Local Content Bill Kenya – Can it Spur Economic Prosperity?

Local content bill in Kenya when well implemented has the potential to spur the economic prosperity in the country.

Local content is an engine that can create value in the economy. Promoting local participation in the upstream oil and gas industry is critical.

Every country with natural resources like oil or gas often implement local content policies with a noble intent. This is in an effort to create jobs, spur local industries and tame ‘Dutch Disease’.

These kinds of policies aim at promoting a system where international companies work with locals. In addition, it promotes the buying local products or services. Therefore, Local Content Bill 2016 is a great start.

Origin of Local Content Bill Kenya

Local content policies have their origins in the writings which outlined the ‘Infant Industry Argument’. This is an argument that was first articulated in the 1790s.

Local content is a topical issue. It has become a hot issue in the natural resource industry in general, and oil and gas in particular.

In developing countries like Kenya, local enterprises are the drivers of economic activity and development.

Since the discovery of commercially viable quantities of oil in Kenya, efforts have been made to promote inclusivity. This improves local participation in this emerging sector, and local content as a whole.

Local Content Bill Policies

The Local Content Bill policies aim towards maximization of the national value creation. This is by means of the oil and gas value chain through employment, value addition, technology transfer and the acquisition of knowledge.

The pre-requisites for enhancing local content are the rule of law, skilled workforce, and investment-friendly atmosphere. However, on their own, these policies are not a silver bullet. Two issues come to mind;

Skills Gap in Oil and Gas

First, skills gap are typically the most prevalent barrier to meeting local content requirements. These gaps creates a void which is bridged through various technical assistance and training initiatives.

Local suppliers who bid for procurement opportunities often fall short of meeting industry requirements. This is in areas such as information technology, systems management, environment, health and safety standards.

This is not surprising given that Kenya is a new entrant in the upstream sector. I would argue that for the technical initiatives to be sustainable in the long term, the government must take the lead.

KEPTAP Program in Kenya

One such program is Kenya Petroleum Technical Support Project (KEPTAP), a USD 50M credit facility from the World Bank whose aim is to strengthen the capacity of the country to manage its petroleum sector and create wealth for sustainable development. 

It is also worth noting that Kenya Pipeline Company (KPC) has taken the initiative to bridge this gap through their Morendat Oil and Gas Training Institute.

Oil and Gas Local Enterprises in Kenya

Secondly, the implementation of the local content regulation will promote the growth. Infact, this will help small and medium-sized enterprises across the value chain. 

The procurement of local goods and services is very important as it establishes a multiplier for local economic development. This will happen through contribution to employment, skills strengthening, supplier and local enterprise development.

Oil and gas exploration companies expend up to 80 per cent of their investments on products and costs that are supplied from without. Thus, indirect employment in the sector accounts for a large proportion of total employment and value addition.

The opportunities available however have not been sufficiently usurped by SMEs due to the information gap on how to create business partnerships, requirements of the industry and actors in the industry.

This is serious challenge given a National Economic Survey report by the Central Bank of Kenya indicated that SMEs constitute 98 percent of all business in Kenya and creates over 80 percent of jobs

Conclusion

In conclusion, if these regulations are implemented effectively, they can have great impact on the Kenyan  economy.

For example, since Brazil, a giant in the offshore oil industry, passed its local content rules, an estimated 875,000 jobs have been created. The value of domestic purchases has reached USD 14 Billion (Kshs.1.4 Trillion).

With the envisaged creation of the Local Content Training and Development Fund, the bill is very futuristic. It ensures that the local content requirements are implemented in full.

BASF – Global Oilfield Chemicals for the East African Market

BASF provides a range of high-quality chemicals for oil and gas exploration and production. This enable customers to meet technical challenges encountered in the field.

By constantly improving the quality and reliability of our chemical solutions, we help service companies to meet the industry’s overall drive for greater efficiency and productivity.

BASF in East Africa

East Africa has become a focal point for oil and gas exploration after discoveries were made in Uganda, Kenya and Tanzania.

One of the major challenges faced in this region is the high wax content and elevated pour point of the oil, making viscosity levels too high to easily produce.

Due to the year-round mild temperatures experienced in East Africa, there is little chance for nature to create workable conditions for the oil.

Therefore, heating or chemical injection is required to decrease the viscosity and allow the oil to be commercially produced.

