The Ministry of Energy failed to collect about Sh1 billion shillings from oil and gas exploration companies for the last three years, despite binding contracts, according to a report by Auditor-General Edward Ouko.
The production-sharing contract for oil and gas companies requires the exploration companies to pay minimum annual fees to the government for the benefit of the communities in the areas of their operations.
The audit report for the 2015/2016 financial year reveals that there were claims that the firms gave the money directly to community projects, but there was no evidence.
Appearing before the National Assembly's Public Accounts Committee (PAC) yesterday, Energy Principal Secretary Joseph Njoroge was hard-pressed to explain why it has taken his ministry more than three years to issue demand notices to the companies.
“Oil and gas exploration is a very expensive risk venture. The ministry usually engages the oil companies through other avenues, including telephone conversations and visits, before resorting to demand letters,” Mr Njoroge replied after Rarieda MP Otiende Amollo asked whether his ministry was serious.
He added that reminders were sent to the companies involved after the Auditor-General questioned the delay.
It also emerged that the ministry has not sought help from the Attorney-General's office to recover the money.
The contract also stipulates that late payments attract interest, but Mr Njoroge did not say whether the ministry has demanded the penalties due from the companies.
Among the companies involved is Camac Energy, which has eight blocks, but has requested to relinquish four. The ministry said it can only honour the request only after the company clears its arrears.
Meanwhile, Simba Energy has given a schedule of how it will settle its debts.
A-Z Petroleum Ltd, with two blocks close to the Kenya-Somalia border, has been granted a number of extensions because of insecurity in the area.
Afren (EAX)/Octant Energy has paid Sh24.6 million while the licences of Adamantine Energy (K) Ltd and Imara Energy have been revoked.
Rift Energy is yet to remit the arrears while Zarara Oil and Gas, currently prospecting on Pate Island in Lamu, has been asked by the ministry to remit the surface and training fees, Mr Njoroge said.
“I do agree that this money should have been collected and sanctions issued against the eight companies for non-payment of statutory fees,” Mr Njoroge told the watchdog committee chaired by Ugunja MP Opiyo Wandayi.