February 23, 2018 / 7:39 AM / 4 months ago

Row over Kenyan oil revenues threatens to delay production

LOKICHAR, Kenya (Reuters) - In the decades before oil was discovered in the northern Kenyan region of Turkana South, 100,000 poor villagers living in arid scrubland relied on a lone church-run health center in Lokichar town for medical help.

Workers walk past storage tanks at Tullow Oil's Ngamia 8 drilling site in Lokichar, Turkana County, Kenya, February 8, 2018. Picture taken February 8, 2018. REUTERS/Baz Ratner

Since Tullow Oil found crude there six years ago, the London-listed company has funded a 40-bed referral hospital, school classrooms and dormitories, provided village water points graded roads, and paid for scholarships to generate goodwill.

Seeing the potential benefits of oil, residents of the poorest of Kenya’s 47 counties now want the central government to make up for decades of neglect by ploughing nearly a third of expected oil revenues back into Turkana.

The central government has other ideas.

Parliament passed a draft bill in 2016 allocating 20 percent of any state oil revenue to local government and 10 percent to communities living where the crude was discovered, leaving 70 percent for the central government in Nairobi.

But President Uhuru Kenyatta never signed the bill. A revised version due to be debated in parliament this month cuts the regional government share to 15 percent, with only 5 percent for local communities.

The legislation must be passed before large-scale oil production can begin. Kenyatta’s Jubilee Party, which controls 213 of parliament’s 349 seats, is likely to back the revised law, but some of its lawmakers may break ranks and side with the opposition pushing for more money for local communities.

“Now that they have suffered for so long, the revenue from oil must actually feed them, treat them and take their children to school,” said Jubilee Party member James Lomenen, member of parliament for Turkana South.

Lomenen plans to table an amendment to the Petroleum Exploration, Development and Production Bill to restore the 10 percent share to local communities.

IT’S OUR LAND

Residents see the new terms as another slap in the face for Turkana, a vast scrubland the size of Sri Lanka where most residents live in villages without power or running water.

Joseph Nachar, a village elder in Loktorio, which is close to one of Tullow’s wells, said locals will oppose oil companies if they don’t get their 10 percent. He vowed to vote against any representative who doesn’t fight for their cut.

In 2013, demonstrators backed by local politicians marched on drilling sites demanding jobs and other benefits, forcing Tullow to halt work for two weeks. “We are the owners of the land where they are getting oil,” said Nachar.

Workers are seen at Tullow Oil's Ngamia 8 drilling site in Lokichar, Turkana County, Kenya, February 8, 2018. Picture taken February 8, 2018. REUTERS/Baz Ratner

Local leaders say the money will help make up for years of neglect in areas such as health and education. Turkana’s literacy rate is just 20 percent, while the national average is more than 70 percent.

The maternal mortality rate in Kenya was 382 for every 100,000 live births in 2014, but in Turkana it was above 1,000, the U.N. children’s fund (UNICEF) said.

“We are starting from scratch,” said Jane Ajele, Turkana county’s executive committee member for health.

Nairobi officials argue that Turkana’s economy, which largely depends on livestock, cannot absorb a wave of cash.

“We want them to prosper but if we see a pitfall somewhere, we have to advise people,” said Andrew Kamau, principal secretary in the Ministry of Energy and Petroleum.

CORRUPTION SCANDALS

Most of Kenya’s oil blocks have not been explored. Those owned by Tullow and its partners, Africa Oil Corp and Total SA, hold an estimated 750 million barrels.

While that’s less than African frontier oil countries such as Uganda and Ghana, exports scheduled to start in 2021 would earn the government $1.2 billion a year at peak production at current prices, government officials say.

That’s about 10 percent of annual revenue, comparable to the country’s biggest export, tea.

The petroleum bill would also create a sovereign wealth fund, financed with oil revenues, which the government says it would manage to guard against currency fluctuations and theft.

But Turkana residents have little faith the government, tainted by a series of corruption scandals, will manage their money well.

Slideshow (10 Images)

Kenya loses a third of its state budget - the equivalent of about $6 billion - to corruption every year, former anti-graft chief Philip Kinisu told Reuters in 2016.

The government denied the figure and Kinisu was fired five months after giving the interview. His successor did not respond to requests for comment.

Auditor General Edward Ouko has also accused the national government of corruption and mismanagement in a series of scathing reports.

He has been equally critical of county authorities, set up in 2013 to help counter complaints about central government theft. About 20 percent of Turkana’s 12 billion shilling ($119 million) budget in 2016 was unaccounted for, Ouko’s office said.

“With the corruption that we have in Kenya, you can only trust what goes to the community directly,” said MP Lomenen.

‘CLOCK IS TICKING’

Tullow has already spent 1.5 billion shillings ($15 million) on community projects. But the row over revenue sharing has eaten into the oil companies’ tight timelines.

“The clock is ticking,” said Tullow Oil Kenya country manager Martin Mbogo.

Technical studies of 40 wells in the Lokichar basin were due to start last year but have been delayed.

So has early oil production, due to start last June. About 2,000 barrels of crude were to be trucked out daily until an 800 km (500 mile) pipeline is built to Indian Ocean ports.

Petroleum ministry official Kamau said delegations including community representatives would visit established producers such as Nigeria, Canada and Oman to seek advice on revenue sharing.

In Nigeria, 13 percent of oil revenue goes to local communities, though that has not stopped attacks on oil installations by those wanting more. The rest is shared out among the three tiers of the Nigerian government; the federal branch gets 52 percent.

Expectations among the Turkana people are similarly high.

“They should think about us because we are not getting any help at all,” said Joshua Losepito, standing with his wife and daughter outside their hut made of sticks and branches near Lokichar town.

Additional reporting by Chijioke Ohuocha in Lagos; editing by Katharine Houreld and David Clarke

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below