Boost for State's LPG plans as key infrastructure take shape

Construction of a new bulk Liquified Petroleum Gas facility by the government will start in two months, Kenya Pipeline Company has indicated, bringing close to the realisation of the ambitious plan.

The facility will be constructed at the Kenya Petroleum Refineries Limited (KPRL) in Changamwe, Mombasa, which has since been taken over by Kenya Pipeline following Cabinet approval.  

The acquisition is expected to see optimal utilisation of the 370 acres of KPRL land, including the defunct refinery whose tankage has been converted to storage for refined imports.

Already, the construction of a loading facility at the KPRL is above 70 per cent complete and will commence serving the market from the existing storage facility.

“The main facility’s construction is expected to commence in two months time,” KPC’s engineer Francis Kiptoo said during a facility visit.

This means by the start of the next financial year in July, Kenya Pipeline will have completed the ongoing procurement process and commenced construction. 

According to the Energy Ministry, the initial phase of the project will involve the construction of a 30, 000 metric tonnes storage and handling facility.

KPC will further construct a 10,000 metric tonnes inland LPG storage to facilitate distribution in the hinterland.

"Being a common user bulk storage facility, it will facilitate the private sector in the last mile distribution and penetration to public learning institutions and low-income households," Energy CS Davis Chirchir had earlier indicated.

These initiatives, the CS said,  present a valuable opportunity for the private sector players including financial institutions, LPG importers, cylinder manufacturers, oil marketing companies, and all other stakeholders to collaborate with the government, to increase the use of LPG for the benefit of all Kenyans.

The government aims to reach 4.5 million low-income households with LPG cylinders across the country in the short term, with a target of increasing LPG consumption from 7.5kg to 15kg per capita, by 2030.

This will also see enhanced penetration from 24 per cent to 70 per cent by 2028, in line with the government’s BETA (Bottom Up Economic Transformation Agenda), of improving the quality of lives of Kenyans.

Under the Clean Cooking  Gas (CCG) project, the govenrment plans to promote the use of LPG as a clean cooking solution in public learning institutions.

To begin with, the government targets 5,000 public boarding schools and learning institutions.

The Ministry of Energy and Petroleum is leading an inter-agency team in developing an LPG policy to guide the LPG sub-sector in the country, to establish an adequate policy and legal framework.

According to CS Chirchir, the policy will inform the development of requisite legislative and regulatory instruments required to promote LPG use and to regulate the sub-sector.

This framework, he said, will also facilitate the implementation of the other three LPG initiatives.

"The Clean Cooking Gas Project promotes the use of LPG as a clean cooking solution in public learning institutions. Reticulation in the Affordable Housing Project and institutions such as public hospitals, the National Youth Service colleges, correctional institutions, among others, will then be targeted", Chirchir said.

The ministry has developed several initiatives that are being implemented in partnership with the private sector and entail an LPG Policy and Legal Framework.

The government is keen to transition about 4.4 million households using kerosene and charcoal to LPG.

Some of the barriers inhibiting this transition include high upfront costs and inadequate distribution infrastructure.

To overcome these barriers, the government will provide subsidised 6kg cylinders, grill, burner and Cylinder Smart Meter which enable small-scale LPG purchases based on disposable incomes to low-income households.

The government through the National Oil Corporation of Kenya plans to distribute 1.3 million cylinders, while the private sector distributes 3.1 million cylinders through their established distribution networks.

Concerning key LPG infrastructure development, the government through Kenya Pipeline will ensure efficient and effective importation, storage and distribution of LPG in the country, through the Mombasa facilities, the main product entry point.

There are two main routes for importation of LPG into the country-the Port of Mombasa and the Namanga border for imports coming from Tanzania, according to the Energy and Petroleum Regulatory Authority (EPRA).

Mombasa accounts for up to 66.7 per cent of imports with Namanga accounting for about 29.9 per cent of imports.

Other entry points are Oloitokitok and Lunga Lunga, which are also connecting Kenya to Tanzania.

President William Ruto’s government has been keen to end monopoly in the country’s LPG market where Africa Gas and Oil Ltd has been handling up to 90 per cent of imported volumes, with a 10,000-tonne storage facility in Mombasa.

Tanzanian-owned firm, Taifa Gas SEZ Kenya Ltd, is constructing a 30,000-tonne LPG storage facility at the Dongo Kundu Special Economic Zone in Mombasa, a project that commenced in February last year.

Government-owned Shimanzi Oil Terminal has a 1,400-tonne capacity with another smaller facility at KPRL.

Demand for LPG increased by eight per cent to 360,594 metric tonnes in 2023, EPRA data indicates.

“This increase is attributed to government initiatives such as the removal of VAT on LPG through the Finance Act 2023 and the implementation of the LPG growth strategy that aims to increase per capita consumption of LPG,” the regulator said in its latest industry update.

There are currently two licensed bulk storage companies operating in the country with only one allowed storage and filling in bulk.

The number of licensed retailers of LPG in cylinders is 459, storage and wholesale of LPG cylinders (113), transporters of LPG in cylinders (89), storage and filling of LPG in cylinders (53), transport of LPG in bulk by road (43) and import, export and wholesale of LPG in bulk (13). 

“The authority is keen on improving compliance in the LPG sector through public education, awareness forums, and enforcement measures,”EPRA said.