Conditions for Oil and Gas Exploration
The Ministry of Energy and National Oil Corporation of Kenya on behalf of the Government of Kenya are pleased to invite the international oil exploration investors to participate in the oil and gas exploration in Kenya. Companies are welcome to negotiate open acreage in the four sedimentary basins of Kenya.
The terms and conditions of petroleum exploration contracts are subject to negotiation and are governed by;
- The Petroleum (Exploration and Production) Act Cap 308 1986 revised edition.
- The Petroleum (Exploration and Production) Regulations.
- The Income Tax (Amendment) Act made to specify the fiscal regime applicable to petroleum operations.
|File Name: Petroleum Act of Kenya
Format: PDF Document
File Size: 28.0 KB
|File Name: Model
Production Sharing Contract
Format: Word Document
File Size: 264 KB
The Petroleum (Exploration and Production Act)
- Provides the legal framework and regulates the negotiations and conclusion of Production Sharing Contracts with potential investors.
- Empowers the Minister for Energy to sign the Petroleum Sharing Contracts.
- Has no signature bonus.
- Government pays taxes on behalf of the investor thus imposing very light fiscal burden.
Terms of the Contract
a. Initial exploration period with two additional exploration periods to be negotiated
with the Government.b. The exploration period shall be extended, in case of a discovery, for the field
evaluation programme.c. Duration of development and production in case of a commercial discovery is
negotiable.d. Acreage surrender is negotiable.i. An agreed percentage of the original contract area at the
end of the initial exploration.ii. An agreed percentage of the original contract area at the end of the additional exploration
periods. e. Surface and other fees are negotiable.
i. An agreed amount per hectare is paid annually during the initial exploration period.ii. An agreed amount per hectare is paid annually during the first & second additional exploration period.iii. An agreed amount per hectare is paid annually as training fee.f. Natural gas – the Government will consider special provisions on natural gas submitted by the Contractor in its offer.
- The income tax chargeable is obtained from crude oil and gas sales and other incomes accruing to the oil company.
- Deductible expenditures for income tax include:
i. Capital expenditure covering acquisition of plants, machinery and industrial buildings.ii. Intangible drilling costs of non-productive wells.iii. Interests on loans made for operations in Kenya.iv. Administration expenses, management and professional fees for all operations in Kenya.v. Losses brought forward from prior years.vi. Exploration costs.
- The corporation tax for non-resident companies is 37.5% and 30% for resident companies.
- Taxes are payable on behalf of the contractor by Government of Kenya from its profit oil share.
- Foreign exchange control is no longer applicable in Kenya following repeal of the Exchange Control Act.
- No duties or levies are chargeable to contractors and sub-contractors on imported equipment.
- The Government may elect to participate in any development area.
- The percentage of participating interest is negotiable.
Environment and Safety
- Environment and safety is covered under the Environmental Management and Coordination Act 1999 administered by the National Environmental Management Authority (NEMA).
Procedure for Applying for a Petroleum Exploration Block in Kenya:
Companies can apply for lease of a Petroleum Exploration Block by submitting their application to:
MINISTER FOR ENERGY
C/o MANAGING DIRECTOR,
National Oil Corporation of Kenya Limited,
Eland House, Kapiti Rd., off Mombasa Rd.,
P.O. Box 58567 - 00200,
Telephone: 254-20 -6952200
Cell phone: 254-734-333000
The applicant should specify the following;
1. The number of the block to which the application applies.
2. The name of the applicant company in full.
3. The nature of business of the applicant company.
4. The place of incorporation.
5. Evidence of the financial standing of the applicant company as well as the technical qualification of the Directors.
6. The Minister may request more information from the applicant if deemed necessary.