Kenya: President Kenyatta to impose capital-gains and windfall tax legislation within months

Kenyan President, Uhuru Kenyatta, stated in a 2 August interview that Kenya will impose capital-gains and windfall taxes on oil, gas and mining companies within months to ensure the East African nation maximizes benefits from its mineral resources.

Enacting the laws this year will be a positive signal to investors that Kenya is keen on creating necessary conditions for the industry. “This is something that we are very clear about,” Kenyatta said from Nairobi’s State House, “We want to ensure that we as a country also are able to benefit from both the windfall and capital-gains tax.” 

Recently oil reserves have been found in northern Kenya, while gas exploration continues and the nation’s potential for gold production is being studied. 

Kenya hopes the new legislation will prevent similar situations to Tullow’s experience in Uganda, where the company is appealing against the state revenue authority’s demand that it pay capital-gains tax of about US$473 million following its sale of assets in Uganda. 

For an in-depth analysis of this issue and how it will affect the exploration companies operating in the country please see our upcoming issue of East Africa Politics & Security.

© 2014 Menas Associates

Kazakhstan tightens control of resources with nationalisation law

Claiming the need for predictability and clarity, on 24th March the government of Kazakhstan announced that its ability to nationalise private property was now enshrined in law. Seeking to calm the concerns of foreign investors, already concerned about growing resource nationalism in the energy sector, Economy Minister Zhanar Aitzhanova insisted that nationalisation would occur only as a last resort, and that market-based compensation would be paid out. In a choice of phrase that underlined the importance of gas and oil to Kazakhstan's economy, Aitzhanova said that nationalisation would only occur in the case of a “ threat to national security".

The nationalisation provision is already law, having been slipped into a new state property bill which was passed by Kazakhstan's rubberstamp parliament last month. Industry experts have quickly drawn a link between the ruling and the ongoing dispute between the Kazakh government and a Western-led consortium (comprising Eni, BG Group, Chevron and Lukoil) investing in the vast Karachaganak gas condensate field in northwest Kazakhstan.

The Karachaganak contracts were drawn up in the chaotic 1990s, when enterprising oilmen used post-Soviet Kazakhstan's economic upheaval and lack of negotiating knowledge to seal extremely profitable deals. As Astana has gained confidence and expertise, it has pushed back on Western investors and sought a bigger slice of the technical action and the profits. Karachaganak is now the only significant hydrocarbon project in the country without the participation of KazMunaiGas, the state energy firm.

An increasingly acrimonious dispute, featuring several lawsuits has emerged between the Karachaganak consortium and the Kazakh government. In August 2010 it was confirmed that the two sides were close to an agreement which would give KazMunaiGas a stake, and in February and March this year senior officials - including Prime Minister Karim Masimov – said that a deal would be reached this year.

Whether the nationalisation law had this project specifically in mind is unlikely: it seems that the two sides have already gone most of the way towards a solution, and suddenly nationalising the project would be a risky step. However, the lengthy tussle over the Karachaganak field has clearly been a lesson for Astana. The new law provides another tool to ensure that any future investments reap suitable rewards for Kazakhstan.

Sources: Reuters, Silk Road Intelligencer

For more news and expert analysis about the Caspian region, please see Caspian Focus.

Algeria: Development contracts progress slowly

On 3rd February, the Algerian Council of Ministers reviewed a host of measures related both to the recent unrest in the country and also to economic development. Among dozens of other decisions, the approval of four presidential decrees on oil and gas exploration inched forwards developments in the strategic south west and in the Berkine Basin. Amendments were approved for contracts governing BG Group's Hassi Bahamou permit, Repsol's Reggane and for a development at Rhourde Messaoud Nord involving Eni. Six of Sonatrach's own exploration deals also got the go-ahead.

An amendment to Sonatrach's July 2002 agreement with Repsol and its partners to develop the Reggane field has confirmed the balance of shareholdings in the joint venture. Sonatrach holds 40 per cent, Repsol YPF 29.25 per cent, RWE Dea 19.5 per cent and Edison International 11.25 per cent. The partners have been awaiting approval of this development for more than a year.

BG Group's contract with Sonatrach for exploration and development of the Hassi BaHamou perimeter has also been amended to extend its exploration period until 2012. BG North Sea Holdings is also awaiting approval of its February 2010 deal to buy its partner Gulf Keystone Petroleum's 38.35 per cent interest in permit for $9.9 million, giving BG a 75.1 per cent stake.

A third decision approved a minority stake for Eni Algeria Exploration in the Rhourde Messaoud Nord perimeter through an amendment to a July 2009 agreement between Sonatrach and Alnaft). According to Eni, it signed a framework agreement with Sonatrach in 2008 “setting out the common contractual ground” and extending the duration of the Rhourde Messaoud development licence and one other for a further 10 years. No details were released about Sonatrach's six exploration contracts agreed with Alnaft in June 2010, which have also now been approved.

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.

© 2011 Menas Associates

BG Group confirms success of new well

BG Group has issued an official statement confirming the success of a new well, named Tupi Alto, on block BM-S-11 in the Santos Basin pre-salt, offshore Brazil. The Tupi Alto well is one of seven successful wells in the Tupi cluster and further confirms presence of light oil. The well, drilled by partners Petrobras, BG Group and Galp is located in the Tupi evaluation area, approximately 275 km from Rio de Janeiro.

The area has been tested by Wireline, who have verified presence of light oil at approximately 30° API and said that the reservoir properties were very good across the key Sag reservoir. The statistics collected from Tupi Alto and other wells; support the estimates which indicate potential to generate up to five to eight billion barrels of recoverable light oil and natural gas from the Tupi pre-salt reservoirs.

“The Tupi Alto well, in conjunction with the trend seen in previous Tupi appraisal wells, has confirmed excellent reservoir properties over a wide area in the Tupi field. Appraisal results continue to confirm the reservoir models in Tupi, Iracema and Guara by giving better definition in crestal areas and on the flanks of the fields. The results continue to de-risk the production outlook for these assets and allow us to optimise field development planning and capital efficiency,” said, BG Group chief executive, Frank Chapman.

To find out more about the BG Group please visit their web site, which you can find here.

For more news and expert analysis about Brazil please see Brazil Focus.

© 2010 Menas Associates