Ownership and Control of Petroleum in Kenya

OWNERSHIP AND CONTROL OF PETROLEUM IN KENYA
“All petroleum existing in its natural condition in Property in strata lying within Kenya and its
continental shelf ‘is vested petroleum. in the National Government in trust for the people of
Kenya.”1
This is basically part of the non-ownership theory of oil and gas
Ownership and control of petroleum is underpinned in provisions such as;
 The Constitution
 The Petroleum Act No 2 Of 2019
 The Land Act No 6 of 2012
THE CONSTITION
Under the constitutions the provisions of chapter 5 of Land and environment and protection of
right to property are the cornerstone in the ownership in terms of land and public resources.
Article 40 (3) (b) The State shall not deprive a person of property of any description, or of any
interest in, or right over, property of any description, unless the deprivation is for a public
purpose or in the public interest and is carried out in accordance with this Constitution and any
Act of Parliament that requires prompt payment in full, of just compensation to the person;2
In line with that under article 62 public land is classified and specifically under sub article 1(f)it
includes all minerals and mineral oils as defined by law3. The Petroleum Act, Petroleum means
all hydrocarbons and includes crude oil and natural gas, whether capable of being produced from
1
The Petroleum Act, Section 14(Property in Petroleum)
2
The Constitution of Kenya 2010 (hereafter referred as CoK 2010), Article 40 (3) (b).
3
CoK 2010, Article 62(1)(f)
conventional and unconventional reservoirs, including shale oil, oil shale, shale gas, coal bed
methane gas, tar sands, and other sources of hydrocarbon reserves;
The constitution further provides that the state shall ensure sustainable
exploitation ,utilization ,management and conservation of the environment and natural resource
and ensure the equitable sharing and the equitable sharing of the accruing benefits4
A transaction is subject to ratification by Parliament if it involves the grant of a right or
concession by or on behalf of any person, including the national government, to another person
for the exploitation of any natural resource of Kenya 5
The CoK provides for equitable distribution of natural resources and utilization of natural
resources for the benefit of the people
The Petroleum Act
The Petroleum Act No 2 of 2019 Laws of Kenya. This act was assented to on 12th March 2019
and it commenced on 28th March 2019. It is an Act of Parliament to provide a framework for the
contracting, exploration, development and production of petroleum; cessation of upstream
petroleum operations; to give effect to relevant articles of the Constitution in so far as they apply
to upstream petroleum operations, regulation of midstream and downstream petroleum
operations; and for connected purposes. 6
The petroleum act comes into place after repealing of the Petroleum (Exploration and
Production) Act 2012.The cabinet secretary has powers under the petroleum act to enter into
4
CoK 2010, Article 69.
5
CoK 2010, Article 71.
6
The Petroleum Act, 2019
petroleum agreements and petroleum exploration agreements on behalf of the government and to
make ancillary regulations. The Petroleum Act permits the government to conduct petroleum
operations either through oil company for example the National Oil Corporation of Kenya or
through private contractors that are licensed by the government (acting through the Cabinet
Secretary in charge of Energy) under petroleum agreements.7
Under Part IV of the act it tackles on upstream petroleum rights and management of petroleum
resources here government owns oil blocks as subdivided by the cabinet Secretary of the energy
and petroleum docket. The Government therefore enter into a petroleum agreement only with a
contractor who shall have the financial, technical and professional capacity necessary to fulfil the
contractor's obligations under the petroleum agreement in order to be able to explore, extract and
produce the oil. The contractors have several of their responsibilities stipulated under the act
including their relation with the government. An example is the Tullow Oil who were the
contractors of the Turkana Oil exploration on the rift basin.
LAND
Article 62 of the constitution classifies public land as also those including all minerals and
mineral oils as defined by law. therefore in cases where natural resources are under private
property or community land ,Whenever the national or county government is satisfied that it may
be necessary to acquire some particular land under section 110, the respective Cabinet Secretary
or the County Executive Committee Member shall submit a request for acquisition of public land
to the Commission to acquire the land on its behalf8.
7
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ID=04310512712102412709407701308009112100903600008206109110602200702511101202308106701112005
81001220420240531150691170090670970730200900340370341010661200970940710951160580020860731261
10093118094095006081002087007116099122030113026102125107084111099006088&EXT=pdf&INDEX=TRUE
8
Land Act ,2012, Section 107
Whenever government acquires land, it can be by way of sale, reversion or surrender as
stipulated under Article 62 of the constitution. Under the petroleum act Whenever the national or
county government is satisfied that it may be necessary to acquire some particular land under
section 110, the respective Cabinet Secretary or the County Executive Committee Member shall
submit a request for acquisition of public land to the Commission to acquire the land on its
behalf9 The National Land Commission may authorize in Power of entry writing, any person to
enter upon any land specified to inspect the land and to do all things that may be reasonably
necessary to ascertain whether the land is suitable for the intended purpose. There after the
government is required to compensate and original owners of the land shall be paid promptly in
full to all persons whose interests in the land have been determined. 10
this therefore shows
complete ownership transfer as would be in any contract of transfer of property.
Exclusive economic zones and continental shelves are also under control of the government.
however, there are currently no blocks on the exclusive economic zones.
In conclusion ownership of oil and gas in Kenya is bestowed upon the government and control of
operations too. The contractors too have a role to play in funding and management of the
exploration and production. The national government share of the profits derived from upstream
petroleum operations shall be apportioned between the national government, county and the local
community at 75%,20% and 5% share respectively.
*All disputes between parties to a petroleum Dispute agreement arising from upstream petroleum
operations shall resolution. be resolved through alternative dispute resolution mechanisms in the
first instance as may be provided for in by the petroleum agreement.
9
Petroleum Act 2019, Section 8
10
Land Act 2012, Section 111

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OWNERSHIP AND CONTROL OF PETROLEUM IN KENYA

This is basically part of the non-ownership theory of oil and gas

Ownership and control of petroleum is underpinned in provisions such as;

 The Petroleum Act No 2 Of 2019

 The Land Act No 6 of 2012

methane gas, tar sands, and other sources of hydrocarbon reserves;

A transaction is subject to ratification by Parliament if it involves the grant of a right or

for the exploitation of any natural resource of Kenya 5

resources for the benefit of the people

The Petroleum Act

contracting, exploration, development and production of petroleum; cessation of upstream

to upstream petroleum operations, regulation of midstream and downstream petroleum

operations; and for connected purposes. 6

Secretary in charge of Energy) under petroleum agreements.7

contractors of the Turkana Oil exploration on the rift basin.

to the Commission to acquire the land on its behalf8.

complete ownership transfer as would be in any contract of transfer of property.

however, there are currently no blocks on the exclusive economic zones.

community at 75%,20% and 5% share respectively.

first instance as may be provided for in by the petroleum agreement.

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