Under the Constitution of Kenya, all natural resources (including those below the surface) belong to the National Government. In this context, the Government owns the resources in trust for the people of Kenya,
However, the same Constitution gives a significant number of responsibilities to the Government about its duty to the citizenry. As such, the Government must remain accountable to its people regarding all its functions and operations and specifically about management of natural resources for the benefit of the country.
The development of mineral resources sector is being done by ensuring an appropriate balance between the Government’s dealings with prospectors and holders of mineral rights which consider the interest of the state as well as the need to provide incentives to attract investors in the sector.
Background
Kenya’s manufacturing sector is among the four pillars of the Big 4 Agenda under the Third Medium Term Plan (MTP III) of the Kenya Vision 2030 development blueprint. The other Pillars are Universal Health Coverage, Affordable Housing, and Food and Nutrition Security. Among the main manufacturing over the MTP III period are: (i) raising the share of manufacturing sector in GDP from 9.2per cent in 2016 to 15 in 2022 per cent (ii) creation of a 1 million jobs yearly (iii) improve ease of doing business from 80 in 2017 to at least 45 rank by 2022 and (iv) increase the level of Foreign Direct Investment (FDI) to $ 2 billion.
The industrial sector consists of the following 4 subsectors (i) manufacturing (ii) building and construction (iii) electricity and water and (iv) mining and quarrying. For Heavy Industries, the focus is on:
- Exploration, exploitation and production of coal, oil & gas and minerals deposits in Joint Ventures with the Government of Kenya
- Refining and beneficiation – treatment of raw material for oil and gas and minerals to improve physical or chemical properties in preparation for further processing.
Some of the interventions underway under the Manufacturing sector include:
- Strengthening the capacity and local content of domestically manufactured goods
- Increasing the generation and utilization of Research and Development results and to develop niche products for existing and new markets
- Establishment of integrated steel mills
- Development of Small and Medium Enterprises (SMEs) and Industrial and Technology parks.
- Establishment of Special Economic Zones (SEZs) for manufacturing and export of manufactured products
- Clustering of industries to facilitate investor participation and service delivery
- Upgrading of products from SMEs through value addition
- Skills development to boost the Technical Human Resource in the Manufacturing sector.
- Commercialization of research and development results
- Attraction of strategic investors in key sectors like iron and steel industries, agro-processing, machine tools and machinery, motor vehicle assembly and manufacture of spare parts.
Oversight and policy
Ministry of Petroleum & Mining
Directorate: Mines and Geology
Departments
- State Department for Petroleum
- State Department for Mining
Mandate
- Enhance commercialization of discoveries
- Develop the requisite skills and infrastructure for production in the oil, gas and other minerals sector
- Improve access to competitive, reliable and secure supply of petroleum products.
Prevailing Legislation
- Mining Act Chapter 2016 and the Petroleum Act 2019
Key Projects
- Early Oil Pilot Scheme EOPS – Maiden Shipment of First Cargo of Kenyan Crude Oil
- Mineral Rights and Concessions Management
- Geological Mapping and Mineral Exploration
- Minerals for Peace
- Opening of Geological Data Bank
- Mineral Processing and Value Addition
- Mineral Certification and Testing Laboratory
- Establishment and Strengthening of Institutions
- Mineral Verification and Audit
- Capacity Building for the Extractives Sector
- Marketing of Minerals Exploration Blocks
Responsibility for development of oil and gas and mineral resources sector activities in Kenya belongs to the Ministry of Petroleum and Mining. The Ministry has oversight over upstream oil and gas and downstream petroleum and coal and is responsible for framing the required policies to create an enabling environment for the sector’s operation and growth. It also has oversight over mineral licenses and mining operations and collects and analyses geological data for better documentation and understanding of the Kenya’s geological nature.
However, because land is the primary asset for mining, it works with the Ministry of Lands & Physical Planning, with the latter responsible for reserving public land for exploitation of natural resources therein. The Ministry of Petroleum and Mining also works with the Ministry of Environment and Forestry to address environmental concerns around the extractives industry.
Other key players include:
- Mineral Rights Board: advises the Cabinet Secretary on mineral rights agreements, strategic minerals, fees and royalties payable under the Act and other matters. Its membership is drawn from various government ministries, including the National Land Commission and industry professionals.
