ISS and Hanns Seidel Foundation Seminar, Nairobi
Oil and Gas Discoveries in Kenya and the Region: Opportunities and Challenges
Organised by the Institute for Security Studies, Nairobi and Hanns Seidel Foundation
Date: Tuesday 6 November 2012, Nairobi, Kenya
East Africa is increasingly developing into an important hydrocarbon region. With proven reservoirs and heightened exploration activity, the region is raising hopes of an oil boom and the attendant profits. In ideal circumstances, the oil and gas resources in Kenya and the region should form engines of stability, economic growth and improved governance. Looking at experiences elsewhere on the continent, however, there is the danger of the â€˜resource curse` syndrome, which counsels about the perils of hydrocarbons turning into sources of instability and ecological catastrophe. Indeed, the dismal track record of Africa`s oil producers has led to concerns about the possibility of Kenya and the greater region bearing Africa`s paradox of plenty. Already, there are emerging concerns about territorial disputes in Kenya and the region linked to the discovery of natural resources.
As Kenya in particular draws increasing interest from major oil companies, the question is, what are the short- and medium-term projections for oil and gas discoveries and what is the geostrategic implications? Significantly, what policy options should Kenya pursue to avoid past development failures associated with petroleum and militate against potential conflict? This seminar sought to examine these questions, among others, with the aim of offering policy recommendations to improve the outcomes of oil and gas production in Kenya and the region.
The seminar began with introductory remarks from the Chair, Kisiangani Emmanuel, who then welcomed the Acting Nairobi Office Director, Tsegaye Baffa. Both welcomed participants and underscored the ISS`s intention to provide a platform for dialogue with the aim of mainstreaming research-based perspectives on public policy processes in Kenya and the region. They also pointed out the increasing interest in extractive industries in the region and the need to put in place mechanisms that would lead to the best use of these natural resources. Tsegaye then thanked the Hanns Seidel Foundation (HSF) for supporting the seminar and invited the HSF director, Markus Baldus, to make a few brief remarks. Markus highlighted the history of the HSF and its working relationship with the ISS, aimed at strengthening human security through research and policy development in the Kenya.
The first presenter, Ms Wanjiku Manyara, spoke on â€˜Oil and gas discoveries in Kenya`. She began by highlighting the current status of oil and gas exploration in East Africa, which has about 28 prospective sedimentary basins. She noted that to date over 37 international oil and gas companies are licensed in the region and that an estimated 3.5 billion barrels of oil and 3 trillion cubic feet of natural gas have so far been discovered in the East African region (oil in Uganda and Kenya and natural gas in Tanzania). The implications of these discoveries include the improvement of the region`s profile due to the commercial viability of these resources, the opportunity to develop sound oil and gas policies, economic growth and development as a result of the region`s transformation into an exporter of oil and gas, capacity building in terms of technical training of oil experts, and infrastructure development and enhancement.
The speaker emphasised that if Kenya wanted to avoid the â€˜resource curse` syndrome, the government and stakeholders should develop sound policies to guide the formulation of new legal, regulatory and institutional frameworks. This, she said, should entail ensuring transparency and accountability, as these are the key factors that greatly influence proper governance and fair distribution of natural resource proceeds. The opposite results in corruption, skewed distribution of oil and gas proceeds, conflict and a circle of poverty. Ms Wanjiku noted that it was critical for governments to recognise that natural resources were public assets that belonged to and should be used for the benefit of the citizenry rather than â€˜goods` that should be used at the government`s discretion.
The speaker emphasised the need for the Kenyan government to develop sound industrial, labour, market, trade and exchange policies in order to avoid the â€˜Dutch disease`, which results in communities abandoning other lines of production to join the oil industry. In conclusion, Ms Wanjiku observed that political will was key to ensuring that a country`s natural resources became a tool for national economic empowerment through well thought-out and comprehensive policies. However, she noted that countries in the region that were in still in the initial stages of Extractive Industries Transparency Initiative (EITI) needed technical and financial support to strengthen their capacities.
The second presenter, Mr Joseph K Kurauka, spoke on the â€˜Community development and environmental aspects` of oil and gas discoveries. He noted that over the last two decades, there have been a number of factors that contributed to the increasing importance of Africa as a source of energy for the United States and Western Europe. These, he observed, included increasing turmoil in the Middle East and the ascendency of nationalist governments in Central and South America. In addition, the traditional destinations for Africa`s oil are now facing increasing competition for supply from the rapidly growing economies of China and India. He added that the benefit for Africa has been the upsurge in oil prices that has created an inflow of petrol dollars into Africa`s oil-producing economies.
