Petroleum Act

This Act may be cited as the Petroleum Act.

Defines 'Section' to include the phrase "any natural gas dissolved in crude oil under reservoir conditions; and".

The Act applies to all upstream, midstream and downstream petroleum operations being carried out in Kenya.

If this Act conflicts with any other Act on upstream, midstream or downstream petroleum operations, this Act takes precedence; and provisions in other Acts that allow someone to grant or deny permission for work do not give that person or body power over upstream petroleum operations.

The Cabinet Secretary must develop and publish a national petroleum policy, ensure stakeholder participation, review it at least once every five years, and publish an annual implementation report within three months after each financial year.

The Cabinet Secretary must develop, publish and review a national petroleum strategic plan, and must prescribe Regulations about the content and timelines for preparing that plan.

The Cabinet Secretary must prepare and publish an annual report on implementation of the national petroleum strategic plan within three months after each financial year ends.

No person may carry out petroleum operations in Kenya without prior approval from the Cabinet Secretary or Authority.

The national government must promote petroleum investments by creating a conducive investment environment, ensuring operations benefit the people of Kenya, and facilitating access to land for exploration.

Section 10 assigns functions to the Cabinet Secretary including reviewing licence/permit applications, negotiating and approving petroleum agreements, overseeing upstream operations, approving exploration and budgets on recommendation, ordering cessation of unsafe operations, and providing reasons in writing when rejecting Authority recommendations within fourteen days.

The Cabinet Secretary may direct a contractor (when the contractor has failed to perform an act required by a petroleum agreement) and may cause required works to be done; costs incurred become a civil debt due to the National Government from the contractor.

Establishes the National Upstream Petroleum Advisory Committee, lists its members, makes the Director-General of the Authority the committee secretary, allows the Committee to co-opt up to four additional members.

The Advisory Committee must advise the Cabinet Secretary on upstream petroleum operations; advise during negotiation and entry into petroleum agreements; on suspension/revocation/termination or recall of securities upon the Authority's recommendation; assist to develop negotiation criteria; and perform other functions under the Act. If the Cabinet Secretary rejects any advice, the reasons must be communicated in writing to the Advisory Committee within fourteen days.

Petroleum in its natural condition found in strata within Kenya and its continental shelf is vested in the National Government in trust for the people of Kenya.

The Cabinet Secretary may, after consulting the Advisory Committee and by notice in the Gazette, divide Kenya and its continental shelf into numbered areas defined by co-ordinates called "blocks"; the Cabinet may reserve any number of blocks for exploration by the national government.

Applicants must apply to the Cabinet Secretary for a petroleum agreement or to the Authority for a non-exclusive exploration permit; applications must include requisite information specified in Regulations; persons operating upstream petroleum without such authorization commit an offence punishable by a fine up to twenty million shillings or imprisonment up to ten years.

Requires the national government to enter petroleum agreements fairly and only with contractors who have necessary financial, technical and professional capacity; requires contractors to maintain capacity during the contract and ensure subcontractors/agents have required skills.

The Cabinet Secretary must negotiate, award and execute petroleum agreements on behalf of the national government and must publish notices and inform bidders when negotiating directly or concluding negotiations; a petroleum agreement may be executed after bidding rounds.

Contractors under a petroleum agreement must perform specified minimum work and expenditures, submit plans, keep records and reports, follow professional and environmental standards, give preference to local inputs, indemnify the Government for third-party claims, provide requested information, and follow best industry practice; the contractor also has an exclusive right to explore and exploit petroleum in the contract area subject to the Act and agreement.

Parties who formed a partnership to jointly apply for a petroleum agreement must submit a joint operating agreement to the Cabinet Secretary when they execute the petroleum agreement and no later than its effective date.

Contractors must appoint an operator for the petroleum agreement; a contractor may substitute one operator for another as provided in the agreement and this Act.

Applicants for non-exclusive exploration must apply to the Authority in the prescribed form with the prescribed fee; the Authority issues permits and may issue multiple permits in the same area; permit holders must provide copies and samples of collected data; conducting a survey without a permit is an offence punishable by a fine of not less than Kenya shillings ten million or imprisonment of not less than two years or both.

