The National Assembly is currently in the process of debating a new bill that would see major oil companies handed significant tax incentives, as well as exemptions from paying certain duties and levies to the government, if passed.

The Special Economic Zones (Amendment) Bill, 2026, introduced in the National Assembly by the Leader of Majority, Kimani Ichung’wah, seeks to amend the existing Special Economic Zones Act to enable gas and oil companies operating in the zones to access exemptions on import duties, value-added tax, and certain levies.

Under the new law, oil and gas companies seeking to invest in exploration and midstream activities, such as transportation, storage, and processing, would enjoy the tax incentives.

“This move is aimed at reducing operational costs and attracting more investors into Kenya’s oil sector,” Ichung’wah said

However, to stand to the tax benefits and exemptions, the companies would be required to operate from the Special Economic Zones (SEZ) related to the operational licences, such as the Turkana oil fields, which the government has set its target to begin exploration and export by December 2026.

Bill proposes adjustments to Tax laws

The bill also proposes adjustments to key tax laws, including the Income Tax Act, the Value Added Tax Act, and the Miscellaneous Fees and Levies Act, aligning them with the SEZ framework and effectively granting benefits to selected investors that ordinary taxpayers do not receive.

At the same time, the new law will now see the investors’ operations divided into two. This will include upstream petroleum operations, mainly involved with the exploration and extraction of oil, and midstream operations, which involve pipelines, storage terminals, and transport infrastructure.

Additionally, the companies would be granted a minimum 10-year licence for their business operations in the SEZs.

Foreign companies seeking to invest in Kenya’s gas and oil sector in the SEZs, which is a critical sector of the economy, would be exempted from the requirement that they have to be incorporated.

Meanwhile, Kenya will also stand to get a new categorisation of the SEZs, including dedicated oil and gas zones, to facilitate large-scale petroleum projects and associated infrastructure development.

Special Economic Zone developers and operators would also be allowed to conduct enterprise activities within the zones, enabling them to manage infrastructure while running commercial operations.

Lawmakers argue that the changes will accelerate commercial development of Kenya’s oil resources, attract foreign investment, and create jobs, particularly in regions like the South Lokichar Basin.

This comes at a time when Kenya’s pursuit to drill its first oil deposits in the South Lokichar Basin project in Turkana was handed a major boost in February after the country acquired an onshore drilling machine worth Ksh1.9 billion from the United Arab Emirates (UAE).