The Government of Kenya has signed a far-reaching Addendum to the Production Sharing Contract (PSC) for the Turkana oil blocks, handing Gulf Energy E&P B.V. significant new fiscal and operational advantages as the company moves toward developing Blocks T6 and T7.<\/p>\n\n\n\n
The Addendum signed in late November 2025 between the Ministry of Energy & Petroleum and Gulf Energy renews the terms of the original PSC initially awarded in 2008 and subsequently held by partners including Platform, Africa Oil, Tullow Oil, Maersk, Total, and MOGAS before finally consolidating under Gulf Energy.<\/p>\n\n\n\n
Sweeping Tax Exemptions Granted<\/strong><\/p>\n\n\n\n One of the most consequential changes is the introduction of a new Clause 32A, which exempts Gulf Energy and all its subcontractors from several major taxes on goods and services used in petroleum operations. These include:<\/p>\n\n\n\n The exemptions apply to petroleum exploration, development, production, processing, and transportation activities.<\/p>\n\n\n\n Higher Cost Recovery Cap Reduces Kenya\u2019s Share<\/strong><\/p>\n\n\n\n The Addendum significantly revises the cost-recovery structure. Gulf Energy can now recover up to 85% of annual crude oil production as “cost oil,” compared to the 65% cap under Tullow\u2019s original contract.<\/p>\n\n\n\n This means the State will only begin receiving \u201cprofit oil\u201d after the contractor deducts a much larger portion of crude to cover costs\u2014reducing Kenya\u2019s immediate revenue share from early production years.<\/p>\n\n\n\n Expanded Recoverable Capital Costs<\/strong><\/p>\n\n\n\n The Addendum broadens the definition of \u201ccapital expenditure,\u201d allowing the contractor to write off a wider range of costs including:<\/p>\n\n\n\n This expansion increases the pool of expenses eligible for recovery before profit-oil sharing begins.<\/p>\n\n\n\n Crude Oil Lifting Point Moved to Turkana<\/strong><\/p>\n\n\n\n The government has replaced all references to Mombasa with Turkana as the lifting point for crude oil.<\/p>\n\n\n\n Under new Clause 27(6), the contractor may lift all crude oil produced, including the government\u2019s share, on terms to be agreed. This centralizes export logistics under Gulf Energy\u2019s control.<\/p>\n\n\n\n Contract Shielded from Future Legal Changes<\/strong><\/p>\n\n\n\n A new Clause 33A ensures the PSC is protected from retroactive changes in law:<\/p>\n\n\n\n \u201c\u2026any amendment, repeal, or enactment of laws\u2026 shall not apply retrospectively to alter, diminish, or impair rights, privileges, and obligations under this contract.\u201d<\/p>\n\n\n\n This stabilisation clause secures the contractor against future regulatory or fiscal adjustments\u2014including those arising from petroleum law reforms.<\/p>\n\n\n\n Gulf Energy Now Sole Owner of Block T7<\/strong><\/p>\n\n\n\n After years of partner exits\u2014including Tullow, Total, Africa Oil, Maersk, and MOGAS the Addendum confirms that Gulf Energy E&P B.V. now holds 100% interest in Block T7.<\/p>\n\n\n\n The company recently restructured its identity, shifting from Tullow\u2019s Kenyan branch to Gulf Energy E&P B.V., a Netherlands-incorporated entity.<\/p>\n\n\n\n Government Approves Field Development Plan (FDP) A Major Turning Point<\/strong><\/p>\n\n\n\n The Addendum confirms that Gulf Energy has already submitted the Field Development Plan (FDP) for discoveries in Blocks T6 and T7, which EPRA has reviewed and forwarded to the Cabinet Secretary.<\/p>\n\n\n\n The government has now approved the South Lokichar Basin Field Development Plan, officially marking Kenya\u2019s transition from exploration to commercial oil development for the first time.<\/p>\n\n\n\n Key FDP highlights:<\/p>\n\n\n\n Total investment: USD 6.1 billion<\/p>\n\n\n\n This approval represents the most significant advancement in Kenya\u2019s oil sector since the original discoveries more than a decade ago.<\/p>\n\n\n\n A New Chapter for Turkana Oil\u2014But With Tough Trade-offs<\/strong><\/p>\n\n\n\n\n
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