Petroleum fuels constitute the main source of commercial energy in Kenya. Kenya is a net importer of petroleum products and has a refinery owned and managed by the Kenya Petroleum Refineries Ltd (KPRL), an 800 km cross country oil pipeline from Mombasa to Nairobi and Western Kenya with terminals in Nairobi, Nakuru, Eldoret and Kisumu, run by the Kenya Pipeline Company (KPC). The sector also boasts of over 30 oil importing and marketing companies comprising of five major companies namely Shell, Total, Kenol/Kobil, Oil Libya, Chevron, and other emerging oil companies which include the Government owned National Oil Corporation of Kenya (NOCK).

The sector, which was liberalized in 1994, has since seen a lot of growth and improvements in quality and level of service. However, without an appropriate regulatory environment being in place at the time of liberalization (the existing legislation at the time was the Petroleum Act Cap 116 of 1948 with latest revision of 1972), several challenges face the sector which include proliferation of substandard petroleum dispensing and storage sites which pose environment health and safety risks; diversion of petroleum products destined for export into the local market by unscrupulous business people to evade tax and a dominance of the market by a few companies among others. The Government noted these challenges in its energy policy contained in Session Paper No. 4 of 2004 on Energy and recommended review of the Petroleum Act Cap 116 and other energy sector statutes and the introduction of a new energy sector legislation to cover petroleum, electricity and renewable energy. It also recommended the formation of a single energy sector regulator to regulate electricity, downstream petroleum, renewable energy and other forms of energy.