The state department for petroleum irregularly spent millions of shillings set aside to train Kenyans on petroleum operations.
The performance audit for the period ending October 2021 by Auditor General Nancy Gathungu has showed.
It said the department had Sh944 million set aside for training but the money was spent on other items.
The report said only 14 of the 61 courses offered for training were appropriate.
“Revenue from Training Fund was spent on non-training items leading to a decline on expenditure on training over the years,” Gathungu said.
Section 11 (4) of the Petroleum Act 2012 states that all monies from the Training Fund shall be used only for purposes for which the kitty was created; training Kenyans on petroleum operations.
In the report, Gathungu said the state department for petroleum used part of the monies from fund to procure specialised equipment and offer grants to the National Oil Corporation of Kenya.
“The insufficient and irregular utilisation of the Training Fund was attributed to the fact that the department had not developed regulations on utilisation of the kitty,” she said.
The Petroleum (Exploration and Production) Act 2012 established a Training Fund that requires contractors to pay an agreed amount per contract year, being payment for training fees, to the fund.
The report said an analytical review of documents provided for audit revealed arrears in training fees amounted to $6.7 million (about Sh700 million).
The production sharing contract provides for termination of a contact if the contractor fails to make any payment to the government for a period exceeding one month.
“However, despite some companies having arrears dating back to four years, the state department for petroleum had not terminated any of the contracts for non-payment of training fees,” Gathungu said.
She added that the department did not have a defined procedure for collection of training fees.
“Non-payment of training fees denies the government revenue, which can be used to build local capacity in the oil and gas sector,” Gathungu said.
The report said receipts into the Training Fund amounted to Sh2.6 billion while expenditure was Sh1.48 billion, giving a utilisation rate of 56 per cent.
Petroleum exploration in Kenya dates back to the 1950s. However, interest in the sector increased significantly after the discovery of commercially viable quantities of oil in 2012.
The audit assessed the measures put in place by the department to manage the implementation of local employment and training provisions as outlined in the Production Sharing Contracts.
It sought to establish the extent which Kenyans are benefitting from local employment and the Training Fund.
Clause 13(1) of the Production Sharing Contract require the contractors to give preference to employment and training of Kenyan nationals.
“It is the responsibility of the state department for petroleum to supervise the implementation of Clause 13(1) to ensure international oil companies only hire expatriates for skills not locally available,” the report said.
It however said a document review revealed that some jobs taken up by expatriates were for skills that were locally available.
“For example, Tullow Oil (Kenya) B.V requested for work permits for expatriates in areas such as supply chain management, security advisor and environmental health and safety. These positions could have been filled with locally available skills,” the report stated.
The department was also cited for insufficient collection of training fees from international oil companies.
(Edited by Bilha Makokha)