Modernising the energy legislative framework

In Summary

•The Petroleum Act 2019 established the legislative framework guiding the exploration and production of petroleum resources in Kenya.

•The updated piece of legislation will govern the contracting, exploring, development and production of petroleum resources in Kenya, including crude oil and natural gas.

Karen Kandie.
Karen Kandie.

 

The assent into law of the Energy Bill 2017 and the Petroleum Bill 2017 (“The Acts”) by President Uhuru Kenyatta, on 12 March heralds a new chapter for Kenya’s energy sector. Aimed at modernising the legal framework for Kenya’s energy sector, the Acts introduce a raft of amendments to Kenya’s ageing energy legislative framework with the view of keeping abreast with the evolving global energy landscape. Additionally, as Kenya is the final stages of making its first crude oil sales under the Early Oil Pilot Scheme (“EOPS”), it is expected that the Acts will reinvigorate investors to participate in Kenya’s nascent oil industry due to increased certainty with respect to Kenya’s legislative regime.

Under the Energy Act 2017, three key institutions are established that will be tasked with managing and regulating Kenya’s energy resources, being, the Energy and Petroleum Regulatory Authority (“EPRA”), the Rural Electrification and Renewable Energy Corporation (“REREC”) and the Nuclear Power and Energy Agency (“NPEA”).

As provided under the Energy Act 2019, the EPRA will be mandated with the regulation of Kenya’s electricity value chain with a specific focus on generation, transmission, distribution and supply segments of the electricity value chain. Additionally, the EPRA will similarly be tasked with regulating the importation, refinement, exportation, transportation, storage and sale of petroleum and attendant petroleum products, with the exception of crude oil.

The REREC, on the other hand, will be mandated with providing oversight with respect to Kenya’s Rural Electrification Programme as currently spearheaded by Kenya Electricity Transmission Company Limited (“KETRACO”) under the guidance of the Rural Electrification Authority (“REA”). Similarly, REREC will be at the helm of Kenya’s renewable energy agenda, and will therefore be mandated, inter alia, with ensuring that Kenya’s energy mix comprises of a significant portion of renewable energy sources, in line with the Paris accord. It is worthwhile to note that significant progress is being made on this front with approximately 65% of Kenya’s energy mix coming from renewable sources.

Similarly, the NPEA will be tasked with assisting with the successful attainment of Kenya’s nuclear power ambitions. It is expected that NPEA will pioneer the introduction and implementation of sound policies under the nuclear power programme, currently spearheaded by the Kenya Nuclear Energy Board. It is expected that the NPEA will ensure the attainment of installed nuclear power capacity amounting to 4GW by 2030.

Conversely, the Petroleum Act 2019 established the legislative framework guiding the exploration and production of petroleum resources in Kenya. The updated piece of legislation will govern the contracting, exploring, development and production of petroleum resources in Kenya, including crude oil and natural gas.

The assent of key pieces of energy legislation, it is expected that Kenya’s legislative framework will be at par with current industry standards and practices. This will likely bring comfort to investors in Kenya’s energy sector with respect to the certainty and modernity of Kenya’s key energy legislative pieces, which may in-turn invigorate investments in the sector.

Karen Kandie – MD IDB Capital