The Authority may grant a non-exclusive exploration permit and set conditions, and must inform affected County Governments about the nature and status of non-exclusive exploration activities.

Contractors must apply to the Authority for operational permits (including for each well); the Authority must provide opportunities for local community participation and give affected persons at least twenty-one working days' notice; contravening this section is an offence with specified penalties.

Contractor must provide a security before the initial or any additional exploration period; if the contractor defaults on minimum work and expenditure obligations, the Cabinet Secretary may suspend or terminate the petroleum agreement and recall the security.

Contractors must not transfer an interest in a petroleum agreement without the written permission of the Cabinet Secretary.

Contractors who discover petroleum must notify the Cabinet Secretary within forty eight hours; contractors must not notify the public before reporting or without approval; such premature public notification is an offence punishable by a fine of not less than twenty million shillings. Contractors discovering other natural resources during petroleum activities must inform the Cabinet Secretary.

Contractors must notify the Authority thirty days before abandoning a well and must obtain the Authority's written permission before closing or plugging a well; contravening these rules is an offence punishable by a fine of not less than twenty million shillings or at least five years' imprisonment or both.

A contractor must surrender all or part of a block in accordance with the Act and the petroleum agreement; partial surrenders must be contiguous and require submission of geological and geophysical data to the Cabinet Secretary and the Authority; surrender does not affect prior liabilities and contractors must meet agreement obligations including decommissioning costs.

Contractors must develop established commercial fields within the time prescribed in the Act and petroleum agreement, must submit a field development plan to the Authority for review in accordance with the petroleum agreement, and the Authority must advise the Cabinet Secretary before approving the plan.

The Cabinet Secretary must submit a production sharing contract and its approved field development plan to Parliament within thirty days for ratification; Parliament must ratify or refuse (and undertake public participation); if Parliament refuses it must state reasons and the Cabinet Secretary must reconsider and resubmit.

Requires a report on the petroleum reservoir.

Contractors must inform the Authority of any significant deviations or alterations to an approved or submitted field development plan and significant alterations of facilities or their use; the Authority may approve such variations or require a new or amended plan; contravention is an offence punishable by a fine of not less than ten million shillings or imprisonment for two years or both.

Refers to development or utilization of associated natural gas by the national government where the contractor does not intend to develop or utilize the associated natural gas.

Removal of petroleum and samples is restricted: it is allowed only with the written consent of the Authority for sampling or analysis, in the case of a contractor in accordance with the petroleum agreement, or as otherwise permitted by the Act; contravention is an offence.

Contractors must inform the Cabinet Secretary within seven days of a discovery that extends beyond their authorized area; the Authority may require development under a unitization agreement and may direct preparation of a joint plan which contractors must submit within eighteen months, or bear costs if they fail to do so.

Owners of infrastructure used for upstream and midstream petroleum operations must provide third-party access under reasonable conditions unless significant technical challenges prevent such use; third parties must bear expansion costs; owners must submit third-party use agreements to the Authority for approval.

Contractors carrying out upstream petroleum activities under a petroleum agreement are prohibited from owning or controlling downstream petroleum operations, but where the upstream contractor is a subsidiary, the parent company or its other subsidiary may operate midstream or downstream businesses.

A contractor must submit a petroleum field decommissioning plan to the Authority before a production permit is issued, and the plan must include specified proposals and information; the Authority may require further information or an amended plan, and the contractor may update the plan as directed.

Requires the Authority to charge contractors quarterly deposits into a decommissioning fund and places obligations on contractors and a management committee for the fund.

The contractor must notify the Authority of the date and time when use of a facility will permanently end before the production permit expires; decommissioning is scheduled after a producing field reaches its economic limit and must be carried out as provided in the Act, the petroleum agreement and the decommissioning plan.

The Authority may issue directions on time limits for disposing decommissioned facilities; all decommissioned facilities revert to the National Government; contractors, owners and other users must comply with the Authority's directions; the Authority may take measures if directions are not carried out and associated costs or risks shall be borne by the contractor or that user.