- National Environmental Management Authority (NEMA): This is the regulator of all environmental matters in Kenya including those affecting mining sector. A NEMA environmental license is a requirement for all mining companies.
- National Land Commission (NLC): It manages all public land on behalf of the national and county governments and makes recommendations on the national land policy.
Kenya has appreciable amounts of mineral resources, some of which are already being exploited by private companies, while others are yet to be prospected and mined. Verified deposits of minerals in Kenya include soda ash, fluorspar, diatomite, carbon dioxide, gold, iron ore, lead, vermiculite, kyanite, manganese, titanium, silica sands, gypsum, limestone and salt.
Others, albeit in smaller quantities, are gemstones and ornamental stones including ruby, tsavorite, sapphire, corundum various types of garnets, tourmaline, aquamarine, zoisite and rhodolite. Deposits of rare earths and petroleum have also recently been discovered. (Forestry, 2017).
However, the 2012 discovery of oil in Turkana County significantly raised the profile of Kenya’s oil and mineral resources sector and repositioned it as a key player in the Government’s efforts to eradicate poverty ((IHRB), 2016).
To support the mining industry, the Government has invested in infrastructure projects to gradually lower operations. Among the projects are paving of new roads, Mombasa Port Efficiency Project, the Standard Gauge Railway (SGR), the National Optic Fiber Project and the LAPSSET (Lamu Port and South Sudan Ethiopia Transport Corridor) Project.
Mining is the extraction of valuable minerals or other geological materials from the earth, usually from an ore body, lode, vein, reef or placer deposit. These deposits form a mineralized commodity that is of economic interest and value to the miner.
Ores recovered by mining include metals, coal, oil shale, gemstones, limestone, chalk, dimension stone, rock salt, potash, gravel and clay. Mining is required to obtain any material that cannot be grown through agricultural processes, or feasibly created artificially in a laboratory or factory. Mining in a wider sense includes extraction of any non-renewable resource such as petroleum, natural gas, or even water.
The mining sector currently contributes less than 1 per cent of Kenya’s Gross Domestic Product (GDP) but has potential capacity to contribute 4 per cent to 10 per cent. This means that much of Kenya’s natural resource wealth is yet to be exploited and there could be significant opportunity for growth. Kenya is still in early exploration stage of its mineral potential.
According to the Economic Survey 2021 prepared by the Kenya National Bureau of Statistics, the quantity and value of mineral production in the country recorded a decline in 2020. This followed reduced demand for minerals in the external market prompted by the COVID-19 pandemic. Total earnings from mineral production declined by 5.8 per cent from Ksh24.1 billion in 2019 to Ksh22.7 billion in 2020.
Oil & Gas
Kenya’s nascent oil and gas industry has become the new frontier that is attracting foreign investors as East Africa becomes the go-to location for oil and gas exploration. The international oil and gas investors are becoming increasingly fixed on East Africa following several discoveries of oil and gas in the region that could see the region become a major oil and gas exporter.
Oil and gas exploration in the country began in 1956 and the breakthrough came in March 2012 with the discovery of – Ngamia 1 Well, in Lokichar Basin in Turkana County.
In the last decade, Kenya like its neighbours Uganda, Tanzania and Somalia has invested heavily on oil and gas exploration, but it was until recently when it discovered commercially viable oil and gas deposits in Turkana County and in Lamu basin in the coastal town of Mombasa.
The country’s new oil discovery has awakened the appetite of international oil and gas investors key in oil and gas exploration in the country.
Though exploration of oil and gas in Kenya began as early as 1950s within the Lamu Basin in the coastal town of Mombasa, it was till 2012 when the Kenyan government and its joint venture partners, Tullow plc, Africa Oil Corp and total discovered the first commercially viable oil deposits in Turkana County.
The oil reserves are estimated to be over 4 billion barrels of crude oil reserves in the Lokichar sub-basin in Turkana, with recovery oil estimated to be 750 million barrels.
Kenya has four petroleum exploration basins namely Lamu Basin, Anza Basin, Mandera Basin and Tertiary Rift Basin.
The discovery was followed by significant gas discoveries in offshore Lamu basin.
