Kenya’s Oil & Gas Sector 2025: Legal, Regulatory & Commercial Breakthroughs
- Muhoro & Gitonga Associates
- Mar 18, 2024
- 7 min read
Updated: Oct 14
Table of Contents
1. Introduction
Kenya discovered commercially viable oil in the Lokichar Basin in 2012 and since then has progressed through phases of exploration, piloting, infrastructure planning, and regulatory reforms.
As of 2025 Kenya is re-shaping its oil and gas industry through legal reforms, environmental litigation, licensing rounds, and shifts in ownership. This article captures the very latest developments, legal decisions, regulation, commercial transactions and analyses what they mean for investors, communities, and the country at large.
2. Recent Key Commercial Developments
2.1 Sale of Tullow Oil Kenya Assets
Tullow Oil has agreed to sell its Kenyan assets to Gulf Energy Ltd for at least US$120 million, in a deal that includes three payments of US$40 million, future royalty payments, and a 30% cost-free participation stake in future developments.
This follows previous write-offs by Tullow and the exit of partners like TotalEnergies and Africa Oil Corp, leaving Tullow as the sole license holder in the Lokichar Basin since mid-2023.
2.2 Restart of Licensing Rounds and Restructuring of Block
In March 2025, Kenya’s Energy and Petroleum Ministry announced that it will restructure petroleum exploration blocks in order to align with global best practices.
Following that, by September 2025, Kenya will launch its First Licensing Round for ten selected highly prospective blocks, particularly in the Lamu and Anza Basins.
2.3 Petroleum Supply Deals & Stabilising Imports
Kenya extended petroleum supply arrangements with Gulf firms (Saudi Aramco, ADNOC, ENOC) which allow for credit terms of 180 days. This helps reduce the pressure on foreign exchange and stabilise fuel prices
3. Regulatory & Policy Reforms
3.1 Petroleum Act 2019 & Licensing Frameworks
The Petroleum Act, 2019 remains the legal foundation for licensing, revenue sharing, environmental regulation and local content in oil and gas activities. It frames how exploration, production and operations are governed.
3.2 Block Restructuring & Transparency
The government’s restructuring of exploration blocks is accompanied by geoscientific data being published in the National Data Centre hosted by the National Oil Corporation of Kenya (NOCK). This is meant to enhance transparency and allow investors better access to necessary baseline data.
3.3 Local Content & Regulation of Tender Processes
There are disputes and legal actions arising from tender processes, aimed at ensuring that local firms are not unfairly excluded, especially when large contracts require sub-contracting that is restrictive. For example a firm has sued Kenya Pipeline Company (KPC) over tender rules in a Sh4.9 billion contract claiming restrictive conditions.
3.4 Oversight & Financial Health of State Entities
Parliament in mid-2025 ordered a special audit of the National Oil Corporation of Kenya, declaring it “technically insolvent,” raising concern about financial management and transparency in its partnerships.
4. Major Legal Cases & Judicial Precedents
4.1 Thange River Oil Spill: Kimeu & 3074 others v Kenya Pipeline Company Ltd & another (Environment and Land Petition 9 of 2019 & Petition 8 & 12 of 2019 (Consolidated)) [2025] KEELC 5239 (KLR) (11 July 2025) (Judgment)
In July 2025, the Environment & Land Court in Makueni ordered Kenya Pipeline Company (KPC) and National Environment Management Authority (NEMA) to pay KES 3,018,831,676 for environmental damages. KPC was held 80% liable and NEMA 20%.
The judgment mandates restoration of damaged land, soil, surface and underground water in the Thange River Basin.
4.2 VAT Refund Case: Africa Gas and Oil Company Limited v Commissioner of Domestic Taxes (Tax Appeal E504 of 2024) [2025] KETAT 196 (KLR) (Commercial and Tax) (14 March 2025) (Judgment)
In March 2025, the Tax Appeal Tribunal allowed a major VAT refund claim by Africa Gas and Oil Company Limited, ordering the Commissioner of Domestic Taxes to process the refund within 90 days.
4.3 Employment Dispute: John v African Gas and Oil Limited (Cause E087 of 2022) [2025] KEELRC 2023 (KLR) (30 June 2025) (Judgment)
On 30 June 2025, Employment & Labour Relations Court in Mombasa found that summary dismissal of an employee by African Gas & Oil was both procedurally and substantively unfair. Compensation awarded included three months gross salary, one month salary in lieu of notice, interest, and costs.
4.4 Environment & Land Case: African Gas and Oil Limited v Kahia Transporters Limited & 6 others; County Government of Mombasa & 2 others (Interested Parties) (Environment & Land Case E012 & E004 of 2023 (Consolidated)) [2025] KEELC 3139 (KLR) (4 April 2025) (Ruling)
In April 2025, a ruling in the Environment & Land Court in Mombasa (Environment & Land Case E012 & E004 of 2023, consolidated) allowed a motion by Kahia Transporters Ltd to have certain earlier orders reviewed and varied; the ruling confirms the role of fair administrative action, land registration, and due process in environmental and land matters.
5. Environmental & Social Governance (ESG) & Community Impacts
5.1 Environmental Liabilities & Remediation
The Thange River ruling sets a precedent in environmental liability, requiring not only damages but physical restoration and ongoing accountability. This has implications for ESG compliance and corporate risk management within oil & gas operations.
