Court fight erupts over Sh93.7bn Gulf Energy deal for Kipevu oil terminal

A Sh93.68 billion agreement giving Gulf Energy access to strategic oil infrastructure in Mombasa for 25 years has landed in court, with a consumer lobby questioning how the company was selected and whether the deal meets constitutional standards on transparency and public procurement.

The High Court has certified as urgent a petition filed by the Consumers Federation of Kenya challenging the crude-oil storage and handling agreement between Kenya Petroleum Refineries Limited and Gulf Energy E&P B.V.

The agreement was signed on August 26 and covers the use of Kipevu Oil Terminal II for the receipt, storage, handling and delivery of crude oil for export.

KPRL is a wholly owned subsidiary of Kenya Pipeline Company.

The deal is projected by KPC to generate approximately Sh93.68 billion in gross revenue over its 25-year life.

Cofek, however, wants the court to examine the process through which the agreement was reached.

The organisation argues that material terms of the agreement and information explaining how Gulf Energy was selected were not sufficiently disclosed publicly.

It wants the court to determine whether the agreement complied with constitutional requirements for transparency, accountability and prudent management of public resources.

It is also questioning whether the process was fair, equitable, transparent, competitive and cost-effective as required for public procurement.

Those are allegations raised in pending litigation. The court has not ruled that Gulf Energy, KPRL or KPC acted unlawfully.

Why Kipevu matters

The dispute is significant because it concerns strategic petroleum infrastructure rather than an ordinary government supply contract.

Kipevu Oil Terminal II is part of the infrastructure through which petroleum products move into Kenya and the wider East African region.

The Gulf Energy agreement is specifically intended to facilitate crude-oil storage and handling.

KPC announced in August that the arrangement would deepen Kenya's role as a regional petroleum logistics hub while generating long-term revenue from infrastructure owned by the state.

But the length and value of the agreement have increased scrutiny over how access to such strategic infrastructure is allocated.

A 25-year agreement can outlast several governments.

Cofek argues this makes transparency around the selection process and contractual terms particularly important.

Court intervention

The High Court's decision to certify the matter as urgent does not determine the merits of Cofek's arguments.

It means the court considers the dispute sufficiently pressing to receive expedited attention.

Cofek wants implementation suspended while the legal questions are determined, arguing that allowing the agreement to progress could create contractual and operational obligations that become difficult to reverse.

The government and companies involved will have an opportunity to respond to the allegations.

The case arrives as Kenya seeks billions of dollars in new energy investment.

President William Ruto's administration is simultaneously pursuing commercial oil production in Turkana and a proposed large refinery and petrochemical complex in Lamu.

Those projects make transparency around petroleum infrastructure increasingly important.

Kenya needs private capital to finance major energy investments.

Investors, however, also require predictable procurement rules and confidence that contracts will survive legal scrutiny.

The Kipevu case therefore presents a larger question than whether one company should be allowed to use one terminal.

It tests how Kenya balances the need to move major investments quickly with constitutional requirements governing public assets and procurement.

For now, the Sh93.68 billion figure represents projected gross revenue from the agreement — not money that has already been paid to the government.

And the allegations surrounding the procurement process remain allegations until the court determines them.

The next important development will be the responses from KPRL, KPC, Gulf Energy and the government, and whether the High Court grants Cofek's request to suspend implementation while the petition proceeds.