KenGen Risks Losing Olkaria Wells Over 18-Year Licence Blunder Kenya Electricity Generating Company (KenGen) faces a serious legal and operational risk at Olkaria after an error in the coordinates of its geothermal licence left part of the company’s wells, steam infrastructure and other assets outside its legally recognised area. The licensing mistake, made nearly two decades ago, remains unresolved despite the Ministry of Energy and Petroleum acknowledging the problem in 2017. The dispute has raised questions about the security of KenGen’s investments, the government’s management of geothermal resources and the potential consequences for Kenya’s electricity supply. Olkaria is the country’s most important geothermal centre and accounts for the overwhelming majority of Kenya’s installed geothermal generation capacity. Licence Error Exposes Strategic Assets The problem dates back to September 19, 2008, when the Ministry of Energy and Petroleum issued KenGen a licence covering ...
Idle GDC drilling machines put Sh15bn investment into question
Image: A GDC Owned Geothermal Rig
Kenya’s geothermal ambitions have long been presented as one of the country’s strongest energy success stories. Yet a fresh audit report has exposed a costly weakness inside the Geothermal Development Company, where drilling rigs worth Sh15.93 billion have raised hard questions about value for money, asset management, and the future pace of geothermal expansion.
The issue is not simply that machines are sitting idle. It is that these machines were bought for a strategic purpose: to drill wells, unlock steam, and help Kenya expand one of its cleanest and most reliable sources of power. When such expensive equipment remains unused for years, the problem goes far beyond maintenance. It points to a breakdown in planning, operations, oversight, and financial discipline.
For a country that relies heavily on geothermal energy to stabilise electricity supply, the implications are serious. Every idle rig represents delayed drilling, slower field development, lost revenue, and a weaker return on public investment. The audit has therefore turned a technical asset issue into a wider debate about how Kenya manages its energy infrastructure.
A costly fleet that is not fully working
The audit findings show that GDC owns seven drilling rigs, but three of them have remained out of operation for the past five years. These rigs were purchased at a significant cost, yet they have not been delivering the drilling activity expected of them. In addition to the rigs, the report also points to other support assets that are underused or non-functional.
The scale of the spending makes the situation especially troubling. The rigs are described as powerful machines capable of drilling deep wells for geothermal development, which means their downtime is not due to lack of importance. On the contrary, they are central to Kenya’s geothermal growth plan. If such key assets cannot be kept in service, the value of the initial investment becomes difficult to defend.
The Auditor-General’s concerns are not limited to the fact that the machines are idle. The report questions whether the country has received value for money from the Sh15.93 billion expenditure. That is a serious allegation in public finance terms. It suggests that the problem is not only operational, but also structural, because the investment failed to translate into the expected output.
Why the rigs stopped working
According to the company’s explanation, the rigs were damaged through vandalism, missing critical components, obsolete parts, and service-part breakdowns over a prolonged period. GDC also says it has lacked sufficient budget to repair the machines and has not had enough skilled personnel to operate all of them.
This paints a picture of neglect rather than a sudden collapse. Heavy industrial equipment does not usually become useless overnight. Instead, problems build up slowly when maintenance is deferred, repairs are delayed, parts are unavailable, and operational planning is weak. By the time the damage becomes visible, the machine may already have been out of action for a long time.
The explanation also highlights a common public-sector weakness: buying expensive capital equipment without fully funding its lifecycle. A drilling rig is not a one-time purchase that can be left to run itself. It needs security, trained operators, scheduled servicing, replacement components, insurance, and active management. Without those supporting systems, even the best machine can become a stranded asset.
One of the more worrying details in the audit is the failure to insure the rigs. For equipment of this value, insurance should be part of the standard risk-management framework. When such assets are exposed to vandalism, mechanical failure, and extended inactivity, the absence of insurance increases the financial risk to the public purse.
GDC has said it was carrying out a risk survey before buying insurance and intended to compare notes with peer institutions to establish best practice. That may be a reasonable administrative step, but it also underlines how slowly basic protections were put in place. For an asset class this expensive, insurance should not appear as an afterthought.
The issue is not merely administrative. Insurance can shape how quickly repairs are funded, how losses are recovered, and how management responds to risk. When a public agency leaves major assets uninsured, it takes on avoidable exposure and reduces the margin for error in an already constrained budget environment.
Support assets are also under pressure
The audit did not stop at the rigs themselves. It also found that eight of twelve bulk cementing trucks purchased in 2016 at a cost of Sh138.9 million were non-functional and had not been used for years. Those trucks are part of the support system needed in drilling operations, which means their failure adds another layer of inefficiency.
In large infrastructure projects, support equipment often receives less attention than the headline assets. Yet these machines are essential for keeping operations moving. When cementing trucks are unavailable, drilling support slows down. When support slows down, wells take longer to complete. And when wells take longer, geothermal development becomes more expensive.
The trucks therefore tell a similar story to the rigs: valuable equipment was purchased, but not properly sustained. That pattern points to weak asset lifecycle management, where acquisition is prioritised over long-term usefulness. In practical terms, this means the agency spends money to buy machines but struggles to keep them productive.
