Case Study

Fiscal Terms Economics GOK WB (Africa)

The World Bank engaged SLR together with Hunton & Williams (‘H&W’) to develop recommendations as to how the Government of Kenya (‘GoK’) should update its fiscal framework with respect to petroleum exploration and production, including the revision of the existing Petroleum Act and Model Production Sharing Contract (‘PSC’). SLR focused on the existing economic and fiscal framework with respect to the upstream, midstream and downstream sectors, and also on forming recommendations for the revision of the Model PSC, which included benchmarking existing and proposed terms against comparator regimes.

Location:

Kenya

Client:

The World Bank

Project Objectives:

  • Provide guidance to GoK on contractual and fiscal terms for natural gas, with respect to existing Production Sharing Contracts, to reduce Contractor uncertainty when exploring in blocks that are considered to be potentially gas-bearing.
  • Provide guidance to GoK on the update and revision of its Petroleum Act, associated Regulations, and Model PSC, as well as provisions of relevant fiscal laws as necessary.
  • Provide a financial-economic model to be used for sector planning and to underpin petroleum contract negotiations.

Our Role

  • SLR reviewed existing petroleum regulatory structures and institutions within Kenya and formed recommendations based on international best practice as to how best update existing upstream, midstream and downstream regulatory structures and institutions.
  • SLR reviewed the Petroleum Act and Model PSC and together with H&W drafted an updated Model PSC.
  • SLR provided recommendations as to how existing fiscal instruments could be revised to become more progressive, better balancing the requirements of investors and ensuring Kenya retains a fair share of rents.
  • SLR developed an economic model for use by GoK and delivered training in its use.

SLR and H&W delivered a Final Report to GoK in July 2013 which was then distributed to key stakeholder groups for comment.

The Final Report and recommendations were discussed at a stakeholder workshop held in Nairobi and were well received by stakeholder groups who viewed the recommendations as a fair, balanced view of the issues. The GoK has used our advice to guide their update of the National Energy Policy and Petroleum Act.

For further information please contact Nick Hooke or Phil Marlow.