State cancels contracts of six energy companies

Oil pumps.

The government has terminated the contracts of six energy firms for failing to meet their contractual obligations.

In a notice in the Kenya Gazette yesterday, Petroleum and Mining Cabinet Secretary John Munyes stripped the production-sharing contracts of the firms that collectively held nine oil and gas exploration blocks.

“It is notified for general information of the following contractors in default of obligations under the respective production sharing contracts, that the cabinet Secretary for Petroleum and Mining on August 27, 2021 issued demand notices and notices of termination in exercise of the powers conferred by sections 10 and 11 of the Petroleum Act and the production sharing contracts,” said Mr Munyes in his notice. 

The firms were Zarara Oil and Gas Ltd, Octant Energy (Castor Vall) and Simba Africa Rift Energy, A-Z petroleum, Milio-Castac Oil Ltd and Lamu Oil and Gas Ltd.

Section 11 of the Petroleum Act, 2019 gives the Cabinet Secretary the power to penalise contractors that fail to meet obligations set out in their respective petroleum agreements, including the option of surcharging them where need be.

“Where a contractor fails or neglects to comply with the direction of the Cabinet secretary in accordance with this section the Cabinet secretary may cause to be done all or any of the things required by the direction to be done and the costs and expenses incurred in doing these things shall be a civil debt due to the national government from the contractor,” the section says.

The terminated firms were part of 19 companies that the government granted production-sharing contracts on 35 out of the 63 exploration blocks. 

According to data from the Ministry of Energy, 56 exploration wells have so far been drilled across the country located in the Lamu, Mendera, Anza and Tertiary Rift basins.

Out of the 56 wells, 30 indicated traces of hydrocarbon with more than 17 known oil seeps across all four basins.