Tullow Oil is fighting off a Sh21.9 billion ($170 million) tax demand from the Kenya Revenue Authority (KRA), in what mirrors a tax tussle the British company faced in a project in neighbouring Uganda.
The company claimed that the tax demand is unmerited and unfair, adding that it will jointly challenge it with Gulf Energy, which bought its project in Turkana, in a Sh15.5 billion ($120 million) deal closed in September 2025.
KRA claims that Tullow Kenya BV, the local subsidiary of the British firm, underpaid capital gains tax (CGT) from the sale of $120 million (Sh15.5 billion) of the project. Additionally, the taxman has said that Tullow underpaid value added tax (VAT) while undertaking the Turkana project.
The Sh21 billion tax demand mirrors a similar dispute in neighbouring Uganda, where Tullow was forced to increase the amount it paid as CGT before Uganda cleared the sale of its Lake Albert oil project to Total and China National Offshore Oil Corporation (CNOOC), more than 12 years ago.
Tullow Kenya BV sold the Turkana oil fields to Gulf Energy in September last year. Gulf has already paid two installments of $40 million (Sh5.16 billion) each, while the last one is due before June 2033.
“We are aware of a tax assessment for $170 million from the KRA relating to alleged underpaid VAT and CGT on the disposal. Our clear and firm position is that the assessment is wholly without merit, and we intend to contest it through the regular objection process,” Tullow Oil says in its latest report.
CGT is charged at the rate of 15 percent on the net gain from the sale of property.
Companies and individuals are required to remit it upon registration of the transfer instrument or by the 20th of the following month.
Gulf fully bought Tullow’s stake 10BB, 13T, 10BA in South Lokichar, Turkana County. The purchase was undertaken through its affiliate, Auron Energy E&P Limited, on September 25, 2025. Tullow’s sale of the Lake Albertine oil project in 2013 flew into headwinds after the Ugandan government declined to approve the deal until the British firm settled the tax demand.
Uganda Revenue Authority had demanded a CGT of $473 million (Sh61.10 billion), a push that Tullow resisted and appealed the demand at the Ugandan High Court and later international arbitration claim.
But Tullow later withdrew from the fight and agreed to pay $250 million (Sh32.29billion) in full and final settlement of its CGT liability, paving the way for the Ugandan government to sanction the sale of the project to Total and CNOOC.
Tullow had sought to successfully undertake oil production in Kenya, following its botched attempts in neighbouring Uganda.
But the inability to secure a strategic investor and rejection of its commercialisation plan for the Turkana oil prompted it to fully sell the project to Gulf Energy.
Tullow discovered commercially viable oil in 2012 and had targeted to start commercial production of the oil in 2020. This target would later be revised as the company struggled to get a deep-pocketed investor to derisk the project.
Gulf says that it will start commercial oil production in Turkana by December this year, in what will see Kenya join Uganda in exporting crude oil.
