Kenya to Offer 10 Oil Exploration Blocks in First Licensing Round in Six Years

Kenya is set to launch bidding for 10 oil exploration blocks this month, marking the country’s first licensing round since enacting comprehensive petroleum legislation six years ago. The announcement signals a renewed push by the East African nation to revitalize its stalled oil industry and attract international investment following significant regulatory reforms and infrastructure developments.

The blocks on offer are strategically located within the Anza and Lamu basins, regions known for their significant untapped hydrocarbon potential and previous discoveries. According to Mohamed Liban, Principal Secretary for Petroleum, the country holds 50 blocks across four sedimentary basins, with the current 10 selected based on comprehensive geoscientific analysis to ensure transparent allocation processes.

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Strategic Restructuring and Regulatory Modernization

The licensing round follows an extensive restructuring of Kenya’s petroleum exploration blocks to align with global best practices and the country’s updated legal frameworks. Energy and Petroleum Cabinet Secretary Opiyo Wandayi announced the initiative during the East African Petroleum Conference and Exhibition 2025 in Dar es Salaam, Tanzania, emphasizing the government’s commitment to creating a transparent and merit-based investment environment.

“This presents a unique opportunity for investors to explore Kenya’s hydrocarbon potential through a transparent and merit-based process,” Wandayi stated during the conference. The restructuring has introduced flexible Production Sharing Contract (PSC) terms alongside a comprehensive package of tax incentives designed to enhance Kenya’s competitiveness in attracting international oil and gas companies.

Petroleum Commissioner Joseph Otieno confirmed that the licensing initiative reflects deliberate efforts to attract international investors by eliminating barriers and improving access to critical geological data. The government has compiled comprehensive geoscientific databases, including detailed seismic surveys, geological reports, and well data, all available at the National Data Centre hosted by the National Oil Corporation of Kenya (NOCK).

Infrastructure Development and Investment Support

Kenya’s renewed focus on oil and gas development is underpinned by significant infrastructure investments designed to support exploration and production activities. Key projects include the expansion of Lamu Port under the LAPSSET Corridor Program and substantial improvements to road networks to facilitate logistics and operational efficiency.

The Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) Corridor represents one of Eastern Africa’s most ambitious infrastructure initiatives, with an estimated total cost of $25 billion. The project includes construction of a 32-berth port in Lamu, railway connections, highway development, and crucially for Kenya’s oil ambitions, the proposed Lokichar-Lamu crude oil pipeline.

The 892-kilometer pipeline project is expected to provide seamless transportation of petroleum products from Kenya’s oil-rich interior to coastal export facilities. Principal Secretary Liban emphasized that these infrastructure developments are designed to lower operational costs and enhance efficiency, positioning Kenya as a competitive regional energy hub.

Learning from Past Challenges: The Tullow Oil Legacy

Kenya’s current licensing initiative comes against the backdrop of significant challenges experienced in previous oil development efforts. The most prominent example involves Tullow Oil’s troubled South Lokichar project in Turkana County, which has faced numerous setbacks despite initial promise.

The South Lokichar project, which targets approximately 460 million barrels of oil across multiple fields in a remote part of Kenya, has struggled to progress beyond exploration phases. The project’s difficulties intensified significantly when TotalEnergies and Africa Oil withdrew from the venture in May 2023, leaving Tullow Oil as the sole owner of the blocks.

The withdrawal of these major partners was attributed to “differing internal strategic reasons,” with Africa Oil’s President and CEO Keith Hill explaining that the company’s strategy had shifted to focus on production and high-potential exploration opportunities elsewhere, including their Orange Basin portfolio in Namibia.

Following the partners’ exit, Tullow’s situation deteriorated further when the Kenyan government rejected the company’s Field Development Plan (FDP) in 2024, citing concerns about Tullow’s weak financial position and ability to fund the estimated $3.7 billion required for full project commercialization. The rejection led to Tullow’s exit from the Kenyan market after over a decade of exploration work, following losses of approximately Ksh19 million during its operations in Kenya.

Regional Context and Gas Discoveries

Despite the challenges with oil development, Kenya has made notable progress in gas exploration, particularly in offshore areas. Previous discoveries have been made in the offshore Lamu Basin, Anza Basin, and Mbawa 1 well located 70 kilometers off the coast of Malindi, while the Sunbird 1 well in the Lamu basin has also shown promising results.

These gas discoveries provide important geological insights that inform the current licensing round, particularly for blocks located in the Lamu and Anza basins. The presence of hydrocarbons in these areas validates Kenya’s hydrocarbon potential and provides confidence for prospective investors considering participation in the upcoming licensing round.

The timing of Kenya’s licensing initiative coincides with increased regional activity in East African energy markets. Neighboring countries have made significant strides in developing their hydrocarbon resources, with Mozambique emerging as a major LNG producer and Uganda progressing with oil development projects. Kenya’s renewed focus on attracting investment reflects recognition that the country needs to act decisively to capitalize on its geological potential.

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Economic Implications and Investment Incentives

The government’s commitment to providing comprehensive investment incentives extends beyond tax relief to include regulatory improvements and enhanced operational support. The restructured PSC terms offer greater flexibility for international operators while ensuring that Kenya retains appropriate benefits from resource development.

Principal Secretary Liban outlined the government’s comprehensive approach to supporting petroleum sector investments: “The government is strengthening the petroleum industry by ensuring that investments are well-supported through better policies and infrastructure.” This includes not only financial incentives but also streamlined regulatory processes and improved access to technical data.

