Tin Town is expected to begin filming in Llanelli in June; the original was based in Swansea.
Allen has returned to Wales to star in the play Gaslight at Cardiff's New Theatre, but will be in Carmarthenshire this summer to star in the new film.
Twin Town and its sequel were written and directed by Allen's brother Kevin.
Keith Allen said other commitments meant his character would only make a fleeting appearance.
"Maybe Emrys will just turn up as a pools winner or a ketamine addict or something, I don't know. He was going to come back as a fully fledged character, but I don't have the time."
"I will turn up in it as something! Hopefully Emrys, for a day's filming."
Twin Town starred Rhys Ifans and became a cult film, prompting regular calls for a sequel until Kevin Allen confirmed the plan in January.
But Keith Allen said his brother's film would tell a new story.
"It's not like he's remaking Twin Town, this is a completely different entity. Hence it is set in Llanelli, not in Swansea.
"The subject matter is different, it doesn't involve a lot of police corruption and all that.
In the original, Keith Allen played Emrys, who unwittingly buys a hotdog laced with magic mushrooms from the Lewis twins, played by real-life brothers Rhys and Llyr Ifans.
Airport disruption meant Keith Allen was forced to pay a huge taxi fare to reach Swansea in time for filming.
"It's still the only film I've ever done that I actually paid to be in.
"So I was at Manchester airport when, I think it was a strike or planes were cancelled, something like that.
"And the only way I could get there was in a black cab and of course the money was just rubbish so it cost me more in a cab fare to get there than what I got paid. And I had no idea what I was going to be doing at all, until I got there."
Speaking on BBC Radio Wales in January, Kevin Allen revealed the Lewis twins would return for the sequel.
At the end of Twin Town they were seen heading to Morocco on a speedboat. He also revealed Bryn Cartwright, the villain of the original played by William Thomas, would return alongside Sue Roderick who played his wife.
Actor Keith Allen will reprise the role of Emrys the farmer in the sequel to Twin Town, after revealing he "paid" to appear in the original cult film.