BASF Basoflux Brand

BASF has designed a wide range of high-performance products, under the Basoflux® brand.

This will help you mitigate paraffin deposits and significantly lower the pour point of paraffinic crude.

How BASF PPDs and paraffin inhibitor products work

Upon cooling, wax separates out as plate-like crystals or needles. These crystals interact to form a three- dimensional network in which the crude oil is trapped. This results in increased viscosity or even solidification of the bulk oil phase.

Pour Point Depressants (PPDs) affect the crystallization process and prevent the formation of such three-dimensional networks, thereby reducing the pour point.

Wax inhibitors generally influence the crystal morphology of wax. This creates weaker deposits which are more easily removed by shear forces within the flowing crude.

All Basoflux® products act as highly effective paraffin inhibitors, with the following benefits:

  • Under the correct conditions, they prevent wax deposition on pipeline walls
  • They have proven performance in a variety of crudes
  • By dispersing paraffins back into the oil, the potential waste stream is minimized. This creates additional revenues through increased sales volume (less pipeline downtime) and decreases disposal expenditure

PRODUCT OFFERING and CHEMISTRIES

Our product offering is varied and includes the following chemistries:

  • Maleic Alpha Olefine (MAO)
  • EVA / Acrylates
  • Poly (Meth) Acrylates
  • Hyperbranched bases

Innovation based on creating more sustainable, high-performing products to make our customers more successful, is at the heart of BASF’s strategy.

We continuously invest in improving this offering and have several new paraffin inhibitor products in our pipeline.

Increasing the efficiency of water-oil separation with demulsifiers

As the importance of oil increases in East Africa, so does the volume of oil produced.

One of the most important objectives of any oil production facility is the separation of water from produced crude (demulsification). The quick and efficient breaking of these emulsions is essential to meet tight downstream crude oil specifications.

BASF offers a wide variety of demulsifiers from different chemical classes to help our customers make tailor-made, high-performance formulations. Demulsifiers from the Basorol® portfolio are especially designed for fast water dropping, drying and desalting.

In order to optimize performance, it may be beneficial to blend two or more Basorol® types together. Based on our experience with these chemistries in multiple oils, we have found it is possible to treat many crudes worldwide.

We treat the crudes with a combination of alkoxylated alkyl phenol resins and alkoxylated polyethyleneimines from BASF.

Please contact your nearest BASF representative for more information about our portfolio, and to discover which chemistries might work well for your specific application.

https://energy-resources.basf.com/global/en/oilfield-solutions.html

Disclosures of Oil Revenues – Is Tullow Oil Kenya Disclosing Enough?

Disclosures of oil revenues is a major issue when it comes to transparency in the oil and gas industry.

Tullow Oil, the British exploration firm which claims to have spent nearly Sh200 billion recoverable from proceeds of oil sales, says it has no problem publishing its production sharing contracts.

The government, however, insists on maintaining secrecy, and has made no effort yet to audit the reported expenses incurred by Tullow.

This is a Q&A with Mr. Joe Watson Gakuo, Founder, Upstream Awards, to try and further explore production sharing contracts disclosure in Kenya.

Do you think the laws are extensive enough to offer clarity on disclosures of oil revenues?

The issue of transparency in the oil and gas industry is important and critical in the management of these resources.

I strongly believe that as a country, we are on the right path especially following the enactment of the constitution in 2010 which provides a robust regulatory system as far as access to information and management of natural resources is concerned.

There already exists a publicly available oil and gas production sharing contract. However, signed contracts have not been disclosed and this might be because of the existing confidentiality clauses in those contracts between the operators and the Government of Kenya.

The proposed Petroleum (Exploration and Production) Bill lays the foundation for a framework towards reporting, transparency and accountability in the upstream petroleum sector which includes the publication of all petroleum agreements.

Disclosures of oil revenues; Are demands for revenue sharing plausible?

In principle, I do agree with them, and as things stand, the government, in the amended petroleum bill, adopted the revenue sharing formula that seems acceptable to all parties.

The discussions and politics of revenue sharing has been a thorny issue, not only in Kenya, but globally, across many jurisdictions.

We must also not forget that oil, like any other natural resource which includes minerals is a national asset that should benefit all Kenyans through revenues, and taxes which is distributed through the budget. Caution is therefore necessary when approaching this issue.

