Potential Petroleum Revenues for the Government of Kenya: Implications of the proposed 2015 Model Production Sharing Contract

Overview

As Kenya establishes the terms for the future exploitation of oil deposits, one challenge is how to maximize the benefits to the country as a whole through design of the fiscal regime, and specifically production sharing contracts with oil companies.

This research report looks at the current model contract and asks whether recent changes are consistent with best practice and will contribute to improvements in potential government oil revenue. It looks particularly at the shift from a deemed to a paid income tax and argues that this could have a major impact on project economics and potential government revenue. Decisions on contract models should be made with full awareness of the significant change that it represents to the Kenya’s petroleum fiscal regime.