The software project that never landed
Another concerning finding involves a drilling monitoring software system contracted in 2014 for Sh344.5 million. The system was meant to provide real-time fleet management and CCTV integration across the rig fleet. According to the audit, it was never installed despite an advance payment of Sh137.8 million.
This part of the report is important because it shows the problem is not only mechanical but also digital and managerial. Modern drilling operations depend on monitoring, data collection, and real-time oversight. A fleet management system could have helped track equipment use, identify downtime faster, and reduce the risk of missed maintenance or theft.
The fact that the software was never deployed raises questions about contract management, vendor oversight, and project follow-through. It also suggests that the lack of visibility into the rigs may have made it harder to detect problems early. In that sense, the missing software may have been both a symptom and a contributor to the broader asset crisis.
Why geothermal uptime matters
Geothermal development is not like buying office equipment or general-purpose vehicles. It is a specialised industrial process that depends on precision, continuity, and scale. A drilling rig that sits idle for months or years is not just a wasted purchase. It represents wells that are not drilled, steam that is not accessed, and power that is not generated.
This matters because geothermal energy plays a central role in Kenya’s electricity system. It is one of the country’s most dependable sources of baseload power and a major pillar of the clean-energy mix. The success of that system depends on the ability to keep drilling, expand steam fields, and bring new generation online at a steady pace.
When drilling assets are idle, the entire pipeline slows down. That can affect project timelines, financing assumptions, and the broader confidence of stakeholders in the sector. The result is not only technical inefficiency but also strategic delay in a sector that Kenya needs to grow.
Financial strain inside GDC
The audit also shows that GDC is under financial pressure. The company’s pre-tax loss widened to Sh1.46 billion in the year ended June 2025, up from Sh528.2 million the previous year. Although a tax credit helped the company post a net profit of Sh352.02 million, the core operating position remains weak.
That financial backdrop makes the idle assets even more problematic. When an agency is already losing money, every underutilised machine becomes harder to justify. The cost of repairs, the cost of insurance, and the cost of keeping a large fleet available all become more difficult to carry.
It also creates a vicious cycle. Weak finances limit maintenance. Poor maintenance increases downtime. Downtime reduces output. Lower output weakens financial performance even further. Unless the cycle is broken, the same problems can continue year after year.
Lessons for public investment
The GDC case offers a wider lesson for public investment in infrastructure. Governments often focus on the acquisition stage because that is where large budgets are approved and visible assets are created. But the real test of a project begins after the purchase. Can the asset be maintained, insured, staffed, monitored, and used productively?
If the answer is no, then the project may look successful on paper while failing in practice. That is especially dangerous in sectors like energy, where the public expects long-term returns from expensive capital spending. A drilling rig has no value if it cannot drill. A support truck has no value if it cannot support operations. A monitoring system has no value if it is never installed.
The principle is simple: lifecycle planning must come before procurement, not after. Decision-makers need to budget not only for acquisition, but also for maintenance contracts, spare parts, security, training, and replacement cycles. Without that discipline, public institutions risk turning investments into liabilities.
What should be done next
The first priority is to restore the rigs that can still be repaired. That requires a clear technical assessment, a repair timetable, and a budget that reflects the real cost of bringing the machines back into service. The company should also identify which rigs are beyond economical repair and document the reasons openly.
Second, GDC needs a stronger asset management framework. That includes preventive maintenance, proper storage, security measures, insurance coverage, and a digital monitoring system that actually works. The combination of physical and digital oversight is necessary if the company wants to avoid repeating the same losses.
Third, staffing must be aligned with equipment ownership. Owning seven rigs is not enough if the institution lacks enough skilled personnel to run them. Training, recruitment, and retention of technical staff should therefore be treated as operational necessities rather than optional extras.
Finally, future procurement should be tied more closely to operational readiness. If GDC cannot demonstrate that it has the capacity to maintain and run new equipment, then buying more machines may only deepen the problem. The focus should shift from buying assets to sustaining productive capacity.
Why the public should care
This is not just an internal government accounting issue. It affects taxpayers, electricity consumers, investors, and the wider economy. Every shilling tied up in idle machinery is a shilling that is not creating jobs, not generating electricity, and not improving public services.
It also affects confidence in Kenya’s energy institutions. Geothermal power has long been one of the country’s strongest success stories, and that reputation depends on competence as much as resource potential. When a flagship energy agency struggles to keep its drilling fleet working, it sends the wrong signal to partners and financiers.
At a time when Kenya is looking for reliable, affordable, and low-carbon power, the efficiency of GDC matters more than ever. The public needs assurance that strategic assets are being handled responsibly and that long-term investment in geothermal development is not being undermined by avoidable mismanagement.
Conclusion
The audit findings on GDC’s idle drilling machines have exposed more than a maintenance problem. They reveal a system in which expensive assets were acquired without enough attention to repair, insurance, staffing, monitoring, and long-term use. That has placed Sh15.93 billion of public investment under scrutiny and raised difficult questions about stewardship.
For Kenya, the stakes are high. Geothermal energy remains one of the country’s most valuable resources, but its success depends on disciplined execution, not just ambition. If GDC can restore its rigs, fix its support systems, and tighten its management practices, the losses may still be recoverable. If not, the idle machines will stand as a costly reminder that energy infrastructure is only as strong as the institutions that run it.
Source: Business Daily
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