Hope for cheaper gas as more firms eye storage terminals

Multi-billion-shilling investments in new liquefied petroleum gas (LPG) import and distribution terminals have raised Kenyans' hopes for cheaper cooking gas.

Five firms have in recent weeks applied for State licences to set up terminals that will act as common user facilities for storage and loading for LPG dealers.

There are limited LPG handling facilities in Kenya, which has exposed the market to supply shocks and stunted the growth of consumption.

The Kenya Kwanza administration is banking on opening up the sector in a bid to push down prices.

Local and foreign firms that are angling for the lucrative LPG business include Tanzanian giant Taifa Gas, and local firms Eleven Energy, Fossil Supplies Ltd, Ken PetroGas Ltd and Makadara Oil Terminal Ltd.

The proposed Sh10 billion Taifa Gas plant to be located at the Dongo Kundu Special Economic Zone in Mombasa will have a capacity of 20,000 tonnes, which will consequently go up to 30,000 tonnes.

Taifa Gas previously tried to enter the local market but encountered regulatory hurdles.

Mombasa-based gas and petroleum company Fossil Supplies Ltd, on the other hand, plans to construct its new LPG terminal near the port of Mombasa at a cost of Sh1.97 billion.

And Ken PetrolGas plans to put up an LPG terminal and open a sea berth (floating jetty) in Kwale County with a total storage capacity of 10,000 metric tonnes.

Meanwhile, Makadara Oil Terminal Ltd plans to put up a Sh400 million terminal in Nairobi.

The Makadara-based facility will have a capacity of 10,000 metric tonnes in the medium term and 25,000 metric tonnes in the long term.

Eleven Energy announced earlier it would set up a Sh467 million plant with a 22,000 metric-tonne storage capacity in the Port of Mombasa.

It also plans to start an associated wholesale and distribution business in Kenya and the wider East Africa Community.

The private companies are keen to reap from the increased use of cooking gas in Kenya despite a lack of investments by the government in adequate storage facilities.

Africa Gas, which is partly controlled by Mombasa billionaire businessman Mohammed Jaffer, who is also the owner of Grain Bulk Handlers, imports the bulk of the LPG consumed in Kenya and also controls a significant transit market to neighbouring countries.

The business mogul mid-2021 firmed up his grip on the lucrative cooking gas market after Proto Gas got the State's nod to snap up a rival cooking gas Solutions East Africa, whose LPG products trade as SeaGas.

And in the same year, World Bank's private lending arm loaned another local firm Mombasa Gas Terminal Ltd Sh2.5 billion to construct an LPG terminal in the port of Mombasa.

Unlike petroleum prices, cooking gas prices are not set by the regulator, giving dealers a free hand to set margins.

LPG use has been on the rise in the country, with monthly consumption ranging from 15,000 to 23,750 metric tonnes, according to the energy regulator.

However, costs remain high. A 13kg cylinder retailed at an average of Sh3,101.94 last month, according to the Kenya National Bureau of Statistics, a 9.5 per cent jump compared to last year.

Previously, oil marketers imported cooking gas individually in small quantities due to inadequate gas discharge facilities.

This led to shortages and rises in prices due to high import premiums and demurrage, which are penalties marketers pay shipping companies when tankers fail to offload in the stipulated period.