Oil firms will pay Sh2 million for a construction permit of crude oil storage and pipelines under proposed regulations, as the country steps up efforts to become an exporter of black gold.
The fee is contained in the Petroleum (Midstream Crude Oil and Natural Gas Pipeline and Storage Operations) Regulations, 2025 where the permits will be valid for up to five years from the date of issuance.
Kenya is this month set to decide on the development and operationalisation plan of the oilfields in South Lokichar, Turkana County as the country seeks to end a wait of more than a decade to become an oil exporter.
The firms will further pay Sh2 million to operate the crude oil pipeline and or storage facilities. Renewal of the permits will cost a further Sh1 million.
“These regulations shall apply to the construction and operation of crude oil and natural gas pipeline and storage facilities and jetty in Kenya, including permits to construct pipelines and storage depots and licences to operate pipelines and storage facilities,” the Energy and Petroleum Regulatory Authority says in the regulations.
The regulations will also guide construction of storage and transport facilities of natural gas. Kenya is keen to tap the commodity from neighbouring Tanzania. Some of the facilities will be as common user facilities with Epra setting the fees that the owners will charge.
Construction of storage tanks and a pipeline to transport crude oil from South Lokichar are integral to Kenya’s plan to ship the commodity from the oilfields to refineries abroad for processing.
Kenya currently lacks a crude pipeline, a situation that prompted the trucking of oil from South Lokichar to Mombasa during the pilot phase that was designed to test the global appeal of the oil between 2019 and 2020.
The regulations signal that Kenya is keen to push its ambitions of commercially tapping oil reserves in Turkana in addition to other blocks set to open for prospecting.
Cabinet’s approval of the Field Development Plan (FDP) for blocks T6 and T7 is expected by the end of this month, as Kenya inches closer to realizing its dream of being an oil producing nation. Parliament will then be expected to ratify the plan within 90 days.
Gulf Energy, who bought the project from Tullow Oil in a $120 million (Sh15.49 billion at current exchange rates) deal, is expected to mobilise funds needed to bankroll the commercial production of the oil.
Tullow discovered commercially viable oil in the South Lokichar basin in 2012. Lack of a strategic partner to bankroll the project and delays in approving the FDP however derailed efforts to progress the project to commercial production.