The economic impact of successful oil and gas development could be transformative for Kenya. The LAPSSET Corridor project alone is expected to contribute an additional 3% increase in Kenya’s GDP, while direct petroleum production and associated industries could provide substantial employment opportunities and foreign exchange earnings.

Kenya’s petroleum sector workforce has been steadily growing and developing technical capabilities, providing a foundation for expanded industry activities. The government has emphasized the availability of “highly skilled and growing workforce” in the petroleum sector as an additional attraction for international investors.

Environmental and Social Considerations

The expansion of oil and gas exploration in Kenya occurs amid ongoing discussions about environmental protection and community impacts. Coastal communities, particularly along the Lamu coastline, have expressed concerns about potential impacts on traditional fishing activities and marine environments.

Approximately 60,000 artisanal fisherfolk live along the Kenyan coast, many of whom have previously raised concerns about seismic acquisition exercises potentially damaging fishing grounds and reducing catch volumes. Environmental groups emphasize the importance of ensuring that expanded exploration activities incorporate robust environmental safeguards and meaningful community consultation processes.

The government has emphasized its commitment to responsible resource development, including comprehensive environmental and social impact assessments for all projects. The LAPSSET project itself has incorporated extensive environmental planning, though implementation has faced some challenges related to community concerns and environmental compliance.

Regional Integration and Strategic Partnerships

Kenya’s petroleum sector development is closely linked to broader regional integration objectives. The LAPSSET Corridor project aims to establish Kenya as a key transit hub for landlocked neighbors, potentially handling oil exports from South Sudan and Ethiopia in addition to domestic production.

The proposed pipeline connections to South Sudan’s oil fields could provide Kenya with additional revenue streams through transit fees while offering South Sudan an alternative export route that reduces dependence on Sudan. However, progress on these regional connections has been slower than originally anticipated, partly due to security concerns and financing challenges.

Ethiopia’s commitment to the LAPSSET project has become less certain due to its partnership with Djibouti to develop alternative pipeline infrastructure. Similarly, Uganda’s decision to link its petroleum infrastructure with Tanzania rather than Kenya has reduced some of the anticipated regional benefits. These developments underscore the competitive nature of East African energy infrastructure development and the importance of Kenya successfully developing its domestic resources.

Technology and Operational Capabilities

The current licensing round emphasizes Kenya’s commitment to deploying modern exploration and production technologies. The comprehensive geoscientific database compiled by the government incorporates advanced seismic surveys and sophisticated geological analysis, providing prospective investors with high-quality technical information to support investment decisions.

Kenya’s National Oil Corporation (NOCK) has developed significant technical capabilities over the years, including data management systems and geological expertise. The availability of this technical infrastructure and local expertise reduces some of the operational risks and costs associated with exploration activities in the region.

The government has also emphasized its commitment to incorporating environmental technologies and best practices in all petroleum sector activities. This includes requirements for modern environmental monitoring systems, waste management protocols, and emission control technologies that align with international standards.

Market Outlook and Investment Prospects

Industry analysts view Kenya’s renewed licensing initiative with cautious optimism, recognizing both the country’s geological potential and the challenges that have affected previous projects. The comprehensive nature of the regulatory reforms and infrastructure investments demonstrates government commitment, while the availability of detailed technical data reduces some exploration risks.

The flexible PSC terms and tax incentives make Kenya more competitive with other East African jurisdictions seeking petroleum investment. However, the success of the licensing round will largely depend on the government’s ability to demonstrate that previous challenges have been addressed and that new projects can progress efficiently through development phases.

Global oil and gas markets remain favorable for new exploration activities, particularly in regions with significant untapped potential like East Africa. Kenya’s strategic location, existing infrastructure base, and growing technical capabilities position the country to benefit from international industry interest in the region.

Conclusion and Future Prospects

Kenya’s first petroleum licensing round in six years represents a critical juncture for the country’s energy sector ambitions. The comprehensive regulatory reforms, infrastructure investments, and flexible contract terms demonstrate serious government commitment to creating a viable petroleum industry.

The lessons learned from previous challenges, particularly the Tullow Oil experience, have informed the government’s approach to the current initiative. The emphasis on transparency, merit-based allocation processes, and comprehensive investor support reflects recognition that successful petroleum sector development requires sustained commitment and professional execution.

Success in attracting credible international operators to the new licensing round could help restore confidence in Kenya’s petroleum sector and provide a foundation for sustained industry development. The strategic importance of petroleum development extends beyond direct economic benefits to include regional integration objectives, infrastructure development, and enhanced energy security.

As Kenya prepares to launch this pivotal licensing round, the country’s petroleum sector stands at a crossroads between past challenges and future opportunities. The government’s ability to execute this initiative successfully will significantly influence Kenya’s trajectory as a regional energy player and its broader economic development objectives.

The outcome of the September licensing round will provide important insights into international investor confidence in Kenya’s petroleum sector and could set the stage for either a renaissance in the country’s oil and gas industry or continued struggles to realize the sector’s potential. With comprehensive preparations now complete, Kenya’s petroleum sector future may well depend on the success of this carefully planned licensing initiative.

The licensing round for Kenya’s 10 exploration blocks will be conducted through a transparent, merit-based process with detailed technical data available to prospective investors through the National Data Centre. Interested companies can access comprehensive geological, geophysical, and regulatory information to support their evaluation and bidding decisions.

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By: Montel Kamau

Serrari Financial Analyst

4th September, 2025