Kenya is looking to ask oil companies to put up standby letters of credit (L/Cs) to guarantee the firms pay surface and training levies to the government.

The petroleum ministry reckons it has recovered the equivalent of just US$25,000 or 3.3 per cent of the US$7.5 million of surface and training levies due from eight oil exploration companies.

Payments overdue

Just one joint venture comprising Afren and Octant Energy has paid the levies due to the government.

The petroleum ministry also served demand notices on another seven companies in 2018. But the ministry says levies are still due from Camac Energy, Simba Energy, A-Z Petroleum, Adamantine Energy, Imara Energy, Rift Energy and Zarara Oil and Gas.

L/C remedy

Petroleum principal secretary Andrew Kamau has now told a parliamentary committee that they are seeking to remedy the issue of non-payment using L/Cs.

"In the future, we should ensure they provide an L/C but for now it is an open account," Kamau told the committee. He added that if a company puts up a standby L/C and defaults on payment then the ministry will cash in the L/C.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.