The Energy and Petroleum Regulatory Authority (EPRA) has put forward draft regulations that could see oil companies operating in Kenya face fines of at least Ksh20 million for obstructing inspections. These proposals come as Kenya prepares to ramp up commercial oil production.

The Draft Petroleum (Upstream Petroleum Cost Management) Regulations, 2026, currently open for public input, aim to introduce robust financial oversight and stricter compliance measures within the upstream petroleum sector.

Key Provisions of the Draft Regulations

  • Fines for Non-Compliance: Contractors denying EPRA inspectors access to facilities or records risk fines starting at Ksh20 million.
  • Expanded Inspection Powers: EPRA will have authority to audit books, inspect all operational sites, warehouses, and offices linked to petroleum activities.
  • Mandatory Cooperation: Oil firms must provide complete, original documents and promptly respond to audit queries, bearing the burden of proving that costs are legitimate and properly incurred.
  • Financial Controls: Petroleum projects must maintain a debt-to-equity ratio not exceeding 70:30, ensuring at least 30% of development costs are equity financed.
  • Cost Recovery Oversight: Companies must secure government approval before recovering project costs, with any budget overruns over 10% requiring further clearance.
  • Transparency Requirements: Monthly, quarterly, and annual financial reports must be submitted, covering production, sales, inventories, and profit-sharing, alongside annual audits by independent, EPRA-approved auditors.
  • Restrictions on Recoverable Costs: The draft excludes certain expenses from cost recovery, including loan interest, foreign exchange losses, CSR initiatives, litigation, and costs arising from negligence or law violations.
  • Audit Scope: EPRA’s audit reach extends beyond production sites where necessary and includes powers to revisit previous audit reports if fraud or errors are detected.

These regulations seek to enhance accountability, financial sustainability, and transparency in Kenya’s upstream petroleum sector as the country moves closer to commercial oil extraction, particularly in Turkana.