KPC stake sale: Kenya's strategic play in East Africa's oil and gas rush

Energy and Petroleum CS Opiyo Wandayi tours the Kenya Pipeline Company oil jetty at the shore of Lake Victoria. [File, Standard]

Questions have arisen on why the sale of the Kenya Pipeline Company (KPC) is being hurried, at least according to some quarters. Kenyans have also questioned why KPC is for sale, and not any other State agency?

While the National Treasury Cabinet Secretary John Mbadi has argued that KPC’s listing is linked to its strategic position in the sector and maturity – being a 52-year-old company – the answer may also lie in what is happening in the oil sector in the region.

For some reason, Uganda and Tanzania appear to be miles ahead of Kenya when it comes to exploration and mining of oil.

So far, the economic prospects in terms of growth seem to favour these countries compared to Kenya majorly because of natural gas and oil exploration.

World Bank data shows Kenya’s economy grew by 4.7 per cent in 2024, while Tanzania’s expanded by 5.5 per cent and Uganda 6.1 per cent in the same period.

Uganda expects to start mining its oil in July 2026. In Tanzania, the Attorney General is reviewing documents related to the Sh5.5 trillion ($42 billion) liquefied natural gas (LNG) project. For this LNG project, Kenya already has an agreement with Tanzania on how to tap into this resource.

While Kenya has moved ahead to fast-track the listing of KPC slated for March 9, Uganda is still discussing the possibility of listing its own State-owned Uganda National Oil Company, which fully owns the Uganda National Pipeline Company (UNPC).

In Tanzania, the Tanzania Petroleum Development Corporation (TPDC) is not listed. There is, however, Swala Oil & Gas, a privately owned firm in the energy space, that is listed on the Dar-es-Salaam stock exchange.

Of the products that KPC handles, 52 per cent are destined for export. Of this, 65 per cent are destined to Uganda. This makes Uganda, apart from Kenya, a major revenue line for KPC. The landlocked nature of Uganda makes it a good business partner for KPC

But with Uganda exploring crude oil mining starting this July, the question that lingers is on how business would look like for KPC even as it goes public?

“We have identified this particular risk. Our view is that, as much as production is expected to start in July this year, refining is not happening before five years,” says Kenne Belgrade, the lead transactional adviser for KPC. 

He adds: “Even that particular product might not be fit for local consumption. We see the projection of demand being stable for the foreseeable future.”

Belgrade says the Uganda factor has been included in the slower growth projected by KPC.

“We do not see Uganda refining oil in the foreseeable five-year future as much as production might start in between,” he adds.

Timelines in Uganda show the Hoima Refinery will be completed in 2028. That should give KPC some time.

Like Uganda, Kenya also has oil prospects. There is an expectation of December 2026, according to plans outlined by Energy Cabinet Secretary Opiyo Wandayi.

This follows renewed government efforts that saw the approval of the South Lokichar Basin Field Development Plan. 

This plan, estimated at almost Sh800 billion ($6.1 billion), has been submitted to Parliament for ratification. This is the furthest in oil mining project execution Kenya has come since exploration.

The expectation is that 326 million barrels of oil will be mined from the project over 25 years. These are 20,000 barrels per day in phase one, rising to 50,000 barrels in phase two.

“The contractor (Gulf Energy) targets first oil by December 2026 and full ramp-up by 2032,” said Wandayi in November 2025 when he signed the documents submitting the plan to Parliament for ratification.

For comparison, Uganda is targeting 1.5 billion barrels of oil in its mining expedition. The country, however, is said to have over six billion barrels.

The KPC IPO Information Memorandum documents that in the FY2024/25, regional markets’ total demand was estimated at 13 million cubic metre comprising 5.8 million cubic metre domestic market and 7.5 million cubic metres for transit.

The document adds that all domestic products and 65 per cent of KPC’s current transit markets (Uganda, South Sudan, Rwanda, Eastern DRC and Burundi) imports were received through the Port of Mombasa.

“Uganda is the major transit market on the Northern Corridor, accounting for 65 per cent of the transit market’s demand as at FY2023/24, followed by Eastern DRC at 19 per cent, South Sudan at 15 per cent and Rwanda at one per cent,” the KPC document says.

In the IPO that was opened on January 19, investors from the EAC have been allocated 20 per cent of the 11.8 billion ordinary shares up for sale by the government.

More so, foreigners also have a similar percentage. This is strategic, considering that KPC serves a majority of the EAC market, and more so, some of the firms that have invested in oil and gas exploration in the region are foreign.

By virtue of Tanzania having its own Port of Dar-es-Salaam that competes with the Kenyan coastal harbour, it gets to serve parts of DRC, Rwanda, Uganda and Burundi.

But for prospects of the KPC IPO, Tanzania’s investment in LNG is what stands out.

KPC Managing Director Joe Sang revealed an existing deal that the company will play a role in once executed.

“In Tanzania, they are now exploiting their natural resources, especially LNG. The government of Kenya has a memorandum of understanding (MoU) with Tanzania, and we are looking at how to activate that process so that we bring LNG into Kenya,” he said.

For Sang, notwithstanding the risks associated with Uganda’s oil exploration and its ripple effects into other landlocked countries, Kenya serves, KPC is looking beyond fossil fuels.

The company already has Safaricom, MTN and Jamii Telecommunication as clients for its fibre. The dark fibre is part of its 1,342 km pipeline infrastructure network.

“By lighting it, we will be able to get even more telcos come on board and take it to the last mile,” he said. “In the next five years in our strategic plan, about 10 to 12 per cent of our revenue will be coming from the fibre optic. And another about eight per cent from LPG and LNG.”

The other plan is to utilise its subsidiary, Kenya Petroleum Refineries Limited (KPRL), to swamp the biofuels market.

“We also want to optimise our subsidiary, which is KPRL, in bringing in biofuels. These are the other forms of energy that we will be bringing on board to mitigate the business risk,” he said. “As a business, we are optimistic that the future is bright.”