•Tullow Oil and its partners lifted 240,000 barrels of Kenya crude in two years of the early oil pilot scheme.
•Two firms were allowed to leave before paying training levy and surface fee.
Image: HESBORN ETYANG
Oil explorations firms owe the state about Sh2 billion in training levy and surface fees amid concerns the Petroleum department may not collect the money from the multi-billion dollar companies any soon.
The surface fee is the money paid to the state by a contractor regarding the occupation of land during the period of exploration or exploitation.
A new audit has revealed that some of the monies have been accumulating over the years and have remained unpaid by the oil exploration companies since 2011.
Auditor General Nancy Gathungu flagged the anomaly after the department reported that it carried forward the training levy and surface fees amounting to Sh1,963,072,617 from the financial year 2019-20.
“The amount is due from eight oil companies that operated 15 oil blocks as of June 30, 2021,” the auditor said in a review of the Petroleum Training Levy Fund for the stated year.
Gathungu further raised the red flag that two of the eight contractors with an outstanding Sh99.8 million have since surrendered the block they were operating to the government.
While the remaining six are still active, the auditor is concerned that the two left before settling the outstanding dues.
“The two contractors who relinquished their blocks were discharged before settling the outstanding training levy and service fees,” Gathungu.
The auditor said the management did not provide evidence to demonstrate how and when the amount will be recovered.
The auditor pointed out that in as much as the department had issued demand notices to the defaulting companies, no other avenues had been exploited in collecting the outstanding amounts.
“Consequently, the recoverability of Sh2.3 billion reflected in the statement of financial position as of June 30, 2021, in respect of the accounts receivables remains doubtful,” Gathungu said.
The audit report has no finer details of the firms in default of training levy payments amid a warning that taxpayers could lose money.
“The recoverability of the long outstanding receivables is in doubt and may result in loss of public resources,” the auditor said.
Vanoil, Lion Petroleum, CNOOC, Africa Oil and Tullow Oil are among the firms with active exploration activities in the country today.
At the same time, the department’s bosses have been called out for failing to remit to the National Treasury some Sh51 million surface fees collected during the year under review.
Gathungu said, “The amount collected did not comprise the training fund revenue and ought to have been accounted for under the state department as appropriations in aid, or surrendered to the exchequer.”
“No explanation was provided for the failure to remit the surface fees collected during the year under review to the National Treasury,” the audit report reads in part.
Besides the unremitted training levies, the auditor has raised eyebrows over the spending of Sh264 million managers reported as incurred on training during the year.
She cited payments totaling Sh20.9 million which the fund managers said were made to various staff members on June 30, 2021.
It has since emerged that the monies were to cover allowances and expenses for activities that did not relate to the Fund and were not in line with the fund’s objectives.
The unrelated activities, the auditor reported, included job description analysis, committee workshops, development of internal audit and audit committee charter, induction programme, risk management training, succession management, and organization structure.
“The management did not provide explanations for the anomaly,” Gathungu said in the report tabled in Parliament recently.
Also flagged was Sh23.5 million which was paid out on June 29, 2021 – a day to the end of the financial year, as training expenses.
The auditor said the management did not indicate when the training was undertaken, hence the payment is doubtful.
“Further, the criterion for selection of the persons to be trained was not supported while the same officers were indicated as being trained severally.”
Gathungu further cited Sh36 million which the fund said was paid to the state department but the same cannot be traced.
“The amounts are not reflected in the financial statements of the state department resulting in an unexplained and unreconciled variance of the same amount,” she said.
Further, payments amounting to Sh26.6 million made to the department on June 29, 2021 were not traced to the department’s cashbook.
“Under the circumstances, the accuracy and validity of expenditure amounting to Sh267 million charged to the fund under general expenses in the statement of financial performance could not be confirmed,” the auditor said.