To ensure a sustainable oil production, Kenya has organized its petroleum sector into three sections: the upstream, mid-stream and downstream.
The upstream section involves the process of exploration, development and production of crude oil and natural gas.
The mid-stream section revolves around storage, refining and transportation of crude oil into consumable petroleum products whereas in the downstream section, refined products are made available to the consumers through supply and distribution.
Since the discovery, Kenya has embarked on several projects aimed at overseeing sustainable, efficient and reliable production and distribution of oil in the region.
For instance, the country is accelerating and improving oil handling, transportation, storage and distribution facilities in the region.
The country is also mobilizing contractors to extend existing oil product pipelines from Kenya to Uganda and Rwanda.
In 2015, Kenya crude oil pipeline plans faced a setback when the government of Uganda decided to abandon the proposed Uganda-Kenya crude oil export pipeline joint venture that was to run from Lake Albert, through Turkana to a new Lamu Port, and instead pump their oil via Tanzania.
However, Kenya decided to go it alone by developing its crude oil pipeline, the Lokichar-Lamu Crude Oil Pipeline (LLCOP). It is also known as the Kenya Crude Oil Pipeline, running for 892km and originating in the South Lokichar Basin, near the town of Lokichar, in Turkana County, in northwest Kenya, and ending at the new Lamu Port in Lamu County.
It is a sub-component of the broader Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor project. The LLCOP will be jointly developed by the Pipeline Project Management Team (PPMT) in conjunction with the LAPSSET Corridor Development Authority (LCDA).
The country has also embarked on enhancing storage capacity of petroleum products from 989,000 m3 to1,222,000 m3 and kick started the development of 20,000MT bulk LPG import handling facility at Mombasa.
The Ngamia-1 exploration well in Kenya marked the start of a significant programme of drilling activities across the acreage. In 2012, the Ngamia-1 well successfully encountered over 200 metres of net oil pay, the second East Africa onshore tertiary rift basin opened by Tullow.
This has since been followed by further exploration success in the South Lokichar Basin at the Amosing, Twiga, Etuko, Ekales-1, Agete, Ewoi, Ekunyuk, Etom, Erut and Emekuya oil accumulations. In 2019 Kenya sold its first-ever crude export cargo, with ChemChina receiving a 240,000-barrel cargo sold at a US$3.5/b discount to Brent.
Tullow Oil, Africa Oil and Total are developing 600 million barrels of recoverable oil at their Lokichar oilfields in northwest Kenya. Under the Early Oil Pilot Scheme, the partners trucked some 2,000 barrels per day (b/d) of crude from Lokichar to Mombasa for storage at a former refinery to build volumes for export. Chinese and Indian refiners were seen as the main buyers of the crude. The partners expect the Lokichar fields to pump up to 120,000 b/d when fully developed.
Refining and beneficiation of oil & gas and minerals
Refining is the process of purifying an impure metal. It is to be distinguished from other processes such as smelting and calcining that involve a chemical change to the raw material, whereas in refining, the final material is usually identical chemically to the original one, only it is purer.
On the other hand, beneficiation is the treatment of raw material, such as iron ore, to improve physical or chemical properties especially in preparation for smelting.
Kenya had a crude oil refinery at its port city of Mombasa but halted operations in 2013 after plans for a US$1.2 billion upgrade were abandoned on the advice of consultants determined that it was not commercially viable.
A bid to via a 2019 partnership with the Tullow Oil and Africa Oil Corporation to develop a crude oil refinery in Turkana and lay a pipeline from Lokichar to Lamu was also deemed not commercially viable. The proposed refinery was to process 60,000 to 80,000 barrels of oil per day.
Under the LAPPSET Corridor development plan detailed feasibility plans have been done for construction of 120,000 barrels per day refinery near the new Lamu port which will have a facility for export refined petroleum products.
Mineral Resources
The first phase of the Countrywide Airborne Geophysical Survey ended in June 2021 and the Mineral Rights Board is in the process of ending a six-year-long moratorium on exploration licences,
The survey covered Migori, Homa Bay. Kakamega, Busia and Siaya counties and was conducted by the Ministry of Mining in partnership with the Ministries of Interior and Defense.
It is estimated that there are close to 200 firms seeking exploration licences.
