Gulf Energy and its sub-contractors will be exempt from paying taxes on petroleum activities in Block T7 after new amendments.
The changes in the new clause include the introduction of a new Clause 32A, which grants the contractor broad tax waivers across the entire oil project.
Under the new clause, Gulf Energy and its sub-contractors will not pay:
- Value added tax (VAT) on goods and services used directly and exclusively in petroleum exploration, development, production, processing or distribution.
- Railway Development Levy (RDL) and Import Declaration Fee (IDF) on goods imported specifically for constructing petroleum facilities.
- Withholding tax on services or on interest from loans linked to the petroleum operations.
This comes after Energy and Petroleum Cabinet Secretary Opiyo Wandayi announced on November 24, 2025, that the government had finally approved the South Lokichar Basin Field Development Plan (FDP).
Gulf Energy Deal Cuts Govt’s Expected Revenue from Turkana Oil
The government will take home a smaller share of revenues from Turkana’s oil project following an amendment that raises Gulf Energy’s cost-recovery limit to 85% of annual crude production.
This is an increase from the previous 65% agreement in the initial contract with Tullow Oil.
According to the revised terms, Clause 27(1) of the production-sharing agreement has been altered to allow the contractor to recover a significantly larger portion of its petroleum costs before profits are shared with the State.
The amendment clause read as follows:
“Subject to the auditing provisions under clause 30, the contractor shall recover the petroleum costs, in respect of all petroleum operations, incurred and paid by the contractor pursuant to the provisions of this contract and duly entered in the contractor’s books of account by taking and separately disposing of an amount equal in value to a maximum of eighty five percent (85%) per fiscal year of all crude oil produced and saved from the contract area during that fiscal year and not used in petroleum operations. Such cost recovery crude oil is hereinafter referred to as “cost oil”.”
Also Read: Govt Approves Turkana Oil Development Plan, Confirms 2026 Deadline
Govt Approves Turkana Oil Development Plan
After its approval by the government, CS Wandayi stated that the project is a massive step towards building a modern, competitive economy.
“Earlier today, I signed the instruments required for submission of the approved FDP to Parliament for ratification in accordance with Article 71 of the Constitution and Section 31 of the Petroleum Act (Cap. 308). This is the first time an FDP has advanced to this level,” CS Wandayi said.
With the approval of the South Lokichar Basin Field Development Plan, Wandayi stated that the government is now shifting from exploration to development.
Also Read: Tullow Oil Exits Kenya After Ksh15.5 Billion Buyout
The FDP was submitted by Gulf Energy E&P BV, a Kenyan company that now owns the oil blocks in the region and is licensed to develop Block T6 and Block T7 in the Tertiary Rift Basin.
CS Wandayi stated that the approved development will require an estimated $6.1 billion (Ksh789.95 trillion) investment over a 25-year contract period.
According to the ministry, recoverable reserves stand at 326 million stock-tank barrels, with oil initially in place estimated at up to 4 billion barrels.
Phase One aims to produce 20,000 barrels per day, increasing up to 50,000 barrels per day under Phase Two.
Wandayi pointed out that Gulf Energy plans to first produce oil by December 2026, with full production expected by 2032.
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