State-backed Gulf Energy bags Sh93.68b oil storage deal

A Gulf Energy outlet on Jogoo Road in Nairobi. [David Njaaga, Standard]

Kenya Pipeline Company (KPC) has quietly signed a 25-year crude oil storage and handling contract with Gulf Energy E&P BV, projected to generate up to Sh93.68 billion in gross revenue.

The deal places the fast-rising local firm at the centre of Kenya's long-delayed oil production ambitions.

The agreement, disclosed to shareholders on August 26, grants Gulf Energy access to storage and export infrastructure controlled by Kenya Petroleum Refineries Ltd (KPRL), a KPC subsidiary.

Under the contract, KPRL will provide facilities and services for the "receipt, storage, handling and delivery of crude oil for export through Kipevu Oil Terminal II (KOT II)", the deep-water jetty at Mombasa port capable of loading crude onto tanker ships for international markets.

"Current internal projections estimate gross revenue of approximately Sh93.68 billion over the 25-year contract period," KPC stated in its public notice.

The company added that "this estimate is, however, based on projected throughput and tariff assumptions and does not constitute a guaranteed revenue commitment".

Revenue will come from fixed service fees plus the recovery of qualifying variable costs.

The Standard could not immediately reach Gulf Energy for comment. We also could not immediately reach KPC or the Competition Authority of Kenya, the local competition watchdog, for comment.

To understand the significance, consider the infrastructure involved. KPRL sits on 377.7 acres of land adjacent to the Port of Mombasa and operates 45 storage tanks with a total capacity of 484 million litres, roughly equivalent to three million barrels of oil.

The facility stopped refining crude in 2013 after its outdated equipment made production too expensive. KPC had been leasing the tanks since 2017 before the government formally transferred ownership in October 2023.

KOT II, the terminal through which crude will be exported, is owned by the Kenya Ports Authority (KPA) and serves as the "principal marine interface" for petroleum products moving through KPC's pipeline network.

KPC also announced it had revised a service level agreement with KPA "governing their respective roles, responsibilities, service standards and coordination arrangements for the operation and maintenance of KOT II".

The new agreement, KPC said, "strengthens clarity, accountability, performance monitoring, maintenance coordination and business continuity at the terminal".

Together, the contracts "reinforce KPC's strategic role in the petroleum supply chain serving Kenya and regional markets, support the optimisation of KPRL assets, and provide a platform for diversified and sustainable revenue generation", according to KPC's disclosure.

Gulf Energy's transformation under President William Ruto's administration has been remarkable.

The firm began as an oil marketing company that used KPC's pipeline to move refined products from Mombasa to inland depots.

Its profile rose sharply after President William Ruto's government introduced a Government-to-Government fuel import arrangement in 2023, under which Gulf Energy became one of the local companies handling petroleum cargoes from Middle Eastern suppliers.

The pivotal moment came in September 2025, when Gulf Energy's affiliate, Auron Energy E&P Ltd, completed the acquisition of Tullow Oil's entire Kenyan assets for a minimum consideration of $120 million (Sh15.48 billion).

The deal transferred 100 per cent of the shares in Tullow Kenya BV, which holds working interests in the South Lokichar Basin blocks 10BB, 13T and 10BA, together containing an estimated 470 million barrels of oil resources.

First oil from Turkana is targeted for December 2026. The Ruto government-backed development plan envisions initial production of about 20,000 barrels per day, rising to 50,000 barrels per day in a second phase.

Unlike earlier plans for a pipeline from Lokichar to Lamu, the current strategy involves transporting crude by road or rail to Mombasa, storing it at KPRL, and exporting through KOT II.

The agreement comes just months after KPC's landmark initial public offering in March 2026, in which the government sold a 65 per cent stake, raising more than Sh106 billion.

The partial privatisation transformed the pipeline operator from a state-owned entity into a publicly traded company accountable to shareholders, making long-term commercial contracts like the Gulf Energy deal increasingly important to its revenue outlook.

But the deal raises difficult questions from stakeholders about concentration and sovereignty. Gulf Energy now controls Kenya's upstream oil production through its Turkana assets, the storage infrastructure through the KPRL contract, and the export pathway through KOT II. One firm effectively commands the entire value chain.

Energy stakeholders and analysts have expressed concerns about the growing concentration of Kenya's oil infrastructure in a single corporate entity.

They fear the arrangement could stifle competition, create barriers for other producers, and give Gulf Energy undue leverage over Kenya's strategic energy assets.

The contract's 25-year duration has particularly alarmed observers who question whether such a long-term commitment should have been subjected to more rigorous public scrutiny and competitive bidding.

KPC, for its part, says it will "monitor implementation of these agreements and will make further disclosures where required under applicable law and the NSE Listing Rules".

But for an industry watching Gulf Energy's relentless expansion, the question is no longer whether Kenya will produce oil commercially but who will control the infrastructure that makes it possible. The answer, increasingly, appears to be one company, players say.