The National Oil Corporation of Kenya (Noc) will receive Sh3.38 billion from the Petroleum Development Levy (PDL) to settle loans owed to KCB Group and pay for fuel that was supplied by two oil firms, Dalbit and Gulf Energy.
The changes are contained in Supplementary Budget III, which saw the allocation of Fuel Stabilisation meant to finance private enterprises reduced by Sh3.38 billion from Sh21.95 billion to Sh18.57 billion.
The Sh3.38 billion has been transferred from the PDL to Noc to cater for the KCB loan and pay pending bills owed to Dalbit and Gulf Energy for the supply of fuel. PDL is charged at the rate of Sh5.40 for every litre of petrol and diesel and Sh0.40 for a litre of kerosene.
“Hence their (Noc) recurrent budget increased from Sh1.53 billion to Sh4.91 billion,” David Gikaria, who chairs the National Assembly’s Energy and Petroleum Committee said in a report on consideration of the third mini-budget in the financial year 2024/25.
“In the Noc headquarters, there is an overall increase of Sh24.64 million which comprised Sh1 million increase on account of salaries shortfall due to in-year promotions and in-postings, which is from the exchequer, while an increase of Sh23.64 million in appropriations-in-aid (AIA) from royalties and AIA from surface fees is for operations and maintenance, as well as cater for pending bills.”
The debt-ridden Noc in January this year started repaying the Sh7.53 billion loan it borrowed from KCB Group more than a decade ago. Noc took the loan to fund operations including fuel purchases decades ago when it sought to remain afloat and ward off competition from other local and foreign-owned oil marketing firms.
The initial loan from KCB Group was Sh4.69 billion and has since hit Sh7.53 billion.
Besides the KCB Group loan, Noc also tapped another loan from Stanbic Bank of Sh1.3 billion to fund purchases of petrol and diesel. The loan has since ballooned to Sh2.58 billion over the accumulation of interest and penalties.
KCB Group had five years ago given a 30-day notice to Noc for payment of the full amount, failure to which it would auction Noc’s assets to recover the debt.
However, the lender did not make good its threat, handing Noc a lifeline and more time to seek help from the National Treasury. Noc slumped into years of losses and was declared technically insolvent as liabilities outstripped assets, underlining the grim state of the once high-flying government oil firm.
Last year, it took the intervention of the National Treasury to commit to settling the loan, helping unlock Noc’s push to onboard a strategic partner to rescue the company from the deathbed.
Noc in January 2025 wrote to the Ministry of Energy and National Treasury requesting the release of Sh1.535 billion, with Sh1.215 billion earmarked for the first payment on the KCB loan.
The repayment is crucial for Noc's ongoing negotiations with French oil major Rubis as part of its revival plan.
Noc early this year announced its deal with Rubis Energy Kenya, where the French oil major will inject Sh6 billion. The funds will be for working capital and expanding and revamping Noc’s footprint.
Mr Gikaria said in the development budget, all projects except for midstream and downstream petroleum distribution projects were affected by the Supplementary Budget III to the tune of Sh309.1 million, with the resource funding being from the Petroleum Development Fund (PDL).
The projects affected include the Lokichar-Lamu Crude Oil Pipeline (LLCOP) lost Sh37.17 million from the PDL.
The Liquified Petroleum Gas distribution and Infrastructure has lost Sh177 million while Clean Cooking Gas for public learning institutions has received a budget cut of Sh196.93 million.
However, Petroleum Exploration in Block 14T has received an increase of Sh52 million while South Lokichar Oil Field Development will receive Sh45 million from Petroleum Development Fund.
Upstream Oil and Gas Exploration has been allocated an additional Sh5 million from the PDL.
“That, the allocation for the State Department for Petroleum has been reduced by Sh284.46 million, comprising an increase of Sh24.64 million for recurrent expenditure and a decrease of Sh309.1 million for development expenditure,” Mr Gikaria said.
“The decrease in development expenditure by Sh309.1 million is attributed to the State Department’s inability to fully absorb allocated funds during the financial year, reflecting implementation challenges that hindered the timely execution of planned development initiatives.”
In the State Department of Energy, Mr Gikaria told the Budget and Appropriations Committee that the biggest increase was witnessed in the Kenya Electricity Transmission Company (Ketraco) budget, which incurred an increase of Sh11.04 million or a 0.2 percent increase in budget owing to an increase in internally generated revenue from wheeling charges (money that electricity generators pay Ketraco for using its network to move electricity).
In contrast, Mr Gikaria said the recurrent budget for Geothermal Development Company (GDC) was reduced by Sh10 million from the sale of steam, which is a 0.7 percent decrease due to low steam uptake occasioned by curtailment and plant downtime for the Olkaria Plant.
