The deal was one of a clutch of bilateral agreements signed by Hu Jintao at the end of the five-nation tour, which has cemented Beijing's economic and political clout, especially in Africa, where it seeks raw materials to feed its economy.
The pact allows state-controlled China National Offshore Oil Corporation (CNOOC) to explore in six blocks covering 115,343 sq km in the north and south of Kenya, which produces no oil but has attracted foreign companies sniffing after possible reserves.
"This vast area has attractive untapped exploration potential, although it is not yet a mature oil and gas producing area," CNOOC said.
Henry Obwocha, Kenya's acting energy minister, said the deals allowed China free access to explore with payments to be made only if reserves are discovered.
"We have not made the agreement on money value. The Chinese will pay for the exploration expenses. If they don't find oil, they make a loss but if they discover oil we will go into production-sharing agreements."
He added that the exploration would start soon and the agreement covered 20 years.
The other China-Kenya deals, which came two days after Beijing struck a $4 billion deal for drilling licences in Nigeria, included grants for economic and technical co-operation, anti-malarial medicine and rice.
Hu's delegation also agreed to maintain a Chinese-built sports stadium, help carry out a feasibility study into revamping Nairobi's potholed roads and patchy street-lighting, as well as provide exchange programmes for Kenyan students.
"We have not made the agreement on money value. The Chinese will pay for the exploration expenses. If they don't find oil, they make a loss but if they discover oil we will go into production-sharing agreements"
Kenya's acting energy minister
Kenya said it would oppose the island of Taiwan if it declared independence from the mainland.
Raphael Tuju, the Kenyan foreign minister, said: "The Kenyan government expressed its opposition to Taiwan independence in any form and expressed its support for China's efforts to realise national reunification."
Kenya and other African countries are eager for investment from China, which offers aid without demands for good governance, unlike Western donors.
Hu reiterated China's stance of non-intervention in other countries, which critics say allows Beijing to turn a blind eye to human rights abuses, corruption and political repression.
"We pursue a policy and ... the principle of non-interference in others' internal affairs," Hu said.
Last year, China handed Kenya 2.6 billion shillings ($36.51 million) in aid, mainly to modernise its state-run power firm.
China's offer of "no strings" aid may be welcomed in the east African country, under Western pressure to tackle rampant corruption. But critics say a flood of cheap Chinese imports is the price Kenyans pay for Beijing's "goodwill".
China's exports to Kenya were worth $457 million in 2005, a 31% increase on the previous year, while imports from Kenya rose only 4% to $17.6 million.
Chinese oil consumption is expected to rise from 6.59 million barrels per day in 2005 to 6.95 million this year as its once largely agrarian economy continues its rapid industrialisation and more of its citizens buy cars.
Last year China bought 38.47 million tonnes of African oil, mostly from Angola, Sudan and Republic of Congo, representing about 30% of the country's total imports, and 9% more than in 2004.
Kenya was the final stop of a tour that took Hu to the United States, Saudi Arabia, Morocco and Nigeria.