A Review of the Nigerian Energy Industry

Foreign companies receive lion’s share of Tullow billions in Kenya

tullow 131 May 2014, Nairobi – Kenyan firms were overtaken by foreign ones in clinching lucrative deals with oil exploration firm Tullow last year, signaling the capacity gap local businesses face in the nascent oil and gas industry.

A special report released by Tullow Oil yesterday shows that local suppliers and contractors benefitted from only 36.6 per cent of the British exploration firm’s total spend of Sh27.3 billion for services supplied.

Tullow Oil paid the government Sh1.9 billion as tax in 2013, spent Sh4.1 billion to pay local suppliers and contracting firms, Sh3.9 billion on various deals with Kenyan businesses and Sh0.1 billion on social investment.

This means that the government together with Kenyan owned businesses made a total of Sh10 billion from Tullow Oil’s operations in Turkana. The company paid international companies registered in Kenya Sh8.8 billion for services supplied, and another Sh8.5 billion to foreign companies for work carried out in the country to aid Tullow’s operations. In total the foreign firms earned Sh17.3 billion from Tullow.

Out of the Sh3.9 billion paid to Kenyan firms, Sh224 million went to companies in Turkana where the oil resources are found. Commenting on the report, Tullow’s country manager Martin Mbogo said the company was working to increase the share of revenues taken up by Turkana based firms.

“Our strategy is to ensure that wherever possible, goods and services are sourced locally, creating new jobs and supporting the local business community and economy,” he said.

In the report the company said by April 2014 it had generated 3000 jobs both casual and permanent with 60 per cent being taken up by residents of Turkana.

Tullow which made the first oil discovery in the country said in the report that in order to move to the next stage of production, nine key milestones need to be reached.

The milestones are field appraisals to confirm commercial threshold oil volumes, approval of a petroleum legislation, commitment from all stakeholders to a basin-wide field development plan, agreement and funding for regional infrastructure to build major roads, rails and terminals.

Other milestones listed are agreement on basin-wide environmental and social plans, regional government alignment and support of export pipeline; approval of pipeline route, terminal location and all fiscal and legislative frameworks, land acquisition for export pipeline and securing investors for pipeline construction.

Some local organisations have started to train their staff on operations of the oil and gas sector to benefit from the budding industry. Kenya Reinsurance plans to start offering products for the oil industry and has been training it staff.

The Petroleum Institute of East Africa on its part was recently named a certified trainer by globally renowned organisation -the Energy Institute- and will now train professionals eyeing the sector in a bid to bridge the skills gap in the country as regards to the oil and gas industry.


– The Star

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