Saturday, March 31, 2012

The inside story of Kenya’s oil discovery

Photo/FILE  Minister for Energy Kiraitu Murungi lifts a bottle containing crude oil during a press conference at Nyayo House in Nairobi, March 26th, 2012.

Photo/FILE Minister for Energy Kiraitu Murungi lifts a bottle containing crude oil during a press conference at Nyayo House in Nairobi, March 26th, 2012.  

By SUNDAY NATION TEAM newsdesk@ke.nationmedia.com

A Cabinet minister, a Permanent Secretary and a former adviser to the Kenya Government have been sensationally linked to the company that raked in nearly Sh1 billion by selling the block of land where oil was discovered.

The Sunday Nation has established that Trade minister Moses Wetang’ula, Energy Permanent Secretary Patrick Nyoike and Kenyan born international businessman based in the UK, Mr Amyn Lakhani, were at various stages linked to Turkana Energy Incorporation, the parent company of Turkana Development Corporation (TDC) which sold Block 10BB for $10 million (Sh840 million) in 2010.

TDC sold the 3.1 million acre block of land to Canadian firm Africa Oil Corporation which, in turn, sold 50 per cent of its stake in the block to Anglo-Irish firm Tullow Oil, which struck the black gold in Ngamia 1 well.

The Sirisia MP has denied any involvement in the deal but said that the law firm that he founded – Wetang’ula, Adan and Makokha Company Advocates – acted in the transaction.

He has maintained that he resigned from the law firm in 2003 when he was appointed Foreign Affairs assistant minister in the first Kibaki Government but new information suggests that he could have played a prominent role in the overall affairs of TEI.

A 2008 online brochure summarising the Block 10BB project lists Mr Wetang’ula as one of TEI’s two advisers, alongside Mr Daniel M Jarvie, who is described as a “well-respected businessman, educator, scientist and philanthropist (who) has educated hundreds of Africans and other geoscientists and supported the creation of technical laboratories across the continent”.

In 2010, a firm that was denied exploration licence accused the Energy PS of colluding with TDC to “steal” results of a chemical analysis of a substance it had discovered in Turkana, believed to be crude oil.

The firm, Interstate Petroleum Company, claimed it had submitted three samples to Mr Nyoike for chemical analysis but was never given the results of the tests, even after pleading with President Kibaki several times. It, however, lost the case on technicalities.

The brochure lists Mr Lakhani as TEI’s vice-president in charge of business operations. Born in Kenya, Mr Lakhani was educated in England and has a degree in business studies and mechanical engineering from Kingston University. He has over 20 years’ experience in international commodities trading in Africa.

He was an adviser to the Kenyan Government on document security and banking issues and ran a consultancy investigating racial discrimination in the UK workplace.

Economic experts and political scientists say the discovery of oil will transform Kenya into a major player in world politics and provide a battleground for global powers eager to reap from the oil reserves.

It will also boost Kenya’s resource base and standing in the region even as the experts warn of a possible invasion and exploitation by foreigners to the detriment of locals.

The experts also caution against high expectations, saying Kenyans should hold their horses until the quantity and commercial viability of the oil is established.

“We have to wait before we can establish its real effects,” Kwame Owino, the CEO of the Institute of Economic Affairs, told the Sunday Nation.

The discovery is also set to shape regional politics and Kenya’s future relations with its neighbours especially Uganda, South Sudan, Sudan, Ethiopia and even Tanzania, the experts noted.

That Kenya’s new-found treasure was set to trigger a major scramble and shape Kenya’s relations with world powers was evident in the way the respected UK newspaper, The Daily Telegraph, reported about the discovery: “A British company has announced it has struck oil in Kenya for the first time, beating rivals including China in the race to strike crude”.

The paper concluded the article thus: “British, Chinese, Italian and French companies are understood to have been in the race to strike crude first. Tullow Oil was the most recent operator to join the search.”

But as Kenya’s colonial master claimed the bragging rights for the discovery, President Kibaki appeared to give a hint as to which direction the country intends to look when choosing its economic partners.

Addressing a Chinese delegation a day after announcing the discovery, President Kibaki termed China a close friend and a valuable partner not only in the advancement of friendly bilateral relations but also a strategic partner in development, peace and security in the Horn of Africa region and Great Lakes region.

He urged Beijing to consider investing in the LAPSSET project in Lamu that is intended to re-engineer the economies of regional countries such as South Sudan and Ethiopia.

In a statement to newsrooms on Saturday, State House said “the President’s diplomatic policy has been guided by Kenya’s present view of changing geo-political dynamics. This entails an understanding of the West and East confluence on world affairs in an ever-changing environment”.

The discovery is also likely to shape Kenya’s relations with its neighbours, coming at a time when it has teamed up with South Sudan and Ethiopia in funding the Sh2 trillion LAPSSET project which entails an 880 km Lamu-Ethiopia-South Sudan superhighway, a 1,710 km Lamu-Juba-Addis Ababa railway line, an oil refinery and a 2,240 km oil pipeline connecting oil fields in South Sudan to the proposed oil refinery at the Lamu Port.

The LAPSSET master plan report has proposed that the three states share part of the project cost, although the countries are seeking an external finance source.

According to Kenyatta University economics lecturer, Dr Paul Gachanja, revenue from the oil will go a long way in financing the LAPSSET project.

China, Japan, Germany and Qatar have expressed interest in financing part of the cost of the project. The fact that China buys more than half of Sudan’s oil, besides being willing to finance the LAPSSET project, places it in pole position to reap from Kenya’s oil reserves.

According to political scientist Prof Macharia Munene, the newly-found oil will also shape Kenya’s future relations with its biggest trading partner, Uganda.

“It’s good that there is oil in Kenya and its even better that other East African countries also have the commodity. But the discovery of oil means that not only will Kenya be transporting oil for other countries but also its own and this gives the country greater influence in the region and Africa,” he said.

According to Prof Munene, this will provide a challenge to Uganda which also recently struck oil.

“Oil in Kenya denies Uganda a ready petroleum market which would have been so important for the landlocked nation,” Prof Munene said.

But even as Kenya welcomes the discovery of the “black gold”, it must ensure that the political instability visited upon so many oil producing countries does not rear its ugly head.

According to the Institute for the Analysis of Global Security, many of the world’s leading oil producing countries are either politically unstable or at serious odds with the US, the global superpower.

Mr Wetang’ula, Mr Nyoike and Mr Lakhani’s alleged involvement with the firms behind the sale of the blocks demonstrates how top government officials and high-flying businessmen got sucked into the lucrative deals involving the hawking of oil prospecting contracts.

The whole business involves relatively small firms, mainly foreign, using their connections in high places to make hundreds of millions of shillings by acquiring blocks and selling them to oil exploration firms such as Tullow Oil.

advertisement