What we must do as a country is to never allow the resources that God has bestowed on us to be the course of conflict. We must defend our unity and harmony with everything we got, and ensure that we handle these kinds of discussions with care and exhaustive consultations.

What can be the best way of bridging this divide?

One thing that came out clearly during that debate is the need for the stakeholders to have exhaustive consultations in developing policies. Also important is proper sharing of information especially with local communities where oil and gas exploration is going on so that they can well understand how the resource will benefit them directly.

Finally, it is unfortunate that this debate seems fixated on the formula. What we should be having as a country is a wider debate of what constitutes an efficient, fair and a stable resource revenue sharing regime in oil, gas and mining sectors.

It is important that more focus be put into the design and implementation of the revenue sharing regimes. In countries where this has been in place, it has been shown to lead to great deal of wasteful public spending, exacerbation of regional inequalities, or even escalation of violence.

Is Tullow Oil hiding under the regulator disclosures in London?

This is very interesting. On one part, Tullow Oil has indicated that it is committed to transparency, and on the other part bound by contractual and confidentiality obligations with Government of Kenya.

However, it is worth noting that Tullow Oil has published copies of the Petroleum Agreements for their contracts in Ghana. I would therefore expect them to publish the production sharing contracts signed in Kenya.

This needs but the support and agreement of the Government of Kenya who are their partners in the PSCs, and citizens’ custodians in these agreements. The new exploration law will make this a bit more open.

Is the Kenyan crude oil export venture viable?

We have witnessed a recovery of the crude oil prices from the lows of $30 per barrel to the current prices which are above $65 per barrel currently.

The ministry officials are on record saying that Kenya would make a profit from sales of crude oil at $34 per barrel. Based on that, the current crude oil prices makes the venture very viable.

Disclosures of oil revenues from the ministry of energy and petroleum in Kenya would be welcome. This would allow for comparative analysis.

Entry of Total into Kenya’s Upstream Sector

It is not the first time Total has shown interest in Kenyan upstream assets, but what would be important is to understand their larger regional strategy. This would inform what cause of action they might take.

However, they are just one of the partners meaning Tullow Oil and the Government of Kenya will play a significant role in the development of the Turkana oilfields as well.

Total also bought significant stake of Tullow Oil’s Ugandan interests. I am not suggesting that they might buy out Tullow Oil’s interest in Kenya, but it is a possibility, and that would make things a bit interesting to watch were they to become the operator or joint-operator in Kenya.

Should Kenya transport crude oil through Hoima-Tanga route?

I do not support the idea of transporting Kenyan crude oil through Uganda. It is easier to link crude oil from Hoima to Turkana then Lamu than having a back loop from Turkana to Hoima then through Tanga port.

But again, I could be biased in favour of Kenya. The real wildcard in this is whether the idea of building the Hoima – Turkana – Hoima will be revived by Total, and ditching Tanzania altogether. Let us wait and see what unfolds.

South Sudan into the East African oil mix

I do not see it as a disruption. It would actually be a great move towards the regional economic integration. South Sudan has been a prolific oil producer.

However, politics have been central to the progress of their oil industry and they are dependent on a pipeline through their hostile neighbours Sudan to export oil.

With oil being their main source of revenue, am sure they would be keen to have an alternative export route, and the Lokichar-Lamu oil pipeline would provide a great link for them.

The pipeline would carry a projected 450,000 barrels of oil a day from Juba.

Oil Prices in 2020 – 3 Factors That Might Affect Fuel Prices in Kenya

Oil prices in 2020 will be affected by a number of factors. But first, did you know that Lake Turkana, also known as Jade Sea, was originally named Lake Rudolf on 6th March 1888?

The lake was renamed Lake Turkana in 1975 by the then President, Jomo Kenyatta. Did you know that?

Now that I have your attention, Happy New Year!

Allow me to share with you my thoughts on what to expect in terms of oil prices in 2020. This is in turn going to affect your day to day life as you know it.

Oil prices in 2020 have recorded the strongest start to a calendar year since 2014, with crude oil opening at over $60 a barrel.

For the un-initiated, the prices of oil collapsed from almost $120 a barrel in June 2014 due to weak demand, strong dollar and a booming shale production in the United States.

