Kenya is on track to become an oil exporter, with plans set for commercial production and exports to begin in 2026 following recent crude oil regulations.
The Energy and Petroleum Regulatory Authority (EPRA), in collaboration with the Attorney-General, has finalised the robust policy and regulatory framework to facilitate the commercialization of oil production, particularly in the South Lokichar Basin in Turkana, where oil was discovered in 2012.
New Crude Oil Rules
Firms will have to pay a permit fee of Ksh2 million to build or run crude oil pipelines and storage tanks, and a Ksh1 million fee for renewal of the permit, which is valid for 5 years from the date of issuance.
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The government is currently reviewing the Field Development Plan for oil blocks T6 and T7, with a decision expected by the end of June 2025. Delays could push the second $40 million payment to 2026 or later, impacting project economics.
The plan, once approved, will be tabled in Parliament for approval within 90 days.
Tullow Plans
Additionally, Gulf Energy is finalizing the acquisition of Tullow Oil’s Kenyan assets for Ksh15.49 billion, a deal expected to mobilize funds for production.
The sale is also part of Tullow’s debt reduction strategy, with their net debt at Ksh193.5 billion by the end of 2024. Combined with a Ksh38.7 billion sale of Gabon assets, it strengthens Tullow’s financial position for refinancing.
Tullow Oil, previously partnered with TotalEnergies and Africa Oil for 13 years, both of which withdrew two years ago, is now the sole owner until the acquisition is complete. Tullow’s focus is shifting to West African assets in Ghana, Gabon, and Côte d’Ivoire.
The deal requires Kenyan government and regulatory approvals, with a Sale and Purchase Agreement (SPA) targeted for finalization in the coming months.
Kenya plans to launch crude oil exports in 2026, with initial production ranging from 60,000 to 100,000 barrels per day.
The government is also planning an oil and gas exploration round for 10 blocks in September 2025, offering tax incentives to attract investment.
Challenges
A major hurdle is the distance between the Turkana oil fields and Mombasa port, approximately 800 km, necessitating a pipeline crossing ecologically sensitive areas, including savannahs and water catchments.
The proposed Lokichar-Lamu Crude Oil Pipeline, initially targeted for completion in 2025, has faced delays due to funding and logistical issues. Construction could disrupt wildlife habitats, notably in the Lamu region, home to UNESCO-listed ecosystems.
The plans for Kenya to become an oil exporter also face significant community and environmental considerations, given the region’s socio-economic dynamics and ecological sensitivities.
The Turkana community, one of Kenya’s most marginalized regions, demands equitable sharing of oil revenues. Locals expect job opportunities, infrastructure development (e.g., roads, schools, hospitals), and direct financial benefits from oil production.
Past tensions, such as protests over job allocation during Tullow Oil’s exploration phase, underscore the need for transparent benefit-sharing mechanisms.
The Petroleum Development Levy Fund Act, CAP.426, is under review by June 2025 to address revenue allocation to local communities.
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Oil infrastructure, including the proposed Lokichar-Lamu pipeline, may require land acquisition, potentially displacing pastoralist communities.
Previous exploration phases faced criticism over inadequate compensation for land use. The government and Gulf Energy must establish clear, fair compensation frameworks to avoid conflicts.
Additionally, Kenya is exploring a pipeline deal with South Sudan to share infrastructure. The oil’s waxy nature, which solidifies below 40°C, adds complexity to transportation, requiring specialized handling and infrastructure.
This increases energy consumption and risks leaks or spills, which could contaminate soil and water sources critical for local communities and livestock.
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