Kakamega
Following the survey’s conclusion, Kakamega County Government handed over 14 acres of land to the Ministry of Petroleum and Mining for establishment of a gold refinery.
The refinery will add value to mining activities in Kakamega County and the Lake Region Economic Bloc.
According to the first phase of the Countrywide Airborne Geophysical Survey, high value gold deposits exist in Ushiuru, Bushiangala and Rostaman areas of Kakamega County.
The county has the oldest mining sites dating back to 1930 alongside the counties of West Pokot, Samburu, Narok, Turkana, Nandi, Siaya, Migori, Homabay and Marsabit.
In 2014, President Uhuru Kenyatta issued a Presidential directive to the State Department of Mining to ensure promotion of value addition in the mining sector.
In the Presidential directive, several minerals were targeted including soapstone processing in Kisii County, granite processing in Vihiga and gemstone in Taita Taveta County,” Governor Oparanya noted.
The proposed site of the refinery will have a processing plant to separate gold from the ore, a refinery to purify the gold, an office block and an office centre, an ICT Centre, a Health Centre and a training facility,” he added.
Nyanza
The State Department of Mining is implementing a programme to empower and avoid exploitation by unscrupulous investors eying a slice of the rich natural resource.
Limestone mining for cement production has taken root in Kisumu and its environs.
The sensitization programme seeks to build the capacity of the community on the existing legal framework and ensure that the investors operate within the set regulations.
The aim is to ensure that mining activities are carried out procedurally according to the Cement Minerals Levy Regulations Act 2013, to generate revenue for the government and benefit the local community.
The Mining Department has partnered with the County Government of Kisumu and other stakeholders to conduct public participation sessions in Koru and Muhoroni areas of Kisumu County and other parts of the region where limestone mining is ongoing.
The department has also joined hands with the National Environment Management Authority (NEMA) to ensure a proper environmental impact assessment is carried out before mining is authorised.
At the same time artisanal miners in the region have been urged to employ safety measures while carrying out mining.
Committees have also been created in areas where gold mining takes place to ensure that safety guidelines are observed to curb incidences of loss of lives.
Other than limestone and cement production, minerals like copper and gold in Siaya are also being targeted.
Coast Region
In May 2021, the Kwale-based Australian mining firm Base Titanium signed its first ever mining contract with the local communities in Kwale and Mombasa counties.
The Community Development Agreements (CDAs), a requirement under the Mining Act, commits Base Titanium to support local community development programmes.
Local communities can now get funding from the mining firm for development projects tailored to their needs. It followed consultations with the communities’ leaders to ensure their sustainable development and growth.
The Mining Act, among other things, introduces the sharing of mining royalties between the National and County governments and local communities, with the National Government taking 70 percent, County 20 percent and local communities 10 percent.
The agreement will see about KSh250 million shared annually between the CDAs in the Kwale and Mombasa counties.
The Government sees such CDAs as a progressive approach to addressing the endemic challenges in communities living in areas where mining is undertaken.
In the historic agreement the firm simply known as ‘Base’ which carries out large scale mining activities in Msambweni sub county of Kwale is obligated to remit one percent of their total earnings accrued from minerals exploitation.
The deal will see the mining company cede one per cent of gross sales revenue to go to development projects in Msambweni which is the main mining area, Lunga where persons affected by the mining activities were resettled and Mombasa, which is at the end of the mineral transport corridor and hosts the storage facility before export.
The Government believes that the Mining Act, if properly implemented, will attract investment and ensure host communities reap more economic benefit from the mining sector.
Such community engagements are vital for entrenching a culture of dialogue to avert unnecessary conflicts generally associated with mining ventures.
Summary of some key achievements
Minerals and Mining Policy developed
Mining Act No. 12 of 2016 operationalised
13 Mining Regulations finalised
First Phase of Countrywide Airborne Geophysical Survey concluded
Development of Kenya Mining Strategy 2030 ongoing
Online Transactional Mining Cadastre Portal (OTMCP) operational.
Continuous exploration activities ongoing
Mineral Certification Laboratory being modernized
National Geological Data Centre soon to be commissioned
Gemstone Centre in Voi soon to be commissioned
Initiated process of setting up a granite cutting facility in Vihiga County
Land use/cover maps produced
Animal population trends produced including mapping of wildlife corridors