Government projects Sh370b in revenue from Lokichar oil fields

The government is expected to earn between Sh136 billion and Sh371 billion once the South Lokichar oil project begins full development and production of oil in Turkana County.

National Treasury Cabinet Secretary John Mbadi told a joint meeting of the Senate and National Assembly Energy Committees that this money will come directly from the government’s share of oil profits and its participation in the project.

Mbadi said Kenya Petroleum Refinery Limited (KPRL) is projected to earn Sh42.3 billion in storage and handling revenues, while Kenya Ports Authority will gain Sh 41.9 billion from the New Kipevu Oil Jetty while the Government will also collect revenues from electricity and water consumption, ancillary services and in Road Maintenance Levy.

“The project is expected to cost $8.2 billion (Sh1.06 trillion) in operating expenses, with $7.6 billion (Sh980.6 billion), about 93 per cent, to be spent locally. It will also require and $5.7 billion (Sh735 billion) in capital expenditure, of which $1.9 billion (Sh219 billion) will also be spent locally. The project is expected to create more than 3,000 direct, indirect and induced jobs, contributing to PAYE and social security revenues,” said Mbadi.

He told lawmakers that communities along the project route will benefit from better markets, improved infrastructure, and growth of local businesses. He added that the project’s progress will also attract more foreign direct investment into Kenya’s oil and gas sector from international companies.

Mbadi said that the broader macroeconomic implications of oil production under the Field Development Plan (FDP) were assessed with oil revenues expected to positively contribute to the growth of Kenya's GDP through upstream, midstream and associated economic activities.

The CS said the revenue estimates could change depending on global oil price fluctuations and production levels. He noted that the government is using cautious price projections in its planning and will continue to closely monitor market conditions to manage the risks.

Mbadi said that under the Field Development Plan (FDP), crude oil transportation will be carried out in phases based on production levels and how ready the infrastructure is.

In Phase I, oil will be transported by trucks because it is the most practical and affordable way to start production without spending too much on infrastructure at the beginning.

In Phase II, transportation will shift to rail, which is more efficient and cost-effective, especially as production increases. This phased plan ensures that transport methods match production levels and helps protect Kenya’s oil revenue from high transportation costs.

“Kenya undertook an Early Oil Pilot Scheme that saw export of crude oil in the international market, the ministry of Energy and Petroleum indicates the volume of exported crude oil amounted to 414,717, generating a revenue of $28.3 million against an expenditure of $62.7 million, occasioning a loss or balance of $34.3 million, forming part of the cost oil,” said Mbadi.

Energy Cabinet Secretary Opiyo Wandayi told the committees that in a recent submission to Parliament on revenue sharing, the government’s profit share was estimated at Sh112.38 billion. This amount will be distributed between the National Government, County Government, and local communities in line with Section 58 of the Petroleum Act, Cap 308.

Wandayi noted that government revenue under the South Lokichar Field Development Plan is projected at $1.04 billion (Sh135 billion). This revenue comes from the government’s profit share, surface fees, training fees under the Production Sharing Contracts (PSC) for Blocks T6 and T7, and the government’s participation as a contractor.

He added that Phase one of the project (until 2031) will require 8 megawatts (MW) of power, while peak demand in Phase two (from 2032 onward) will rise to 34MW. Most of this power will be generated using gas from associated oil production. To meet this demand, the CS said KETRACO has plans to construct a 220kV transmission line from Turkwel through Lokichar to Lodwar by the year 2029, with a substation in Lokichar.

National Lands Commission CEO Kabale Arero told lawmakers that the Commission has resumed the land acquisition process in compliance with the law, with inspections conducted in December 2025 and renewed engagement with stakeholders.

Arero explained that previous Gazette notices for the project were issued in 2016, 2019, and 2022. At the time, the project was gazetted using geographic coordinates because the land was unsurveyed. After the statutory timelines expired, a new Gazette Notice was issued in October 2025, expressing the government’s intention to acquire the land and start statutory inquiries.

He said that once the land valuation exercise is complete, the Commission will follow the statutory compensation process: Approval of the Valuation Report, submission of funding requests to the Acquiring Authority, issuance of awards to affected persons, and payment of compensation.