REPUBLIC v PERMANENT SECRETARY MINISTRY FOR ENERGY [2010] KEHC 4118 (KLR)

REPUBLICOF KENYA.

IN THE HIGH COURT OF KENYA AT KITALE.

MISC. APPLICATION NO. 30 OF 2010.

(FORMERLY ELD TR. NO. 18 OF 2010. )

IN THE MA TTER OF SECTION 84 (1) OF THE CONSTITUTION

AND

IN THE MATTRER OF AN APPLICATION FOR LEAVE TO APPLY FOR ORDERS OF CERTIORARI, MANDAMUS & PROHIBITION.

AND

IN THE MATTER OF THE LAW REFORM AC! CAP 26; CIVIL

PROCEDURE RULES CAP 21 LAWS OF KENYA PLUS THE RULES OF PRACTICE AND PROCEDURE THEREIN.

AND

IN THE MATTEROF THE PETROLEUM (EPLORATION &

PRODUCTION) ACT CAP 208.

AND

IN THE MATTER OF AN EXPLORATION PERMIT GRANTED TO CENTRIC IMAGING INC. DISCLOSURES IN THE DAILY NEWSPAPER ON TUESDAY 11TH DAY OF MAY, 2010

BETWEEN

REPUBLIC…………………………………APPLICANT.

VERSUS

PERMANENT SECRETARY MINISTRYFOR ENERGY..........RESPONDENT.

AND

TURKANA DRILING COMPANY OF KENYA......................... 1sT INT. PARTY.

LUNDIN KENYA LIMITED .......................................................2ND INT. PARTY.

AFRICAOIL COROPORATION ...........................3RD INTERESTED PARTY.,

PLATFORM RESOURCES INC.............................................4TH INT. PARTY.

CENTRIC IMAGING INC...........................................................5TH INT. PARTY.

INTERSTATE PETROLEOUM LIMITED..........................................EX PARTE.

RULING.

1. Pursuant to an order of leave granted to the exparte applicanton 27th July, 2010, the applicant filed a notice of motion on 9thAugust, 2010 in which it seeks for an order of certiorari toremove to this court the exploration permit issued by therespondent in respect of Block 10 BA, BIO-ck 10 BB, Block 11 B,Block 12A and Block 13 T granted to the 1st to 5th interestedparties, for purposes of quashing the permit and its consequential regulations. The applicant is also seeking for an order of Mandamus to compel the respondent to make full disclosures regarding information given to it by the applicant in respect of samples submitted vide letters dated 14th July, 2006, 27th December, 2005 and 30th December, 2005 and also 13th December, 2005.

2. The applicant also sought for an order to compel therespondent to issue an exploration permit in respect of Block10 BA, B lock 10 BB, Block 11 A, Block 11 B, Block 12A andBlock 13T to the applicant. And an order of prohibition torestrain the interested parties from executing whatsoever, theexploration permit issued by the respondent in respect of the'above cited blocks. Finally, the applicant sought for an orderof restitution of the crude oil samples and/or the chemicalanalysis report thereon to the applicant. This application issupported by the grounds stated on the body thereto. Thestatement of facts dated 17th June, 2010 and the verifyingaffidavit sworn by Maosa Kengara Monene sworn on 17thJune, 2010 as well as a further affidavit sworn on 5thNovember 2010.

3. Briefly stated, the applicant's case is that on 13th December,2005 while drilling for water in Turkana and West Pokot areasof Rift Valley Province, they discovered a black substancesmelling like kerosene which they suspected to be crude oil.They submitted the samples for chemical analysis to the Ministry of Energy. This was submitted in three sampleslabeled P. TI and T2 in bottles. On 27th December, 2005 thePermanent Secretary Ministry of Energy acknowledgedreceipt of the letter and confirmed that the samples would besent for chemical analysis and the results would be communicated to the applicant. The letter went on to explainto the applicant the requirements one is required to meet inorder to venture into petroleum exploration and productionin Kenya.

4. This is provided for under the Petroleum (Exploration andProduction) Act Cap 308 Laws of Kenya. There is a letter onrecord from the Kenya Petroleum Refinery Limited dated 30th'December, 2005 which gives the results of the analysis that thesample is more likely to be fuel oil. They requested for alarger sample for conclusive analysis and they promised toprovide the correct size sample bottles if required. On 14thJuly 2006, the PS Ministry of Energy wrote to the applicantand indicated that the samples were sent to Kenya PetroleumRefineries Ltd. and was found to be black and very heavy.