I think there are three factors that will affect oil prices in 2020 in Kenya. They include the following;

Saudi Arabia and Russia will affect oil prices in 2020

The worlds biggest oil producers, Russia and Saudi Arabia, have continued to strengthen their collaboration in the oil and gas industry. This is one relationship that we should watch closely because it signals a strategic partnership between two oil-rich states.

Cooperation between Saudi Arabia and Russia ensures that crude prices are propped up.

Saudi Arabia is very intent on listing Saudi Aramco. As such the country is quite motivated to keep the oil prices going up. High crude oil prices means that the consumer fuel prices in Kenya will be high as well.

The risk to this outlook could become apparent if Russia stops cooperating which has been a significant tipping factor in the production cuts.

How will oil prices in 2020 be affected production cuts?

In a meeting at Vienna, Austria in May 2017, OPEC and non-OPEC producers agreed to continue with crude oil production cuts until the end of 2018.

The cuts which started in January 2017 are meant to clear the global over supply of crude oil.

It is also worth noting that the United States crude inventories have dropped by over 20% from the highs recorded in March last year.

The current deal among the producers is to cut supply by about 1,8 million barrel per day (bpd) in an effort to boost oil prices. However, there is high likelihood of another price collapse if the producers in the United States increase production due to higher prices.

The crude oil export limitation agreement between Russia and Saudi Arabia has been a success in strengthening the crude price and also in market rebalancing, removing the volatility out of the system.

Oil and Gas Project Sanction

It is forecasted that there will be an increase in projects from the 2015 low.

The continued recovery of the upstream companies will lead to an increase in their production. This is going to help the midstream and the oilfield services businesses. This is a boom to the supporting ecosystems

Within Kenya and East Africa, the oil and gas exploration companies will continue with their upstream activities motivated by rising oil prices, as well as embark on the development phase in Turkana in Kenya and Hoima in Uganda.

The proposed construction of 1,445 kilometer long crude oil pipeline will commence once FID is reached. From Hoima in western Uganda to Tanga sea port in Tanzania, the pipeline will carry 216,000 barrels of crude oil daily.

In Kenya will equally be speeding up the process that will see the construction of the crude oil pipeline from Turkana oilfields to Lamu.  A joint development study agreement has already been signed.

The 865 km pipeline will cost about $1.2 billion and expected to be complete by 2022

Moving Forward

During the 2014/2016 period, over $1 trillion was taken out of industry spending from 2015 to 2020. This means that cuts are over and upstream companies will seek to grow their profitability and operate at lower prices. Overall, this makes the industry better and more efficient.

Projects worth as much as $200 billion are in the pipeline, both onshore and offshore.

For example, Saudi Aramco has announced plans to invest $300 billion in upstream oil and gas projects over the next 10 years. With these investments, the oilfield services sector will to continue recovering in 2020 in tandem with the increase in the oil prices.

This bill introduces a raft of rules and guidelines into the country’s nascent upstream oil and gas industry, as a means of protecting and promoting local growth.

The global rise in crude oil prices will mean that you as a consumers and motorists will fork out much more from your pockets for fuel or petro-related products.

The average landed cost for the products increase with the increase in the crude oil prices. It would a double tragedy if the Kenyan shilling was to weaken during the course of the year.

The latest price update by the EPRA reflects these changes.

Conclusion

In conclusion, given the global and regional geopolitics as well as economics, 2020 promises to be very interesting in the upstream oil and gas industry.

Oil prices in 2020 will be keenly watched as this is a major contributor to the global energy matrix.

A major event, the upstream awards, continues to bring stakeholders in the oil and gas industry together in the country. Later in the year, upstream awards is coming to a city near you.

I am inviting you to celebrate with us.

Winning an Award – 6 Reasons Why Winning an Upstream Award is Great.

Winning an award at the prestigious Upstream Awards require attention and efforts. This is important when submitting an entry or when nominating someone or a company.

I was asked recently if winning an upstream award is good for you or your business. It is important to note that upstream awards are a peer-to-peer review mechanism. The awards focus on individuals or businesses that are contributing positively to the upstream oil and gas industry in Africa.

Here are six reasons I think upstream awards would benefit you:

Winning an Award Validates Your Work.

The journey starts by gaining validation from a number of sources, friends, business acquaintances and eventually through independent judges.

The process toward the upstream awards is inclusive and involves nominations from industry peers, then short-listing and eventful judging process.

Submitting your work, programs or activities you have done in the upstream oil and gas industry is a great way to showcase yourself or your organization.

