Weak legal policy may lower country’s projected oil gain

When National Assembly Majority Leader Aden Duale applied sudden brakes on a planned debate on the Petroleum Exploration, Development and Production Bill over claims that several other clauses had been added to it, another slippery phase of Kenya’s journey to oil riches reared its head: legislation. 

A persistent barrier into any meaningful use of natural resources, legislative loopholes have time and again stood between countries and their mineral wealth.

Often ignored in the rush to make money for the mostly poor countries, good laws make a key component in the transition towards making gains from these resources. 

That is why Kenya’s latest legal rut regarding the Petroleum Bill is a double-edged sword; cutting with the benefit of more time to get a better law while fuelling excitement over the black gold discovered more than six years ago in Kenya’s poorest county. 

The tussle is taking these twists even after news that a British firm, Wood Group, has signed a deal  to begin construction of an oil pipeline from fields in Turkana to the coast. 

It is not the first time the Bill has been aborted, a sign that Kenya may have to wait for longer to touch its first petrodollars.

Experts contend that the wait for legal framework may be better in the long run as newcomers in the oil game build expertise in the industry.

Canadian upstream expert Professor Alan Franklin believes the availability of a properly trained local workers makes operations within the set legal frameworks easy, as the people engaged have a better understanding of the industry. 

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The University of Athabasca-based professor says countries with natural resources like Kenya must ensure that firms do not push for rules that favour them alone and take the least possible responsibility after gaining from the resources. 

“At the bare minimum, no company should even start operations without showing that they comply with IFC performance standards, monitoring and transparency,” he said.

His Columbia University counterpart, Professor Jenik Radon, who, as a lawyer, has been involved in multimillion dollar oil negotiations in Eastern Europe and Africa believes the countries have less to lose by moving slowly. They hold the advantage of the resources being beneath their own soil.  As Professor Radon says, if a country has the assets, the companies will come.

Professor Radon emphasises on a good legal framework as part of a critical foundation which must be achieved. 

Kenya has made considerable progress in laying a foundation inn mining. Before 2016, the country’s only law governing mining was the pre-independence Mining Act of 1940. It had no provisions for fair revenue sharing and efficient waste management, making the 2016 Act a welcome update to a long-neglected sector. 

The new law outlines revenue sharing schemes which require Community Development Agreements (down to the number of elders that should be on the community council) and clears up issues of mineral rights and licenses. However, it cannot be fully operational until the Mineral Rights Board defines fees, charges, and royalties for mineral rights or minerals. Otherwise, it will be difficult to move the funds needed to meet the Act’s requirements. 

Edwin Okoth is a Nation journalist studying at Columbia University; Anastasia Grinberg is a final year student at Columbia College, USA.