5. There are several correspondence from the exparte applicants to the Minister for Energy, and also a petition to the Presidentof the Republic of Kenya seeking for an exploration permitunder section 5 (2) of the Petroleum Act. According to theletters, the applicant needed the permit so as to obtainsufficient substance as sample, to be submitted for chemicalanalsyis as requested by the letter of 14th July, 2006 by thePermanent Secretary Ministry of Energy. The exparteapplicant also wrote on 16th August, 2006 seeking for the copy of the chemical analysis certificate and report of the samplesanalyzed. They applied to be granted with a non-exclusiveexploration permit covering Blocks 10A and 11.

6. The experte applicant persistently sent letters to therespondent including to the President of the Republic of Kenya insisting that they should be issued with a nonexclusive exploration permit. Finally, on 18th January, 2010the experte applicant issued a notice under the GovernmentProceeding Act, giving its intention to sue the Attorney'General on behalf of the Minister for Energy who is accused ofabuse of secrets contained in the chemical analysis report „which is alleged to have been expropriated to TurkanaDrilling Company Ltd. The Permanent Secretary is alsofaulted for denying the exparte applicant a non exclusiveexploration permit contrary to section 5 (2) of the Act. He isalso alleged to have colluded with Turkana Drilling CompanyLtd. and abused its powers under the Act.

7. This is the genesis of the dispute that has now snow balled into the present application that is seeking for orders of judicial review to set aside the permits issued to the interested parties. According to counsel for the exparte applicant, it was denied information and was not aware that it ought to have sought to enter into a Production Sharing Contract. The respondent failed to provide the applicant with the necessary information and in the absence of information, the exparte applicant kept on seeking for exploration permit. Counsel urged the court to find that, the respondent failed to perform an administrative duty which it should be compelled toperform. The applicant was also not informed of the fate ofthe application. When the exparte applicant submitted thesamples for analysis they were kept in great expectations butthe respondent failed to communicate on their application forexploration.

8. Regarding the time frame within which the application wasfiled, counsel submitted that one of the contracts entered intobetween the respondent and the 1st interested party was inJanuary, 2010 thus an order of certiorari can issue. It was further argued that the analysis carried out on the sampleswas not complete, yet the respondent failed to cooperate withthe exparte applicant and frustrated their efforts to carry outan exploration so as to provide sufficient sample. Counselmade reference to the case of; Republic vs. Attorney General St Another Exparte Waswa St 2 others 120051 1KLR where

Nyamu - J (as he then was) and Ibrahim-- J. held that:

"(1) There an implied duty of jairness attached to alladministrative acts. Where an Act of Parliament confers anadministrative power, there is a presumption that it will beexercised in a manner which is fair. Taking into account anirrelevant consideration is one of the recognized grounds for intervention in Judicial Review. The Registrar had taken intoaccount an irrelevant consideration in the decision makingprocess.

(2)A legitimate expectation arised where a person responsible fortaking a decision has induced in someone who may be affectedby the decision a reasonable expectation that he will receive or retain a benefit or that he will be granted a hearing before thedecision is taken. In such cases the expectation ought not to hesummarily disappointed.

(3)The failure by a public officer or public body to give reasons for a decision may be proper ground for challenging the decision. A duty to give reasons would be implied in the following situations.

(a)Where the decision involves an interest, which is highlyregarded iii law;

(b)Where the nature of the process requires reasons to be give; or

(c)From the circumstances of the individual.

9. This application was opposed by the resyondent and also bythe interested parties. Mr. Ombwayo , learned counSel for therespondent relied on the replying affidavit sworn by Mr.Patrick Nyoike, the Permanent Secretary Ministry of Energy on 18th October, 2010. It was submitted that the order ofcertiorari can not issue because the Minister for Energy has not granted any exploration permit to any of the interestedparties (or any other person). In respect of Block 10 BA, 1OBB,11, 12A and 13 as alleged by the applicant or at all.

Moreover Geological information on the disputed blocks wasavailable and well documented in the library and Website ofNational Oil Corporation of Kenya. The possible existence ofcrude oil deposits in the disputed Blocks is a matter of generalnotoriety which has been in public domain from as early as 1992. This information is publicly available at the library's'website and archives of the National Oil Corporation of Kenya. Moreover, Shell, an International oil and Marketing company . conducted exploration and discovered crude oil in Block 1 NB in 1992.

10. The application' by the exparte applicant applied for "Exclusive" rights while the Act clearly states that anexploration permit only confers non-exclusive" rights to aholder. There is therefore nothing to quash as there is nodecision, even if the same permit existed an order of certioraricannot issue because a permit is not a decision unless if thereis an error on the face of the record. The respondent has the discretion and powers to issue a permit. The court can only compel the Minister to consider an application for issuance of a permit but cannot compel the issuance of a permit which is tantamount to ousting the powers, mandate and discretion vested upon the Minister.

