The National Treasury has cut Sh9.84 billion in funding for the development of the South Lokichar Basin, hurting the country’s dream of delivering its first oil before the end of 2026.
Budget estimates approved by the National Assembly last Thursday excluded the entire Sh9.84 billion, which had earlier been apportioned to the State Department for Petroleum for development of the oil field.
The 2026 Budget Policy Statement (BPS), which the National Assembly approved in March 2026, had allocated the State Department for Petroleum some Sh30.23 billion for the 2026/2027 fiscal year.
This included Sh20.4 billion in recurrent expenditure and Sh9.84 billion towards development. However, in the estimates approved by the House, the State Department was only apportioned Sh22.04 billion for recurrent expenditure, with the entire development budget scrapped.
The acting Principal Secretary for Petroleum Mohamed Birik said that the scrapped development budget puts the implementation of seven ongoing major projects in the country in limbo.
They include oil production in Lokichar, Turkana, which had been allocated Sh5.52 billion; the implementation of the LPG distribution, Sh991 million; and infrastructure and clean cooking gas for boarding learning institutions, Sh370 million.
‘Withdrawal of the budget under the South Lokichar oil field will hamper the development and commercialisation of the discovered oil resources and realisation of the first oil by December 2026 and export by February 2026,’ says Mr Birik.
Kenya, through Gulf Energy, expects to start commercial production of the Turkana oil Block T6 and Block T7 by December 2026. An estimated 20,000 barrels per day(bpd) of crude oil will be produced in the first phase (2026-2032) before it is scaled up to 50,000 bpd from 2032.
Documents show that Parliament has ratified the field development plan(FDP) for the Turkana oilfields. The FDP shows that 600,000 bpd of crude oil will be exported every month in phase one. This will jump to 1.5 million bpd in phase two.
The slashed funding by the Treasury also risks affecting the midstream and downstream petroleum distribution programmes, which had been allocated Sh590 million; upstream oil and gas exploration (Sh1.41 billion); the Lokichar- Lamu crude oil pipeline (LLCOP) Sh710 million and the petroleum exploration in block T11, which has seen Sh250 million chopped off.
The projects had been funded in the fiscal year 2025/26 supplementary estimates I to the tune of Sh5.3 billion, with the funding for the 2026/27 period meant to oversee their completion.
‘The removal of funding will adversely and immensely affect the projects,’ says Mr Birik.
For instance, the funding for the South Lokichar oil field development was meant to finalise land surveys, the inspection and valuation for the oil fields and compensation of persons displaced by the project.
Also affected are the payments of the ongoing consultancy service contracts for developing a grievance redress framework, resettlement and livelihood restoration framework, and environmental and social impact audits for the oil exploration activities in blocks T6 and T7, among others.
There is also the stakeholder and community sensitisation and engagements on local content, waste management, petroleum revenue sharing and management, negotiation of commercial and host government agreements between the State and the contractor.
The funds were also required for coordination of the multi-agency project support workstreams- water, electricity, security, environment, and monitoring and evaluation of the implementation of the project.
LPG distribution through 6 kg cylinders to low-income households and LPG reticulation under the Affordable Housing Programme and support to the LPG growth strategy are part of President William Ruto’s pet growth projects.
The national LPG growth strategy aims to increase LPG per capita consumption from 7.5 kg to 15 kg per year and ‘enhance penetration from 24 percent to 70 percent by 2028.
The funds were meant to cater for the development frameworks and financing models for the manufacturing and distribution of 6 kg cylinders by the private sector and safety awareness sensitisation on LPG usage.
The funding also affects stakeholder engagement and public sensitisation on the LPF reticulation, scoping and pre-feasibility studies of affordable housing sites for LPG reticulations, joint feasibility studies on regional gas infrastructure- the Kenya-Tanzania natural gas pipeline- and monitoring and evaluation of the implementation of the LPG growth strategy.