By Andrew Kariuki
Members of the National Assembly have begun debating the Special Economic Zones (Amendment) Bill, 2026, which seeks to extend SEZ incentives to petroleum operators in a move aimed at attracting investment into Kenya’s oil sector.
The proposed law intends to incorporate upstream and midstream petroleum activities into the country’s Special Economic Zones framework, aligning regulatory and fiscal structures with the demands of large-scale oil projects.
Lawmakers backing the Bill argue that existing legal and tax frameworks have slowed the transition from oil exploration to commercial production, particularly in capital-intensive projects that require long-term investment.
A key proposal in the Bill is the introduction of longer licensing periods, with petroleum zone operators set to receive licenses lasting a minimum of 10 years. This is expected to replace shorter-term arrangements that have been viewed as inadequate for projects requiring significant upfront capital and extended development timelines.
The legislation also introduces a range of fiscal incentives designed to lower operational costs and improve investor confidence. These include extending value-added tax (VAT) relief to supplies made to SEZ operators and removing time limits on certain withholding tax exemptions for payments to non-residents.
Additional provisions seek to exempt critical oil sector equipment from selected levies, particularly those related to rail transport, easing the movement of heavy infrastructure to production sites.
The proposed reforms build on measures introduced in 2025, when the government granted tax and duty exemptions to Gulf Energy under a restructured production-sharing contract for Block T7 in Turkana. The agreement included VAT exemptions on petroleum inputs, removal of import levies, and adjustments to withholding tax obligations, alongside expanded cost recovery provisions.
The new Bill seeks to standardise such incentives across the petroleum sector by embedding them in law rather than limiting them to individual project agreements.
Supporters of the proposal say the move could create a more predictable investment environment and accelerate development across multiple oil blocks, particularly in Turkana, where recoverable reserves are estimated to exceed 300 million barrels.
The reforms signal a broader policy shift aimed at positioning Kenya’s petroleum sector within a more competitive fiscal and regulatory framework to attract long-term investment.