Mr Kurauka described the resource curse as â€˜the inverse association between development and natural resource abundance`. He said this was a situation whereby natural resources such as oil generated large revenues for governments but paradoxically the outcome was economic stagnation and political instability. Evidence shows that in many of the net oil-exporting countries (in Africa and elsewhere) it has been a major source of economic, social, political and environmental problems, rather than a benefit. He alluded to studies that point out that petroleum, in particular, brought trouble: waste, corruption, consumption, debt overhang, deterioration, disintegration of public services and conflict.
With regard to the environmental challenges, the speaker said that soil and water pollution from oil spills may result in the long-term degradation of the environment and cited the example of oil production in the Niger Delta region, where oil has done great harm to both the people and the ecosystem. He added that waste and wastewater disposal, air and dust emissions, noise pollution, changes in aquatic floral composition, terrestrial habitat destruction, risks and hazards, land compensation, conflict over the distribution of oil benefits, and the risk of STD/HIV/AIDS were all environmental challenges brought about by the exploration of oil and gas resources.
Mr Kurauka emphasised the importance of developing measures to mitigate environmental challenges. Some of the measures he suggested were conducting Environmental Impact Assessment surveys that included social impact assessments, insisting that oil-producing companies develop sound environmental management plans, and the government developing environmental monitoring plans as well. He pointed out the need to have a budget from which funds were allocated towards mitigating all the negative environmental impacts. The speaker concluded by advising all stakeholders to incorporate lessons learnt from other African states that have sustainably benefitted from the proper management of oil and gas resources, and stressed the need to engage all stakeholders before exploiting natural resources.
The last presenter, Mr Eliud Omeri Idoket, spoke about the oil discovery in Turkana, Kenya. He began his presentation with an overview of Turkana county, observing that it was a hot and dry area prone to famine and cattle rustling. It is one of the most marginalised and underdeveloped areas in Kenya with a poverty index of 98%. According to the speaker, the challenges faced by the Turkana people as a result of oil exploration include the influx of people buying land, the side-lining of the local Turkana County Council by the national government in decision-making related to oil exploration, lack of sensitisation of the local community regarding oil exploration and its effect on livestock grazing zones, and the displacement of households by investors with no form of compensation to the affected families. He added that the Turkana County Council had not been paid the exploration land fee and of concern too was the fact that out of 500 people hired to do the exploration, only 40 were locals. He underscored the need to conduct an audit of the human resource needs of exploration companies and adopt clear laws and guidelines on employment.
Mr Omeri observed that despite the anticipated economic gains suggested by the previous speakers, the Turkana community was apprehensive about any improvements in their lives. He affirmed the need for Turkana people to be consulted on all oil exploration processes including tendering processes, environmental conservation strategies, production sharing agreements (PSAs) and revenue sharing arrangements, to remove any mistrust and suspicion among local communities. The speaker indicated that joint forums held with stakeholders in the Turkana community have highlighted the need for the community to understand Kenya`s laws, international laws, existing policies and best practices of natural resource exploration. He added that victims of accidents caused by the oil companies have so far not been compensated and that Kenya should sign on EITI to strengthen its weak laws on natural resource exploration. He described the weak governance structures at both county and national level as an impediment to the development of the Turkana people and proposed that local communities be informed of their share of proceeds from the oil revenue. He concluded by revisiting the issue of community land rights, saying they needed to be determined in a transparent manner during contract negotiations for oil exploration to avoid disputes in future.
During this session a number of issues were raised. These included the need for the Turkana community to moderate their expectations regarding oil revenues since these would be shared with the rest of the country. It was also noted that the community needed to be cautious of politicians who heightened expectations, as this could lay grounds for conflict. One speaker observed that the constitution needed to be used as a guideline for sharing oil revenue and that the devolved system of government would benefit the Turkana community only if the community held its county leaders accountable. One participant raised the issue of how fair play would be achieved among the different stakeholders, to which respondents observed that the production-sharing commitment was still under review and that when finalised, it would help all parties to come to an agreement. It was also reiterated that clear and properly considered policies were the solution to concerns on fairness and equitability. On the challenges relating to the implementation of policies, speakers underscored the need for civil society organisations and citizens to resort to advocacy and ensure that the policies are effectively implemented. On a question related to the need to effect environmental compensation, the speakers agreed that people`s land, livestock and water, if affected by the exploration, should be compensated and that this needed to include agreements with local communities and in policy frameworks. The ISS was thanked for organising this seminar and the speakers called for more such events, given their relevance to some of the immediate challenges facing the country.
Chairperson: Dr Emmanuel Kisiangani, Senior Researcher, ISS
- Wanjiku Manyara, General Manager of Petroleum Institute of East Africa (PIEA)
- Joseph Kathiai Kurauka, School of Environmental Studies, Kenyatta University
- Eliud Omeri, Director, Turkana Development Initiatives
Report by Mashaka Lewela
Institute for Security Studies
Lavington Gitanga Off Muthangari Road