Contractors must remove property they brought into the production-permit area or make satisfactory arrangements with the Authority; apply for a plug and abandonment permit for wells; and take actions to conserve and protect natural resources and the environment. Failure to comply within the notice period is an offence punishable by a fine of not less than ten million shillings or imprisonment up to two years or both.

Persons required to implement disposal directions and contractors who abandon facilities are liable for damages or loss from the disposal; multiple liable parties are jointly and severally liable; the contractor and National Government may agree that the National Government assumes future maintenance, responsibility and liability for agreed compensation.

Owners or masters of ships carrying petroleum must notify port authorities on entering a port and comply with petroleum transport laws; failure to notify attracts a minimum fine or imprisonment; the government or relevant agency must restore the environment as reasonably practicable and may recover costs from the owner or master.

Regulations may define the kinds of petroleum to which they apply and divide petroleum into classes or categories with different provisions for those classes or categories.

Every licensee must furnish to the licensing authority such information as the licensing authority may, in writing, require, at the times and in the form and manner specified.

A licensee who makes a false statement (or one he has reason to believe is untrue) to the Cabinet Secretary or to the Authority (including committee, agent or officer acting for the Authority), as required under the Act, commits an offence and on conviction is liable to a fine not exceeding ten million shillings or imprisonment for a term not exceeding five years or both.

Disclosure of information to the Cabinet Secretary for the time being responsible for petroleum.

A licensing authority must not give undue preference to, or create undue disadvantage for, any particular person when performing its functions or exercising its powers under the Act.

The Director of Public Prosecutions must, on the request of the Commission, appoint an officer of the Commission or an advocate of the High Court to act as a public prosecutor to prosecute offences under the Act.

The Cabinet Secretary must establish the Consolidated Petroleum Fund for a strategic petroleum reserve; the fund must be managed in accordance with the Public Finance Management Act; and the Cabinet Secretary may prescribe regulations for the Fund.

People may apply for licences to the licensing authority; the licensing authority may grant or reject applications and must give written reasons for any refusal within seven days.

Certain petroleum activities require licences or permits and contraventions attract specified fines and/or imprisonment.

When reviewing an application, consider the impact of the undertaking on the social, cultural or recreational life of the community.

Sets matters that may be included in a licence or permit (tariffs, duration, capacity, market segments and other related matters) and requires the licensee to comply with applicable environmental, health and safety laws; states the licensee is subject to liability under tort and contract laws; requires necessary licence fees be paid on time; and provides that a licence or permit may not be altered except with the consent of the licensee.

Applicants must apply to renew licences at least thirty days before expiry and include the prescribed fee; the licensing authority must renew if satisfied the applicant still meets requirements; penalties apply for conducting petroleum business at multiple premises without separate licences.

Allows a person to apply to amend a licence, permit or certificate; sets application requirements, licensing authority powers to amend, notification duties on rejection, that amended instruments keep their expiry date, and an appeal right to the Tribunal within thirty days.

An application for a licence must be accompanied by an environmental liability policy prescribed by the Authority.

Licensees or permit holders must display the licence or permit (or a certified copy) at the premises; failure is an offence punishable by a fine not exceeding one million shillings.

The licensing authority may give a licensee fourteen days' notice to show cause for revocation, and must determine the matter within thirty days of the notice's expiry.

Licensees or permit holders may apply for a replacement licence, permit or certificate; the licensing authority must issue a duplicate on payment of the prescribed fee.

Licensees may not transfer or divest rights, powers or obligations under a licence or permit without the consent of the licensing authority; the licensing authority must check transferee competence and the transferee must undertake in writing to comply with licence conditions. The licensing authority should not withhold consent unless public interest is likely to be prejudiced.

Any person may inspect the register of licences and permits during official working hours on payment of the prescribed fee, subject to subsection (3).

Appeal against action of a licensing authority refusing to grant or renew a licence, permit or certificate or revoking a licence, permit or certificate.

Before starting construction of specified petroleum facilities, a person who intends to construct must apply in writing to the licensing authority for a permit.

