New, profitable mining laws coming

BAK · 2012-10-14T01:19:39+00:00

New, profitable mining laws coming By JOINT REPORT THE EAST AFRICAN Posted Saturday, October 13 2012 at 12:14 In Summary Already Kenya, Ugandan and Tanzania have proposed measures that will see their governments earn more from oil, gas and mining. The changes include more royalties, increased taxes and threats to revoke mining licences of companies that do not keep to their exploration schedule. East African states are seeking amendments to their mining laws to increase their share of revenues from one of the regions fastest growing sectors. Already Kenya, Ugandan and Tanzania have proposed measures that will see their governments earn more from oil, gas and mining. The changes, some made in the past two weeks, include more royalties, increased taxes and threats to revoke mining licences of companies that do not keep to their exploration schedule. With the region having already confirmed the availability of hydrocarbons, analysts say governments are now in a position to push for more favourable terms in the oil and gas sector. At the same time, the governments are expected to maintain favourable terms for companies involved in exploration for other minerals whose commercial existence has not been proved. The new trend is to charge different rates for different minerals. The advantage is that you may be more endowed in some areas than in others. In Botswana, they charge 10 per cent royalties on diamonds but three per cent on copper, Ghanaian mining and minerals expert Martin Ayis told The EastAfrican. Kenya said in September that it plans to raise the royalties on gold and diamond from three to five and 10 per cent, respectively, of the minerals gross value. Two weeks ago, the government increased tax on proceeds from the sale of property and shares of oil and gas prospecting companies to 20 per cent, a move which should help it raise Ksh1.5 billion ($17.6 million). Kenya is also threatening to revoke the licences of companies that fall behind their schedule. When exploration contracts are signed, bank guarantees for failure to meet work obligations are issued to the Ministry of Energy. The government has the right to cash the bank guarantees; it can also revoke licences, Kenyas Petroleum Commissioner Martin Heya said last week. Across the border, Tanzania is reviewing the 27 oil and gas production contracts that it has already issued, while at the same time indicating that it will raise the royalty on natural gas from 12.5 per cent to a yet to be determined figure. The country is endowed with gas deposits, which the government is keen on distributing equitably. There are plans to introduce a new gas policy that will guide the development and sharing of the proceeds from the sector. We need a dedicated gas policy to guide operations so as to realise these benefits, because the natural gas resource belongs to the people and must be managed in a way that benefits the entire country, said Nobert Kahyoza, Tanzanias Assistant Commissioner for Natural Gas. The country also plans to introduce signature bonuses a lump sum payment made by the mining company to the government once it signs a contract on gas contracts. Earlier in the year, Tanzania increased the three per cent royalty paid on both gold and uranium to four and five per cent respectively. In Uganda, the government plans to start offering mineral prospecting and production licences on competitive bidding rather than on first-come-first-served basis as it tries to weed out speculators. They [speculators] hold ground and do no work ... so well be doing due diligence to find out whether you have financial capacity, technical capacity, whether you have the experience to carry out the work programme that youve been licensed to do, Kabagambe Kaliisa, Permanent Secretary in the Ministry of Energy and Minerals said. Analysts say the change in strategy by governments in the region, while good for the countries, could potentially prove to be a headache for smaller mining firms. Most of the smaller players depend on acquisitions by bigger and more experienced firms to be able to meet their contractual obligations involving exploration and drilling of oil and gas wells. Failure to meet the obligation can be quite costly. For example, Lion Petroleum Corporation paid a $4 million penalty to get a 12-month extension of contract of 2B acreage in northeastern Kenya. By Peterson Thiongo, Kennedy Senelwa, Lilian Onyango and Rosemary Mirondo

Thread starter BAK
Start date Oct 14, 2012

BAK

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