The government is in the process of working out a formula for taxing proceeds from oil explorers in the country. This has led to suspension of the sell of oil exploration blocks. Energy minister Kiraitu Murungi said during the East Africa Gas and Oil Summit 2012 that no firm will be allowed to sell an exploration block until the government comes up with a model for levying and collecting capital gains tax on such transactions.

The Oil & Gas East Africa Summit brings together  energy ministers from across East Africa and international oil & gas companies for a two-day Summit focusing on the latest developments and opportunities in East Africa’s booming oil and gas industries.

According to the Petroleum exploration and Production Act, transfer of exploration permit is allowed only when approved by minister in charge. The move to halt transfer of exploration rights to third parties is one of the administrative actions that the ministry has taken to kick out cartels from the oil sector. The Energy ministry has also suspended the first-come-first-served basis of issuing exploration licences, saying it opened doors to cartels that had infiltrated the sector lately.

The Business Daily reports that a number of politically-connected individuals are said to have used briefcase firms to acquire exploration permits for speculation purposes when the second phase of oil exploration began in 2002. "Without a capacity to undertake oil search, such firms have been campaigning to earn billions of shillings from foreign investors by offloading their licences especially after Tullow and Africa Oil discovered significant deposits in Turkana early this year", reports the article.

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