Transitioning to Oil Production: Governance and Public Interest Considerations in the Project Oil Kenya Field Development Plan and Production Sharing Contracts
Kenya’s journey toward becoming an oil-producing country has spanned more than a decade, marked by extensive exploration, appraisal, and institutional reforms aimed at establishing a credible upstream petroleum sector. The discovery of commercially viable oil in the South Lokichar Basin elevated expectations around economic transformation, national revenue generation, and regional development, particularly for Turkana County.
The publication of the South Lokichar Field Development Plan (FDP) represents a critical turning point in this journey, signaling Kenya’s transition from oil exploration to full-scale production. Unlike exploration, oil production introduces long-term fiscal, environmental, governance, and social implications that will shape national outcomes for decades.
At the same time, proposed amendments to the Production Sharing Contracts (PSCs)– currently before Parliament, define the fiscal, legal, and governance framework under which oil production will occur. These amendments raise important questions around public returns, fiscal sovereignty, transparency, community benefits, and environmental safeguards.
In line with the Petroleum Act, 2019, both the FDP and PSC amendments are subject to parliamentary ratification, underscoring the importance of public participation, transparency, and informed scrutiny. It is within this context that AWEIK convened this webinar to support evidence-based dialogue and strengthen public interest considerations ahead of critical policy decisions.
The webinar aimed to create an informed, inclusive, and evidence-based platform to interrogate the South Lokichar FDP and proposed PSC amendments, with a focus on:
- Governance and fiscal sustainability
- Environmental and social safeguards
- Transparency and accountability in petroleum contracting
- Public participation and parliamentary oversight
The objective was not to pre-empt parliamentary processes, but to equip civil society, policymakers, communities, and the public with the knowledge required to meaningfully engage in Kenya’s transition to oil production.
The discussion opened with reflections on the significance of Kenya’s move from exploration to oil production. Panelists emphasized that decisions made at this stage will determine how risks and benefits are distributed between the state, contractors, and affected communities for decades.
Participants underscored the need for transparency, strong governance safeguards, and alignment with constitutional principles to ensure that oil development advances national development objectives rather than undermining them.
Muturi Kamau from the Kenya Oil and Gas Working Group provided a detailed overview of the South Lokichar Oilfield development, outlining its historical evolution, proposed production phases, and infrastructure requirements. Key concerns raised included:
- Limited stakeholder engagement, particularly with affected communities
- Environmental and social risks linked to large-scale infrastructure development
- Gaps in consultation informed by lessons from the Early Oil Pilot Scheme (EOPS)
Participants emphasized that inadequate community engagement at this stage risks entrenching mistrust and future conflict.
A central focus of the webinar was the fiscal structure of the proposed PSC amendments. Mulwa Kasangya from Institute of Public Finance highlighted concerns that the amendments disproportionately favor contractors over the state and citizens. Key issues discussed included:
- The increase in the cost recovery ceiling to 85%
- Extensive tax exemptions granted to contractors
- Delayed government revenue flows
- Weak alignment with principles of public finance management
Panelists cautioned that while investment incentives are important, overly rigid fiscal terms could significantly undermine Kenya’s long-term public returns from oil production.
Clause 33A of the PSC emerged as a major concern. Panelists warned that fiscal stabilization provisions risk locking in policy and regulatory frameworks in ways that undermine future democratic lawmaking.
Muturi and Mulwa noted that similar clauses in other jurisdictions have constrained governments’ ability to respond to changing economic, environmental, and social conditions. Participants agreed that Kenya must preserve its fiscal sovereignty and regulatory flexibility to protect public interests over time.
Discussions highlighted rising community expectations in Turkana County, often driven by limited public understanding of how oil revenues are generated and distributed. Geoffrey Eregae, Deputy Director for Petroleum Production, acknowledged that insufficient public participation has contributed to misconceptions around immediate benefits.
Panelists emphasized that early, continuous, and meaningful engagement with local communities, particularly local professionals and leaders- is essential to managing expectations and ensuring equitable benefit sharing.
Concerns were raised regarding the transparency and oversight of the National Oil Corporation of Kenya, particularly in relation to profit sharing, tax implications, and marketing control under the PSC amendments.
Participants stressed the importance of publishing the full PSC- not only the amendments to enable informed public scrutiny and parliamentary oversight, as required under the Petroleum Act, 2019.
Across the discussions, several critical themes emerged:
- The need to publish the full PSC to enhance transparency and accountability
- Strengthening parliamentary and public oversight of oil contracts
- Aligning oil development with environmental sustainability and community interests
- Ensuring local employment, local content development, and fair benefit sharing
- Addressing governance risks early to avoid long-term liabilities
- Prepare and submit written comments, memoranda, and recommendations on the FDP and proposed PSC amendments, with clear justifications.
- Provide specific clause-by-clause recommendations, particularly on cost recovery ceilings, tax exemptions, marketing control, local content provisions, and fiscal stabilization clauses.
- Advocate for the publication of the full PSC, not only the amendments, to support meaningful public and parliamentary review.
- Ensure that submissions explicitly address public participation, local employment, environmental safeguards, and community benefit sharing.
- Share and publicize the official email address for submission of written inputs and ensure all participants can access relevant documents.
- Facilitate the collection, consolidation, and formal submission of stakeholder inputs to Parliament and relevant authorities.
- Organize follow-up dialogues with policymakers, government representatives, and where possible, the contractor, to allow for direct engagement and clarification.
- Proactively include representatives from Turkana County, including local professionals and community leaders, in future discussions to center community perspectives.
The webinar underscored that Kenya’s transition to oil production is not merely a technical or commercial process, but a defining governance moment with long-term implications for fiscal sustainability, environmental protection, and social equity.
Participants agreed that transparency, public participation, and strong institutional oversight are essential to ensuring that Kenya’s petroleum resources are managed in the public interest. The discussions marked an important step toward informed civic engagement and laid the groundwork for coordinated, evidence-based submissions to Parliament as the country approaches a historic milestone in its extractives journey.