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Govts’ ‘quick-tax mindset’ leaves oil investors cautious

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JAMES ANYANZWA

By JAMES ANYANZWA
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African governments’ appetite for quick tax revenues from oil production is putting off potential investors, denying the continent billions of dollars’ worth of projects.

Further, foreign investors are concerned about the uncertainty surrounding the taxation measures that African governments impose on the oil and gas sector.

According to a report — Africa’s Energy Outlook (2020) — prepared by energy sector lobby group Africa Energy Chamber, such hostile environments are likely to dampen the interest of foreign investors, particularly Chinese oil firms looking to invest $15 billion in the sector in the next four years.

It is estimated that on average, China consumes around 42 per cent of crude exports by value across sub-Saharan African, with Angola exporting the largest volumes of crude to China.

So far Chinese firms are behind the development of two pipelines that will enable Niger and Ethiopia to become exporters of crude oil and natural gas respectively. These projects will lay a combined 2,500km of pipeline to provide export routes via Benin (for Niger) and Djibouti (for Ethiopia).

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Africa’s proven oil reserves stand at around 125 billion barrels of oil constituting 7.3 per cent of the global reserves while proven gas reserves stands at 509.6 trillion cubic feet (tcf) accounting for 7.2 per cent of global reserves.

But commencement of commercial production has frequently been delayed by disputes over taxes and disagreements over field development plan.

“Governments must find better ways to reconcile their expectations of short-term tax gains with the need for sustainable and long-term investment in exploration and production. There are tens of billions of dollars’ worth of projects which are being delayed due to uncertain environments,” according to the report.

“Uganda is facing a challenging road to reach first oil by 2022 due to disagreement between project partners,” says report.

“A lack of regional co-operation combined with President Yoweri Museveni’s disputes with international oil companies, particularly over domestic refineries, have also slowed the development of Lake Albert,” it adds.

Uganda discovered crude oil reserves estimated at six billion barrels in the Albertine rift basin near the border with the DR Congo, in 2006.

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In August this year, a proposed $900 million farm out by Britain’s Tullow Oil to France’s oil giant Total and China National Offshore Oil Corporation in the stalled Lake Albert development collapsed following a tax dispute with the Ugandan government.

As a result, Total suspended its technical work on the exploration field and the crude oil pipeline from Uganda to Tanzania.

Oil producers such as Nigeria and Angola are expected to dominate the sub-Saharan Africa energy landscape over the next five years.

Between mid-2014 and 2017 several oil and gas projects were either halted or cancelled due to tough economic conditions, political instability, regulatory uncertainty and inadequate infrastructure to evacuate products to market in African countries.

The downturn also had a severe impact on oil-dependent economies including Nigeria, Angola and the Republic of the Congo, which have experienced stalled economic growth and tightening government revenues.

In Kenya, President Uhuru Kenyatta early this year signed into law the Petroleum Bill, which regulates oil exploration and production and outlines how revenues are to be shared between the government, local communities and companies.

Successful engagement between international oil companies and local communities over revenue sharing will be essential to ensuring that Kenya is able to fully exploit its oil reserve potential. The Constitution of Kenya stipulates that the national government will allocate 20 per cent of its portion of oil revenues to local government, five per cent to the local communities living where oil was found and retain 75 per cent. Parliament is expected to review the percentages within 10 years.

Kenya currently produces around 2,000 bpd from the South Lokichar Basin under its Early Oil Pilot Scheme, led by Tullow Oil. And in August, the country achieved an important landmark in exporting its first consignment of 200,000 barrels of crude oil to the Chinese State-owned petroleum firm ChemChina.

A Final Investment Decision on the Turkana development is expected in the second half of 2020, with commercial production scheduled to begin in 2023, once a $1 billion pipeline to the port of Lamu is completed.

Current forecasts suggest that production will reach around 90,000 bpd by 2025. 

WHY DEALS STALLED

In August, a proposed $900 million farm out by Britain’s Tullow Oil to France’s oil giant Total and China National Offshore Oil Corporation in the stalled Lake Albert development collapsed over a tax dispute with the Uganda government.

In Kenya, successful engagement between oil companies and local communities over revenue sharing will ensure that Kenya is able to fully exploit its oil reserve potential. This should be cemented by the Petroleum Bill.

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World Bank pushes G-20 to extend debt relief to 2021

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World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

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People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

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Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options. 

This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.

The Scope Markets app offers clients over 500 investment opportunities across global financial markets.

The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.

The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).

The platform also offers an enhanced client interface including catering for those who trade at night.

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The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour;  Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).

The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.

Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”

He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.

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