Section 87 lists matters the licensing authority must consider when granting permits, sets permit conditions (including duration, authorised persons, area, and use-conditions), prohibits use of permitted works before prescribed conditions are satisfied (subject to a licensing-authority notice), allows the licensing authority to specify limited use by notice, and deems a licensee whose permit is cancelled before completion to have satisfied conditions for partially executed works.

The owner of the petroleum logistics facility must inform the licensing authority in writing about emergency construction works and provide detailed drawings and the route, within sixty days of commencement; emergency works for pipeline construction may be executed without authorization by the licensing authority.

The licensing authority may suspend or revoke a construction permit if its terms or conditions are not complied with; before doing so it must notify the permit holder at least twenty-one days beforehand specifying reasons and must take precautions to ensure fairness; it may reinstate a permit if the reasons no longer exist.

If construction has not begun within twelve months (or any extended period the licensing authority allows), the permit ceases to have effect.

The licensing authority must decommission works and charge the cost to the person if the owner/occupier fails to remove illegal works; persons who construct specified petroleum facilities without a permit are liable on conviction to a fine of not less than one million shillings.

Persons offering for sale, transporting or storing petroleum for use in Kenya must ensure the petroleum meets the relevant Kenya Standard or, if none exists, approved international standards; no person shall divert goods destined for other markets to sell in Kenya. Non-conforming or adulterated petroleum is an offence punishable by at least a KSh 5,000,000 fine or at least two years' imprisonment, or both.

A person licensed to import petroleum must maintain minimum operational stocks of petroleum as prescribed by the Cabinet Secretary on the Authority's recommendation.

Licensed operators of common user facilities must provide non-discriminatory open access to any licensee or person for use of the facility on payment of fair and reasonable charges prescribed in regulations; licensees must promptly evacuate petroleum products held in common user logistic facilities; the Authority may compel evacuation and may order disposal and impose penalties if a licensee wilfully delays or fails to comply.

People licensed to operate a common user facility must use a form of contract approved by the Authority.

The Cabinet Secretary may provide (in whole or in part) financing, procurement, storage, maintenance and management of strategic petroleum stocks.

Persons engaged in petroleum business must comply with environmental, health and safety laws; operators or those transporting or selling petroleum must clean up pollution after incidents and bear the cost; those storing, transporting or selling petroleum must have an oil clean-up plan; transporters must ensure safe transport; the licensing authority may require compliance evidence and may cause cleanup work to be done at the operator's expense if operators fail.

Every County Government must designate parking areas exclusively for petroleum tankers; persons in charge of tankers who park outside designated areas commit an offence punishable by a fine not exceeding one hundred thousand shillings or six months' imprisonment or both.

Section 99 lists various offences related to petroleum operations (ownership, operation, possession, construction, vandalism, pricing, licensing and handling) and sets fines and/or imprisonment depending on which paragraph the offence falls under.

Requires reporting of all geological, geochemical, geophysical surveys, drilling, completion and production data and any other information in accordance with the petroleum agreement and regulations under this Act.

Title: disclosure of information addressed to the Cabinet Secretary responsible for petroleum.

Every contractor must provide to the Cabinet Secretary and the Authority, at the times and in the form and manner required, any information the Cabinet Secretary or the Authority requires in writing.

A person must not refuse to provide information requested under section 47 or make false statements to the Cabinet Secretary or the Authority; committing such acts is an offence punishable by at least KSh 20,000,000 or at least five years imprisonment or both.

Persons may not claim they are excused from providing information or answering questions required under this section on the ground that the information may be incriminating or expose them to liability; the person to whom data is furnished may make copies or extracts of that data.

Contractors must prepare and submit long term and annual local content plans before engaging in petroleum operations; the Cabinet Secretary may make regulations on local content.

The Authority must supervise, co-ordinate and manage development of local content and carry out related functions including preparing guidelines, recommending regulations, setting minimum requirements, public education, monitoring, audit and enforcement.

Institutions that want to provide human capital development and technical capacity in upstream petroleum must be accredited; contractors must pay training contributions into a Training Fund; the training contribution amount is specified in the petroleum agreement.

