Tullow Oil PLC has formally objected to a KSh 23 billion (US$170million) tax assessment by the Kenya Revenue Authority (KRA), setting up what could be a protracted dispute over the company’s exit from Kenya.
- •The assessment, covering the period between 2020 and 2025, includes KSh 18.3 billion in value-added tax, KSh 4.6 billion in capital gains tax, and KSh 128.5 million in withholding tax, according to disclosures by the tax authority.
- •The taxes relate to Tullow’s US$120 million sale of its Kenyan interests to Gulf Energy Group, a deal the company has argued is being overstated by the authority, prompting its decision to pursue a statutory objection process.
- •The dispute also intersects with the commercial structure of Tullow’s exit; US$40 million paid at completion, US$40 million due by mid-2026 subject to regulatory approvals, and a final US$40 million linked to the start of production.
In its most recent trading update, Tullow indicated that delays in receiving part of the Kenya proceeds had already weighed on cash flow, underscoring the extent to which the exit remains contingent on regulatory milestones, including approval of the field development plan.
The challenge also comes as Kenya sharpens its approach to petroleum taxation, amid concerns that earlier fiscal terms could dilute the state’s share of future oil revenues. Lawmakers and auditors have warned that extensive exemptions, elevated cost-recovery limits and delays in auditing petroleum contracts risk deferring government earnings once production begins in the Turkana fields.
Tax data presented to Parliament show exploration firms in Kenya benefited from at least KSh 12.47 billion in import-related exemptions, including KSh 9.9 billion granted to Tullow’s local subsidiary, intensifying scrutiny of the sector’s fiscal regime. Authorities have signaled plans to curb exemptions, tighten transfer pricing oversight, and revise rules governing deductions and cross-border financing.
The tax dispute leaves Tullow with a lingering legal exposure in a market it has exited, even as the company pivots to its core producing assets in Ghana, where it reported about US$ 847 million in revenue. The group has also refinanced debt facilities to extend maturities and expects 2026 production of 34,000 to 42,000 barrels of oil equivalent per day.
