Kenya’s ambitious plan to deliver its first commercial oil before the end of 2026 has suffered a major setback after the National Treasury slashed Ksh9.84 billion in development funding for the South Lokichar Basin project.

In a statement shared on X on Monday, June 8, 2026, Fintech raised concerns over the budget cut, warning that the move could derail the country’s long-awaited commercial oil journey and slow key petroleum development programmes.

The funding reduction follows budget estimates approved by the National Assembly last Thursday, which removed the entire development allocation initially earmarked for the State Department for Petroleum, leaving the department with Sh22.04 billion for recurrent expenditure only.

Projects now in uncertainty

Acting Petroleum Principal Secretary Mohamed Birik warned that the withdrawal of development funds has placed several strategic projects in limbo, including oil production activities in Lokichar, Turkana.

The Lokichar project alone had been allocated Ksh5.52 billion, while LPG distribution had been earmarked for Ksh991 million and clean cooking gas infrastructure for boarding schools allocated Ksh370 million.

“The withdrawal will hamper the development and commercialisation of the discovered oil resources,” Birik said.

He further noted that the budget reduction could affect land surveys, compensation for displaced persons, environmental and social impact assessments, community engagement and local content programmes.

Commercial oil target faces fresh pressure

Kenya, through Gulf Energy, had projected the start of commercial production from Turkana oil Blocks T6 and T7 by December 2026.

Initial projections indicated production of approximately 20,000 barrels per day between 2026 and 2032 before increasing to 50,000 barrels per day from 2032.

However, the latest development now casts uncertainty over that timeline.

Clean cooking and pipeline projects also affected

The budget cut is also expected to affect petroleum exploration in Block T11, the proposed Lokichar-Lamu crude oil pipeline and government-backed LPG growth programmes tied to President William Ruto’s clean cooking agenda.

The government had targeted an increase in LPG consumption from 7.5kg to 15kg per person while raising national penetration levels from 24 per cent to 70 per cent by 2028.

Stakeholders are now expected to closely monitor the next steps as concerns emerge over the future of Kenya’s long-awaited oil production ambitions.