Winning an Award Motivates your staff & key partners. 

You work long, hard and are passionate about what you do. These upstream awards gala event  also provide an opportunity for your team to have a night out.

These awards validates that you are on the right track, whether you win or not. It is great to be shortlisted

Focuses you on positive contribution to the industry. 

Upstream awards look at your personal or corporate contribution to the oil and gas industry. Therefore, entry into the awards requires you to be concise and clear on the activities you are undertaking.

You need to be able to articulate your contribution in a simple and clear way so the judges get the key messages.

Sharing this with your team and others helps you stay on message.

Confirmation for Investors, new & old.

Depending on the involvement of your investors, they also want confirmation they are backing a winner along the journey. It also helps you to be noticed by new investors.

Shows your potential customers you are well regarded. 

Your customers before they even buy the first product want to know your company and product is validated by the industry. That you are respected, trusted and a proven supplier.

Participating and being part of the upstream oil and gas awards is a clear indication to the market that the oil and gas industry regards you highly.

Winning an Award is a Great for your PR Efforts

This is the perfect opportunity to promote your company, or even launch a product at the upstream awards. Local and national press typically announce that you’ve won these prestigious awards and people are very keen to read more about your success.

Conclusion

In conclusion, I have to say there is great joy and pride in winning an award, especially on something you have worked on for many years.

I know there are many more reasons but thought this might help provide some ideas and motivate you to apply to be part of upstream awards this year.

The past awards event were great, and was covered by standard media group

I would love to hear from you. Drop me a comment below.

Make Traveling To Africa A Priority In 2020 By Visiting These 4 Countries

Traveling to Africa is on the rise with campaigns like Ghana’s Year Of Return and Afrochella

The continent has so much to offer and no matter what your interests are, you’re bound to find a city on the continent to suit your taste. 

Here are the most awesome places to visit in Africa this year.

Kigali, Rwanda

In addition to being a luxury safari destination with a focus on Gorilla tourism, Kigali is one of the cleanest cities in the world and the cleanest city in Africa. 

It’s amazing to see how the citizens of Kigali come together to ensure their city remains spotless — taking responsibility and not littering. 

Other notable places to visit are the Kigali Genocide Memorial, a cultural tour at Nyamirambo Women’s CenterInema Art Center, and Kimironko Market.

There are also great places for food like The HutRepub Lounge, and Brachetto Restaurant. Not to mention the amazing coffee that Rwanda has!

Cape Town, South Africa

Cape Town has some of the most beautiful beaches in the world. It is a melting pot of cultures, music, and art and is extremely progressive. 

There is an abundance of things to do while in Cape Town but some of the most epic activities are hiking Lion’s Head, visiting Table Mountain, visiting Robben Island, relaxing atV&A Waterfrontand hitting up Boulders Beach

Of course, the food is amazing in Cape Town, they’re the home to two of the best restaurants in the world. If you’re a vegan or vegetarian, there are plenty of plant-based restaurants to choose from as well. 

Taking a stroll through Bo-Kaap is great to learn more about the Muslim culture of the locals and see the beautifully colorful homes in this area. 

Traveling to Africa in 2020; Madagascar

This African country is commonly referred to as the “eighth continent” because of its size and “unique flora and fauna” as well as being home to nearly 80 percent of species that exist nowhere else in the world, according to an article by Harvard Museums of Science & Culture

Madagascar is the fifth-largest island in the world and was cut off over 100 million years ago from the African mainland. 

While here, you can visit national parks where you can get an unclose look at lemurs, chameleons, orchids, baobabs, geckoes and more. 

Take a trip to the city of Antananarivo and explore colonial architecture, street-food, art galleries, and museums. 

Consider Egypt When Traveling To Africa.

According to the World Tourism Organization, Egypt is the fastest-growing travel destination in the world. 

Egypt is home to the Nile River, the longest river in the world, ancient pyramids of Giza and temples but there’s a lot more to explore. 

Learn about Egypt and it’s history, culture, and present by exploring the city of Cairo, visiting the Karnak Temple Complex, viewing ancient tombs in the Valley of the Kings, experiencing the Temple of Horus and going on a Nile River Cruise

Shop for souvenirs at Khan El-Khalili Bazaar and after shopping enjoy a cup of mint tea or Arabic coffee. 

This article was first published here.