11. Regarding the issue of disclosure of information, it wasargued that it was up to the exparte applicant to seekinformation as provided for under the Act. The respondent does not owe the applicant any duty to provide informationwhich the applicant would have obtained in the ordinarycourse of business. Mr. Ombwayo also faulted thisapplication which he submitted was brought outside tostatutory period. The locai standing of the applicant was alsochallenged as the party who submitted the three bottles ofsamples is different from the exparte applicant. It was furtherargued that the orders for restitution cannot also be granted in .an application for judicial review in view of the provisions of section 8 (1) of the Law Reform Act which binds the court tofollow the provisions of the Administrative Act of England of1938.

12. This application was also opposed by Prof. Githu Muigai andMr. Zul Alibhai, both appearing for the Pt 2nd and 31,:iinterested parties. Mr. Monari teaming up with M/s. Omondialso opposed the application on behalf of the 4th and 5thinterested parties. It was submitted that the exparteapplicants lacks loci standito bring this application forjudicial review based on claim that they submitted samplesfor analysis with the respondent. The samples weresubmitted by an entity known as Interstate Mining CompanyLtd. which is different from exparte applicant. The exparteapplicant was incorporated in 2006 therefore there was nolegal entity inexistence to submit the samples that arecomplained about. It is also explained in the replying

affidavit by the interested parties that they were not aware ofthe samples submitted to the respondent by the exparteapplicant.

13. The interested parties have explained in the replyingaffidavits how International exploration of crude oil is donethrough excavation and review of ecological data which information is available at the National oil Company ofKenya. The exploration of crude oil started way back in 1980's •when Shell petroleum discovered some crude oil in twoblocks and the issue then, was whether the volume wascommercially viable. It is therefore not true for the exparteapplicant to state that they were the first to discover oil while drilling for water. Secondly, the applicant's case is predicated on the grounds that they were denied an exploration pemiit. While the interested parties have production sharing contracts and there is no permit to quash.

14. The exparte applicant did not applyTor a Production SharingContract, but applied for a permit which is different asdefined under section 5 (2) of the Petroleum Act. As far as theinterested parties were concerned, they have nothing to dowith the information that the exparte applicant claimed was not given to them. Moreover an exploration permit cannotconfer any right of priority to the applicant. It is a contractwith the Government where the company is required to do somuch by way of exploration, spend a lot of money and if theoil is found, it has to be shared with the Government. It is a huge risk for the exploration company and the reward has tobe shared with the Government.

15. In this case, there was no need for further exploration permitand that is why the respondent entered into a ProductionSharing Contracts. The Government needed parties withfinancial resources, know how, technical competence as setout under section 8 of the Act. The exparte applicant did not demonstrate any of the above conditions.

Prof. Githu Muigai and Mr. Monad also submitted extensively on points of law which I will analyze later on in this ruling. Imust register my appreciation to all the parties for the researchdone in this matter as demonstrated by the volume ofauthorities cited and espoused in the written submissions.

16. This application seeks for orders of judicial review. Inconsidering whether or not to grant the orders sought, theprinciples to bring to bear are well settled in some long line ofauthorities settled by the Court of Appeal and also the HighCourt. Key among them is the case of; KenyaNationalExamination Council vs. Republic Civil Appeal No. 266 of1996. The Court is supposed to consider firstly, how the decision sought to be quashed was arrived at, otherwiseestablish whether there was procedural improprieties. Secondly, whether the tribunal that passed the decision had jurisdiction to do so, or to determine whether there areillegalities. Lastly, the Court is also supposed to establishwhether the rules of natural justice were observed andwhether the decision took into account relevant matters suchas fairness were taken into account to rule out irrationalities.

17. The applicant seeks to set aside the decision of the Ministerthat issued the interested parties with an" exploration permit"'by way of an order of Mandamus. An order of Mandamus isdefined by the learned authors of the text book Halsbury'sLaws of England:-

"As a command issueing from the High Court ofJustice directed to any person, corporation or inferiortribunal requiring him or them to do some particular thingspecified in it which appertains to his or their office and isin the nature of public duty"

In this case the order of Mandamus is sought to compel the Minister to issue an exploration permit to the applicant. Under the petroleum Act, the Minister is given the discretion to issuenon exclusive exploration permits.

18. It was contended by the respondent that it was not necessaryfor the Minister to issue exploration permit to any party because that had been done earlier. The respondent was interested in entering into Production Sharing Contract with companies for production sharing and that is what was entered into with the interested parties. It is also common ground that there is no exploration permit that was issued tothe interested party. The interested parties were issued with aProduction Sharing Contract which is different from a nonexclusive exploration permit that the applicant is seeking toquash.

