10 - Local Content Requirements and Treaty Implementation in Kenya’s Petroleum Sector

Summary

Kenya, having recently discovered roughly 560 recoverable million barrels of oil in its Northern region, is now preparing to move into the development phase of the reserves. These discoveries have created significant expectations among the local populace of the sector’s potential to generate wealth, significantly reduce poverty, and spur much-needed economic development, especially in the marginalised areas where the resources have been found. With this comes the urgent need to design robust laws and policies to maximize the potential sustainable development gains and avoid the oft’ touted resource-curse trajectory that other mature oil-rich countries in Africa have unsuccessfully grappled with. The discourse on how to facilitate national ownership and control of petroleum resources has already began stimulating a myriad of legislative efforts towards embedding local content. However, this has resulted in conflicting local content legislation, regulatory and policy proposals, such as the Local Content Bill and the Petroleum (Local Content) Regulations, among others. Intense debate has been sparked regarding the potential incompatibility of the proposed legislations with international trade measures applicable to members of the World Trade Organisation (WTO), including Kenya. This chapter examines concerns of social exclusion, environmental tradeoffs, misalignment with WTO rules, and incoherent application of LCRs that have been raised in the design and implementation of LCRs in Kenya. It discusses economic, environmental, and social considerations that current and proposed local content laws and policies ought to mainstream so as to deliver a robust and effective local content legislative framework.