After extracting Instant Client on your hard drive you will need to set the TNS_ADMIN environment variable to point to the location of the various *.ora files (e.g., sqlnet.ora, ldap.ora, tnsnames.ora). Oracle suggests putting these in the ORACLE_HOME directory, and sqlplus can find them there, but without TNS_ADMIN, SQLTools apparently looks in the wrong place.
So what's needed is:
ORACLE_HOME=instant_client_path> PATH=%ORACLE_HOME%; <rest_of_path> TNS_ADMIN=%ORACLE_HOME%
If you cannot change yout environment variable because of lack of permissions then sqlt-launcher might be the only choice.