Oil and gas exploration is a very expensive venture owing to the sophistication of technology and equipment involved. The uncertainty of striking any oil or gas reserves further raises the risk profile of the business, making it quite unpopular among many investors.
Countries such as Kenya that hold ambitions of exploring their energy reserves have to face these facts or fail to realise their dreams.
Fortunately for Kenya, large deposits of oil have been confirmed and investors and exploration firms are willing to help exploit the reserves.
The exploration firms have, however, raised concern over the 16 per cent Value Added Tax (VAT) charged on their equipment and proposed for zero-rating. This request by the explorers makes sense because the prospecting phase is all about risk and no income is generated to warrant such taxation.
We believe loading tax on exploration equipment limits the country’s competitiveness in terms of attracting investors and firms to do the job. World over, the competition for equipment and services of established exploration firms is tight and we cannot afford to put off investors.
It would be pointless having reserves of oil and gas underground when the country is thirsty for energy. We should create an enabling environment for investors.