Kenya's oil production on track after agreement on income distribution

A dispute erupted after President Uhuru Kenyatta reduced the Turkana County government's share to 15 percent.

Kenya will start exporting small-scale oil from its fields in the northern tip of Turkana County in June after an agreement on how to share the revenues, thus avoiding delays, the presidency said on Saturday. Tullow Oil and its partner Africa Oil discovered commercial reserves in the Lokichar basin in 2012.

Since then, Total has taken a 25 percent stake. A dispute erupted after President Uhuru Kenyatta reduced the Turkana County government's share to 15 percent and the local community's share to 5 percent, leaving the rest to the national government.

He then met with representatives of Turkana at the State House in Nairobi to conclude a new agreement, which will raise the county government's share to 20 percent and return the national government to 75 percent. "Now we have an understanding that can put Kenya on the map of oil-exporting countries," Kenyatta said in a statement.

The agreement will allow a long-delayed law on oil exploration and production to wash the parliament, allowing the start of exports. "We will intensify our exploration efforts not only in Turkana but in the rest of the country now that we have a legal instrument that can help guide the management of oil and gas in our republic," the president said.

The agreement was reached after the national government agreed to remove a cap on income owed to the county government and the local community, a senior government official said. Officials in Nairobi had proposed limiting the annual allocation of oil exports to Turkana, arguing that the local economy could not absorb a sudden influx of too much cash.

"The clincher was the removal of the cap," said Andrew Kamau, the principal secretary in the ministry of petroleum and mining.

(With inputs from Reuters)