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

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 contract was executed through Kenya Petroleum Refineries Limited (KPRL), a wholly owned subsidiary of KPC. Under the terms of the agreement, KPRL will provide storage, handling, and delivery services for crude oil destined for export through the Kipevu Oil Terminal II (KOT II) in Mombasa.

KPC clarified that the Sh93.68 billion figure represents an internal projection based on expected crude oil throughput and tariff assumptions, rather than a guaranteed revenue commitment. The company noted that KPRL will earn fixed service fees and recover qualifying variable costs over the 25-year period.

The long-term deal arrives as Gulf Energy expands its operations from downstream petroleum distribution into upstream exploration and production. The firm is pursuing upstream ventures, including interests in the South Lokichar Basin located in Turkana County.

In a related development, KPC and the Kenya Ports Authority (KPA) revised their Service Level Agreement governing operations at KOT II. The updated framework clarifies institutional responsibilities, strengthens accountability, and improves maintenance coordination between the two state entities.

While the revised agreement with KPA is not expected to yield direct monetary returns, KPC stated that the operational framework remains critical to maintaining petroleum logistics and ensuring supply continuity across regional markets.

The infrastructure deal follows corporate restructuring at KPC after the government completed a partial privatization process on the Nairobi Securities Exchange (NSE). The transaction involved selling a 65 percent stake while retaining 35 percent ownership, raising over Sh106 billion.

The commercial arrangement utilizes upgraded assets at the Mombasa refinery site, supporting the integration of crude transport links between inland production fields and maritime export infrastructure.