19. The second matter for consideration is whether therespondent who derives powers to issue permits by statute;can be directed by a Court to exercise those powers in a specific way, unless of course it can be proved there was abuse of the process. As stated above, the interested parties were not issued with an exploration permit, but entered into a contract known as production sharing contract. Therefore the order sought to be quashed by the exparte applicant does not exist. It is trite that a party is bound by its own pleadings; the claim by the exparte applicant is in respect of the exploration permit.

20. The applicant contended that they submitted samples comprising of some black substance 'Which they believed was crude oil that they discovered while drilling water. They claimed that the respondent short changed them and expropriated their secrets to the interested parties. The evidence presented by the exparte applicant in support of this contention is not plausible because the samples were presented in 13th December, 2005 by an entity known as Intestate Mining Company Ltd. while the exparte applicant was registered sometimes in 2006. Moreover, the exparteapplicant applied for an exploration permit under section 5(2)of the Petroleum Act. Which provides that:?

"Forthe purposes of obtaining geologicalinformation, the Minister may grant non-exclusiveexploration permits, in respect of areas specified therein,under which a person may enter upon an area and prospect and carry out geological and geophysical surveys."

21. Under section 8 of the same Act it makes provisions of theconditions a contractor has to comply with before theGovernment can enter into a Petroleum agreement asfollows:?

"The Government shall enter into petroleumagreement only with contractors who have the financialability, technical competence and professional skillsnecessary to fulfill the obligations under the petroleumagreement."

The reason why I have cited the above provisions of the law isto find out whether the respondent acted contrary to the law.Firstly, the Minister is given the discretion to grant a permit.This court cannot interfere with the respondent's discretionunless it can be shown that it was not exercised in accordancewith the law and the set down regulations. The exparteapplicant has not demonstrated that it presented an applicationfor permit. What is shown on record is a host ofcorrespondence which did not reveal the necessary informationsuch as;

(a)the name, nationality, nature of business and the principal place of business of the applicant;

(b)the name and nationality of every director wherethe applicant is a company, corporation or other body corporate;

(c)the delineation of the area proposed to be covered*by the exploration permit; and

(d)the purpose of the proposed exploration to beundertaken and the description and estimatedduration of the exploration; and

(e)such additional information as the Minister mayrequire to enable him assess the suitability of a grantof an Exploration Permit.

22. What the exparte applicant's correspondence reveal is a seriesof correspondence that show that they were in the business ofborehole drilling and stumbled on what they thought wascrude oil? There is no evidence that' they demonstrated therequired qualifications as set out above. Moreover theapplicant did not exhibit any copy of a formal application thatthey submitted for exploration permit that was allegedlyrefused by the respondent. I am therefore not satisfied that theapplication meets the threshold of granting orders of judicialreview.

For the sake of clarity I need to emphasize that the interested parties were not issued with an exploration permit but with aProduction Sharing Contract which as demonstrated by theinterested parties, was granted in accordance with theprovisions of section 8 of the Act. There is no evidence by theapplicant that they applied for the Production SharingContract, they applied for a non exclusive permit which is not the same as PSC.

23. The nature and scope of rights conferred on the holder of anexploration permit are different from those conferred by a.Production Sharing Contract. An exploration permit onlyconfers non exclusive rights on an applicable block, while aproduction sharing contract on the other hand confers exclusive rights on the applicable block. Thus an applicant for an exploration permit cannot be granted such a permit in an area where another entity has concluded a Production Sharing Contract. In this case it can only be said that the applicant came late to seek an exploration permit when the interested parties had gone ahead and entered-into a Production Sharing Contracts. I need not belabor this point any further save to say that an order of prohibition cannot also issue.

24. The last issue to consider is whether the applicant is entitledto an order of restitution that is the return of the samples thatit submitted. Mr. Orribwayo, counsel for the respondentsubmitted, and rightly so, that under section 3 of the Petroleum Act, it is provided that:-

"All petroleum existing in its natural conditions instrata lying within Kenya and the continental shelf isvested in the Government, subject to any rights in respectthereof which, by or under any other written law, havebeen or are granted or recognized as being vested, in anyother persons."

25. The record also show that the samples were submitted forchemical analysis and the results were made available to theapplicant. I agree with the submission by counsel for therespondent that the samples cannot be returned to theapplicant. Moreover the order of restitution cannot issueunder the provisions of section 8 of the Law Reform Act ororder 53 of the Civil Procedure Rules.

26. Finally I find this application by the exparte applicant lackingin merit. It is i)ased on the applicant's fanciful desire to enterinto petroleum exploration without following the laid down procedure but through a chain of correspondence that arecontrived to circumvent the lengthy procedures andregulations set out under the Act.

27. I have no hesitation to order it dismissed with costs to therespondent and the interested parties.

Ruling read and signed on this 16th December, 2010 at Kitale

M KOOME.

JUDGE.