Canadian firm to sue Kenya over licences

Canadian oil firm Vanoil is planning to sue the Kenyan government to have the termination its licences in Kenya reversed. The firm said it would 'vigorously' evaluate all the legal remedies in its bid to recover the investments made and lost profits.

It also said it would demand an arbitration on the move by the Energy and Petroleum ministry to terminate its exploration licence in Northern Kenya. The firm could be asking for as much as Sh8.6 billion in the suit, which it has in the past spent in exploration activities so far and missed opportunities since the revocation of its licences to explore oil in Blocks 3A and 3B in Northern Kenya.

Vanoil has since December been in a tussle with the ministry over refusal to renew the firm's initial exploration licence. The ministry had argued that the firm had been on site longer than the required two years by its initial exploration licence, and has in the past enjoyed extension on this in a suspect manner.

The firm, according to the ministry, failed to meet the terms of public sharing contracts signed in 2007, giving the Government enough grounds to deny it an extension on its licence. "Vanoil has decided to proceed with a formal demand for arbitration in accordance with the arbitration rules adopted by the United Nations Commission on International Trade Law as per the respective PSCs," said the firm in the July 7, 2014 statement. "Furthermore, Vanoil has commenced evaluation of all possible legal remedies the Company may have against the Kenyan Government."

The firm has in the past said it had met all the terms of its licences and that the prolonged stay on site has been due to factors beyond its control, including bad weather and insecurity.

In February, Vanoil had said its legal action against the State had potential to cost the taxpayer about Sh8.7 billion ($100 million), in which it would be asking to recover the money it has spent as well as lost investment opportunities."While we would have preferred to proceed with the two well programmes approved by the Ministry of Energy, we are looking forward to pursuing all legal remedies," said Vanoil Chairman James Passin in the Monday statement. "Vanoil will now seek arbitration in order to recover its significant investment and lost profit opportunity in Blocks 3A and 3B."

In June 2014, the Parliamentary Committee on Energy backed the Ministry of Energy's a decision. In a report to Parliament early June, the Committee notes that Vanoil has been a speculator in the upstream industry, which is a breach of contract. But the firm said the economic value of its blocks 3A and 3B had increased following the discovery of hydrocarbons with oil in a well sunk by Africa Oil in the Anza Basin.