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Kenyan parliamentarians ask for KenGen drilling contract to be reviewed

Kenyan parliamentarians ask for KenGen drilling contract to be reviewed Great Wall Drilling rig on site in Kenya (source: cofek.co.ke)
Alexander Richter 24 Feb 2012

Discussions about a drilling contract negotiated by KenGen with Chinese company Great Wall Drilling continue. Kenyan parliamentarians are now asking for a review of the contract, questioning terms and KenGen as contractual partner.

Kenyan discussions about a memorandum of understanding signed with Chinese drilling company Great Wall Development Company signed in the spring of 2011 continue.

“A Kenyan parliamentary committee has now recommended that the contract for the drilling of 80 new geothermal wells at the Ol Karia Geothermal Field Phase I and II be reviewed.

The Energy, Communications and Information Committee resolved that procurement of the Sh43 billion ($400 million) project that is to be executed by Great Wall Drilling Company must follow the provisions of the Public Procurement and Disposal Act.

Energy PS Patrick Nyoike has been recalled to appear before the committee Wednesday morning over the issue.

Energy minister Kiraitu Murungi and KenGen managing director Eddy Njoroge have already appeared before the team to shed more light on the deal. The committee wants the contract executed through the Geothermal Development Company and not KenGen as indicated in the yet to be signed contract.

The committee chaired by Karachuonyo MP James Rege met behind closed doors Tuesday and concluded that the memorandum of understanding (MoU) signed between the Ministry of Energy and Chinese firm Great Wall Development Company on March 10, last year should be reviewed.

Last year, the committee raised questions as to why the ministry signed the MoU with a foreign private company as opposed to the Chinese government. It would then have invited tenders from qualified companies to bid for the drilling of the wells.

The company is to drill 30 wells in the Ol Karia Phase I and 50 wells in Ol Karia Phase II at an estimated $6 million (Sh540 million) per well. The estimated contract for the Ol Karia Phase I is $150 million while Phase II is $ 250 million. (READ: KenGen embarks on expansion with two steam plants)

Sources say the committee took issue with the terms of the financing of the projects whose funds were to be secured from the Exim Bank of China. They particularly singled out the 20 per cent escalation price to Chinese firm, which they argued would not reduce the cost of electricity in the long run.

In the MoU, the government was seeking the financing through the Government of China in the form of Preferential Export Buyers Credit or Concessional Loan for drilling of wells in support of a 420 megawatts power generation facility in the Ol Karia.”

Source: Business Daily Africa