Contractor must comply with financial and fiscal obligations under the petroleum agreement and pay all taxes, fees and levies to the National Government; taxes, profit petroleum and royalties are to be collected under relevant tax laws; failure to pay when due triggers penalties prescribed in the agreement.

The holder of a petroleum agreement must pay annual fees as prescribed, payable on grant and then each anniversary until termination.

The contractor must pay to the National Government a signature bonus, as prescribed in the petroleum agreement, before the award of the agreement.

Payments due to the National Government under this Act must be made in an internationally acceptable and freely convertible currency.

Profit from upstream petroleum operations must be shared between the contractor and the National Government; the national government's pre-tax share must be deposited into a dedicated petroleum fund and managed under the Public Finance Management Act and other law.

Allocates percentages of the national government’s share from upstream petroleum operations: county governments receive 20% of the national government's share; local communities receive 5% payable to a trust fund; county governments must establish the board of trustees and manage funds prudently; Parliament must review the percentages within ten years.

A contractor must carry out upstream petroleum operations in the contract area in accordance with applicable environment, health, safety and maritime laws and best petroleum industry practices, and must take specified measures to protect persons, the environment and reservoirs.

Contractors must manage waste from upstream petroleum operations in line with applicable environmental, health, safety and maritime laws and industry best practice; they may hire others but remain responsible; contracted persons must be registered and licensed; managing such waste without a license or in breach of license terms is an offence with fines and/or imprisonment.

Contractors must (a) keep all petroleum-agreement area structures, facilities, equipment and other property used in their operations in good repair; (b) remove property in the area that is not being used or intended for use in those operations; and (c) take reasonable steps to warn nearby persons of such property and possible hazards. Subsection (2) exempts property not brought into the area by or with the authority of the contractor. Contravention of subsection (1) is an offence attracting a fine of not less than one million shillings or imprisonment for not less than six months or both.

Contractors must not vent or flare natural gas except with prior authorization; where authorized they must follow consent terms, inform and report to the Authority, and applicants must include alternatives and details; emergencies are exempt; breaches carry large fines or imprisonment.

Persons engaged under a petroleum agreement or permit must notify the Authority in writing, within forty eight hours and in the prescribed form and manner, of any accident or incident causing death, injury, explosion, oil spill, fire or environmental or property harm occurring in Kenya or its EEZ or Outer Continental Shelf.

A person must not use or employ any mode, material or apparatus in upstream petroleum activities unless it complies with Kenya Bureau of Standards specifications or, if none exist, an international standard approved by the Kenya Bureau of Standards.

Upstream petroleum operations must be conducted to enable a high level of safety to be maintained and further developed.

The contractor must inform workers of safety precautions and obtain insurance to cover related eventualities.

Contractors and other participants in upstream petroleum operations must at all times maintain effective emergency preparedness measures to deal with incidents that may cause loss of life, injury, pollution or property damage, and the contractor must ensure measures include restoring the environment as far as possible to its original condition.

The contractor must maintain emergency preparedness measures, contingency plans, make facilities available for drills, identify and evaluate hazards and risks in upstream petroleum operations, prevent exposure where practicable, and involve relevant authorities and communities.

Creates a disaster preparedness, prevention and management unit in the Ministry; assigns duties to that unit and to the Cabinet Secretary for coordination, collaboration, risk assessment, mitigation and local public awareness related to upstream petroleum operations.

Section 70 creates safety zones around upstream petroleum facilities; the Cabinet Secretary determines their extent (in consultation with the Authority and, if the zone crosses an international border, Parliament), may establish or extend them in accidents or emergencies on the Authority's advice, and a person must not carry out unauthorized activity in those zones.

If an accident or emergency occurs the contractor or other person responsible must suspend upstream petroleum operations as necessary; in special circumstances the Cabinet Secretary may order suspension or impose conditions; the contractor must ensure workers have necessary skills and qualifications at all times.

The contractor is liable for pollution damage related to its upstream petroleum operations in Kenya or its territorial waters, regardless of fault.

