Kenyan Firm Oilfields Accuses Zakhem of Using Liquidation to Block Sh2.2bn Claim

A Kenyan engineering firm, Oilfields Engineering & Supplies Limited, has accused construction company Zakhem International of using insolvency proceedings to block its efforts to recover Sh2.26 billion in unpaid dues. The debt arises from the replacement of the Mombasa-Nairobi oil pipeline. Oilfields claims Zakhem is seeking to liquidate it over an alleged debt of Sh75.86 million, despite an arbitral award in favour of the Kenyan firm.

The dispute stems from a subcontract agreement dated November 17, 2015, under which Oilfields was engaged by Zakhem to undertake civil works during the replacement of the 450-kilometre Mombasa-Nairobi oil pipeline. Zakhem had been contracted by Kenya Pipeline Company (KPC) to execute the project. The parties fell out and the dispute over payments was referred to arbitration, culminating in a final award published on June 30, 2021, in favour of Oilfields.

The arbitral award directed Zakhem to pay Oilfields $17,410,391.47. Oilfields subsequently moved to the High Court seeking adoption of the award, while Zakhem filed an application seeking to have it set aside. Oilfields says the award remains valid and enforceable unless it is set aside by the court. The company also points to a ruling delivered by the High Court on August 31, 2023, restraining KPC from releasing $31.3 million held in favour of Zakhem under the pipeline contract.

Oilfields accuses Zakhem of concealing material facts about the dispute, including the arbitral award and court orders issued to preserve funds due to the construction company. In an application challenging the liquidation petition, Oilfields argues that the proceedings are malicious and intended to cripple its ability to pursue the much larger claim against Zakhem in separate but related court proceedings.

Zakhem, however, maintains that Oilfields owes it Sh75,866,678.67 arising from a certificate of costs issued following taxation proceedings. The construction company says the costs were awarded by the High Court in an order issued on February 8, 2023, and subsequently taxed at Sh75.86 million, as confirmed by a certificate dated April 29, 2025.

John Huba Waka, a director of Oilfields, says the company is solvent and that its assets, including its entitlement under the arbitral award, exceed its liabilities. He argues that Zakhem has not demonstrated that Oilfields is unable to pay its debts as required under Section 384 of the Insolvency Act, 2015. The company further says it was never served with the statutory demand, liquidation petition or hearing notice.

The application will be heard on November 26, and Oilfields wants the liquidation proceedings stayed pending the hearing and determination of its challenge. It also wants the petition dismissed on grounds that it has a genuine and substantial cross-claim against Zakhem that exceeds the alleged debt. Alternatively, it wants Zakhem ordered to deposit $31.3 million as security for costs within 14 days.

Key points

• Oilfields Engineering & Supplies Limited accuses Zakhem International of using insolvency proceedings to frustrate its efforts to recover Sh2.26 billion in unpaid dues.
• The dispute stems from a subcontract agreement dated November 17, 2015, under which Oilfields was engaged by Zakhem to undertake civil works during the replacement of the 450-kilometre Mombasa-Nairobi oil pipeline.
• Zakhem maintains that Oilfields owes it Sh75,866,678.67 arising from a certificate of costs issued following taxation proceedings.