The State Department for Petroleum has told lawmakers that Kenya’s plan to grow its oil industry faces fresh uncertainty after the National Treasury removed all development funding in the proposed 2026/27 budget, a move officials say could slow down key projects and halt ongoing exploration work.
While appearing before the National Assembly Committee on Energy on Tuesday, acting Principal Secretary and Secretary Administration at the State Department for Petroleum Mohamed Birik said the budget decision threatens several strategic programmes, including the South Lokichar Oil Field Development in Turkana County, as well as exploration activities in the Lamu Basin and Block TH.
According to the budget proposals, the department had requested Sh9.835 billion to finance development work in the 2026/27 financial year. However, the Treasury has allocated zero funds under the development vote.
The planned money was set to support major initiatives such as South Lokichar Oil Field Development, which was to receive Sh5.519 billion, Upstream Oil and Gas Exploration at Sh1.405 billion, LPG Distribution and Infrastructure under the BETA programme at Sh991 million, the Lokichar-Lamu Crude Oil Pipeline project at Sh710 million, and petroleum exploration activities in Block TI worth Sh.250 million.
Mohamed Birik told MPs that the removal of funding leaves the department unable to implement its core development agenda and fulfil government directives tied to the petroleum sector.
“Consequently, the State Department has no funds in the FY 2026/27 to cater for ongoing development projects, through which it implements its core mandate and Cabinet directives,” Mohamed Birik said.
Lawmakers were further informed that the cuts come at a time when Parliament had already approved the South Lokichar Field Development Plan, clearing the way for commercial oil production.
“The Field Development Plan has already been ratified by Parliament paving way for commercial oil production,” Mohamed Birikstated.
He explained that the budget was also meant to cover preparatory work required before production begins, including land processes, compensation, and community engagement in project areas.
This included activities such as “Finalization of land surveys, inspection, and valuation for the South Lokichar oil fields” and “compensation of project affected persons for structures and compulsorily acquired land for oil field development.”
Other planned engagements involved “stakeholder and community sensitization and engagements on local content, waste management, petroleum revenue sharing and management among others,” as well as “negotiation of commercial and host Government agreements between the Government and the Contractor.”
Mohamed Birik cautioned that failure to fund these processes could delay implementation timelines, discourage investors, and slow down Kenya’s shift into oil production.
Attention was also drawn to exploration work in the Lamu Basin, where planned seismic surveys and environmental assessments were expected to guide future drilling.
In Block TH, operated by the National Oil Corporation of Kenya, the department said significant technical progress has already been made through data collection and interpretation.
“To date, NOCK has acquired seismic data and consolidated of all data sets since the effective date of the PSC. The interpreted data has been able to map drillable prospect with a petroleum resource potential of up to 118 million barrels of oil,” Mohamed Birik said.
The next phase of work was expected to involve drilling an exploratory well during the 2026/27 financial year.
“NOCK will utilize the Financial Year 2026/27 budget for the drilling of an exploratory well through the prospect,” Mohamed Birik said.
However, officials warned that without funding, ongoing geological work risks being wasted and potential discoveries delayed.
“The withdrawal of funds in the 2026/27 financial year will stall the exploration Program in Block TH, thereby negating the already established value of up to Sh3billion worth of data; and the chance for discoveries of Petroleum resources and subsequent commercialization,” Mohamed Birik said.
The department further told MPs that it had been allocated Sh.30.3 billion in the 2025/26 financial year for both recurrent and development spending. By March 30, 2026, only Sh.6.07 billion had been spent, representing 20 per cent absorption.
The low absorption rate was linked to reduced spending under the oil market stabilisation programme, following relatively stable global and domestic fuel prices.