An Evaluation of the legal and institutional framework governing insurance of upstream petroleum operations: a case study of Ghana

Abstract

This study explores the legal and institutional framework pertaining to upstream oil and gas insurance and the strides made by the Government in realization of this objective. The research will review key drivers of placement of oil and gas insurance with local companies and the legislative framework in place. This research will study the factors that inhibit successful implementation of oil and gas insurance provisions in Kenya. This study examines other jurisdictions which have succeeded in this space with an emphasis on Ghana. I have reviewed the mechanisms put in place to measure and monitor implementation by identifying Ghana’s success story in domestication of upstream oil and gas insurance. In particular, the research analyses the legal and institutional framework that promotes placement of oil and gas insurance in Ghana for a possible legal transplant to Kenya. Having recently discovered commercially viable quantities of oil and gas, Kenya is still at the nascent stages of oil and gas operations. With a diminishing economy, soaring cases of corruption and high unemployment rates, evaluation of laws that foster economic prosperity for the welfare of all Kenyans are key to achieving the government’s big four agenda. Therefore, it is paramount to review the current law and improvise ways of building Kenya’s industries and create employment opportunities by capitalizing on available resources which follow suit upon oil and gas discoveries in developing economies. Key among them is insurance services. The risk of capital flight and ‘dutch disease’ are imminent in an emerging oil and gas producer such as a Kenya. The key findings of my research was that there is a lacuna in the regulatory framework governing oil and gas insurance in Kenya. The provisions of the Petroleum Act and in particular Section 50 (3) requiring IOC to submit a local content plan on insurance inter alia, cannot be enforced due to lack of enactment of Petroleum Regulations which are supposed to operationalize the Petroleum Act. Further, Insurance Act which regulates insurance business in Kenya is silent on regulation of upstream oil and gas insurance. This study was conducted through analysis of primary and secondary data such as journals, statutes, books, reports and audits. This study hopes to inform the Government of Kenya and policy makers on how best to implement these insurance provisions for the country to derive the benefits of the oil and gas sector.