Contractors or licensees seeking to enter land for petroleum operations, exploratory activities, or surveys must seek the prior consent of the landowner, and the Cabinet Secretary must prescribe the forms and procedures for that consent; the consent must not be unreasonably withheld.

The National Land Commission may in writing authorize a person to enter land specified in section 108 to inspect it and take necessary actions; if any damage results from such entry the applicant must pay full just compensation under relevant written laws and regulations.

Contractors or licensees who give notice must pay compensation to the legal representative when the owner is incapacitated; occupiers or other interested persons are entitled to compensation if they claim within three months.

People who object to proposals to develop petroleum infrastructure on their land must raise their objections under the relevant written laws; where rights of way or way leaves are being acquired, the person must likewise raise the objection under the relevant written laws.

If there is a dispute about who is entitled to compensation under this Act, entitlement is to be determined in accordance with the provisions of the relevant written laws.

Contractors or persons authorised by them may enter land to operate, inspect, repair or remove petroleum infrastructure; if infrastructure is removed the contractor or licensee must restore the land forthwith and costs may be recovered from them.

Contractors or licensees must compensate owners or occupiers (and their agents, workmen or servants) for damage, loss or loss of use to land that arises from exercising powers under this Act, irregularities or wrongful proceedings in execution, damage to petroleum infrastructure, or defects in such infrastructure.

Contractors or licensees may install petroleum infrastructure across public ways for production and transportation of petroleum, subject to notice, supervision, county rules, reinstatement and payment obligations; county governments may execute and recover costs if contractors fail.

Contractors or licensees must pay fair compensation on demand for disturbance or damage to private land caused by petroleum operations; owners or occupiers may sue within six months if unpaid or dissatisfied with the offer.

Disputes from upstream petroleum operations between parties to a petroleum agreement must first be resolved through alternative dispute resolution per the petroleum agreement; other upstream disputes go to the Authority first; dissatisfied persons may appeal Authority decisions to the Tribunal; the Tribunal has original civil jurisdiction in bidding-round disputes and certain midstream/downstream disputes and appellate jurisdiction over certain Authority and licensing authority decisions and may refer matters back for reconsideration.

A contractor under a petroleum agreement must keep the national government indemnified against all actions, claims and demands arising from the contractor's exercise of rights under the petroleum agreement.

The Cabinet Secretary must develop a framework for reporting, transparency and accountability in the upstream petroleum sector and include publication of specified petroleum data and payments.

Provides for the forfeiture of any vehicle, aircraft, vessel or equipment used in the commission of the offence.

Section 121 lists acts related to upstream petroleum (illegal dealing in designated land; vandalism; theft and related dishonest handling of equipment; destruction; malicious misinformation) as offences; vessels used to convey vandalised equipment are forfeited to the state; civil recovery may be instituted to recoup losses.

Employers or principals are liable for offences committed by their employees or agents under this Act unless they prove the offence occurred contrary to their express or standing directions.

Penalties under this Act are in addition to other liabilities such as payment of compensation or revocation of a petroleum agreement or permit.

If someone defaults or contravenes a provision of the Act for which no penalty is stated, that person, on conviction, must pay a fine of not less than Kenya shillings five million.

Communities are entitled to be informed through an appropriate communication strategy prior to any upstream petroleum operations within their county and sub-county.

The Cabinet Secretary may make regulations (on Authority recommendation and subject to sections 11 and 127); the Authority must publish proposed regulations at least thirty days before recommending them; the Authority may formulate or receive proposals; regulations may impose conditions, prohibitions, and prescribe time periods and may be limited or unlimited in duration.

Allows petroleum and water to be recovered from any well or petroleum reservoir, and contemplates the rates or the method of setting those rates for recovery.

Section 128 repeals the Petroleum (Exploration and Production) Act (Cap. 308) subject to savings and transitional provisions, preserves certain prior acts, assigns interim exercise of the Authority's powers to the Energy Regulatory Commission and the Ministry of Petroleum, requires the Cabinet Secretary to operationalize the Authority within one year, and assigns tax collection to the body responsible for taxes and revenues in Kenya.