First published in the Business Daily on September 21, 2015.
In late 2013, an oil exploration company announced a temporary suspension of its operations in Turkana East and Turkana South sub-counties following a number of demonstrations by the local community.
Amongst other grievances, the community was protesting against being sidelined in employment opportunities and destruction of the environment.
The issue was compounded by the paucity of the Petroleum (Exploration and Production) Act of 1985, which was enacted at least two decades before the discovery of oil in Kenya to provide for the negotiation and conclusion of petroleum agreements between the government and petroleum companies.
With oil production in sight, the Petroleum (Exploration, Development and Production) Bill 2015 proposes to extend the scope of the legislation. Notably, the Bill seeks to ensure proceeds from the sale of petroleum resources benefit the local communities and that petroleum companies contribute directly to Kenya’s economy. The Bill provides for the participation of local communities in the review and awarding of permits.
On benefit sharing, the local community will be entitled to five per cent of the government’s share of profits from the oil operations in the sub-counties.
The county governments, in consultation with the local communities, will establish boards of trustees to manage the funds paid to the local communities. The Bill further establishes community rights. Prior to any operations within their county and sub-county, the local community will have a right to information on the proposed activities.
Local communities will have the right to compensation by any petroleum company which causes pollution or environmental damage. The companies will be required to compensate members of the local communities for injury or illness, loss of source of livelihood and damage of property arising from the company’s operations that could have been prevented.
The local community will also be entitled to education and sensitisation on petroleum operations within their county and sub-county. Lastly, local communities will have the right to participate in planning for corporate social responsibility projects in their area. This gives the communities an opportunity to prioritise projects depending on their needs.
Nationally, the Bill seeks to ensure petroleum companies contribute to the economy by prioritising services provided and goods manufactured in Kenya in their procurement. However, the goods and services to be procured will have to meet the required standards.
Further, the companies will prioritise employing Kenyan workers who have the required skills, as long as the cost of employing them does not exceed that of importing the labour.
Succession plans
To promote local capacity, the Bill proposes the establishment of a training fund from which Kenyans will be trained in oil operations.
The companies will be required to share their technology and skills with Kenyan employees and government officials, and provide succession plans for positions that are not held by Kenyans.
While boosting the Kenyan economy, the Bill may lower the chances of conflict between petroleum companies and local communities by providing for their inclusion and setting out the obligations of petroleum companies towards them.