5.2 Local Community Rights & Land Matters
Cases like the Kahia Transporters / AGOL matter show that land-use, environmental rights, administrative fairness and due participation by communities are becoming stronger judicial themes.
5.3 Regulatory Compliance & Environmental Standards
Under the Petroleum Act and other environmental laws, stricter regulation of environmental impact assessments, waste management, spill preparedness, and biodiversity conservation are being enforced. Legal judgments are increasingly imposing severe cost and penalty burdens on non-compliance.
6. Challenges & Opportunities Ahead
6.1 Infrastructure & Export Pathways
The lack of a fully operational pipeline or export route remains a constraint. Rosy discoveries notwithstanding, without cost-efficient transport and export infrastructure, commercial viability is challenged.
6.2 Investment & Partnering Risks
The exit of partner firms (TotalEnergies, Africa Oil) from Kenyan projects reflects risk concerns. The sale of Tullow’s assets to Gulf Energy is promising but also underscores the need for stable fiscal, legal, and regulatory frameworks to attract and maintain investment.
6.3 Governance, Financial Sustainability & State Actors
State entities like NOCK face questions over solvency, governance and transparency. Ensuring that national oil companies are well governed, with clear reporting and financial discipline, is critical.
6.4 Climate Transition & ESG Expectations
Global pressures toward decarbonisation, as well as Kenya’s own climate commitments (including net zero targets), mean that oil & gas projects must be assessed in light of environmental cost, carbon emissions, community health, and biodiversity.
6.5 Regulatory and Policy Certainty
Investors require clarity on licensing terms, local content requirements, taxation, revenue sharing and environmental obligations. Regulatory flip-flops or delays reduce investor confidence.
7. Future Prospects & Strategic Directions
7.1 First Licensing Round (2025 & Beyond)
The upcoming licensing round for the ten newly restructured blocks offers a major opportunity for both international and local investors. Transparent data, merit‐based award criteria and predictable regulation will be essential.
7.2 Upstream & Midstream Infrastructure Development
Plans for pipelines, refineries or port export facilities are likely to gain renewed attention. Infrastructure financing models that include public-private partnerships or investor consortia may help address capital intensity.
7.3 Expanding LNG and Energy Transition Options
In addition to oil, Kenya is exploring liquefied natural gas (LNG) as an energy transition pathway. Converting thermal power plants, cleaner fuel import arrangements, and integrating gas into power generation are all under consideration, especially under Kenya’s climate policy framework.
7.4 Strengthening Local Content & Community Benefit Sharing
Laws and policies will increasingly require that communities benefit via jobs, revenue sharing, infrastructure, environmental protection and compensation. Dispute resolution systems and clear community engagement processes will be important in this domain.
7.5 Regional Collaboration & Export Markets
Kenya may deepen cooperation with neighbouring countries in East Africa for cross‐border pipelines, shared markets and regional regulatory harmonisation. Exporting to global markets depends on logistical, diplomatic and trade export capacity improvements.
8. Conclusion
Kenya’s oil and gas sector stands at a pivotal juncture. The combination of legal precedents, licensing reform, commercial realignments, and environmental regulation shows a maturing sector that is increasingly aligning with global expectations.
Recent court rulings such as the Thange River spill compensation and the dismissal of unfair dismissals are signals that courts will enforce accountability for environmental harm, labour rights, taxation, tendering and transparency.
Success in upcoming licensing rounds, strengthened infrastructure, and stable policy environment will largely determine whether Kenya can fully realise its potential as an energy hub.
While challenges remain from regulatory friction, investment risk, environmental liabilities, to climate change, the opportunities are significant. For Kenya, the road ahead will require balancing economic development with social, environmental and legal responsibility.
9. Frequently Asked Questions (FAQ)
Q1: When is Kenya’s next oil and gas licensing round?
A1: Kenya plans to launch its First Licensing Round for ten newly restructured exploration blocks in September 2025.
Q2: What are some recent landmark legal cases in Kenya’s oil and gas sector?
A2: Some top recent cases include:
Q3: What regulatory frameworks govern oil and gas in Kenya?
A3: Key frameworks include the Petroleum Act, 2019, the National Oil and Gas Policy, environmental laws, local content provisions, revenue sharing laws, and licensing regulations. Tenders must comply with fair administrative action and constitutional rights.
Q4: How do environmental laws impact the sector?
A4: Environmental laws and judicial precedents now enforce significant liabilities, restoration obligations, mandatory impact assessments, community rights, and stricter oversight via NEMA and Environment & Land Courts.
Q5: What are the main risks for investors in Kenya’s oil and gas sector?
A5: Major risks include regulatory uncertainty, high infrastructure costs (transport, export routes), environmental liabilities, community disputes, financial sustainability of state actors, and global climate transition pressures.
Q6: Is Kenya’s oil and gas sector attractive to foreign investors now?
A6: It remains promising, especially with new licensing blocks, improving transparency and stronger ESG enforcement. Recent exits show caution among investors but also open opportunities for those willing to partner, comply with law, and manage risk.
Q7: How are communities impacted or involved?
A7: Communities are increasingly involved through legal cases (environment, land, compensation), through revenue sharing obligations under the law, and via requirements for environmental protection. However, implementation gaps remain in ensuring meaningful benefit, transparency and capacity.
