Saturday, Feb 28th 2015

Oil marketers to meet over Mombasa gas fee

Tuesday, March 19, 2013 - 00:00 -- BY SOLOMON KIRIMI

Oil marketers will meet the owners of the Mombasa based Africa Gas and Oil Company to discuss the usage and proposed charges. The meeting expected to bring together the oil marketers, officials from the ministry of energy and Agol managers has been convened following disagreements on the cost of storing the LPG products for the importers at the newly cosntructed plant.

The marketers are opposed to import handling fees of 207.65 dollars (Sh 17,650.25) per tonne being proposed by Agol. The marketers want the handling costs reduced by more half, but the facility owners argue the proposed price is already too low in light of the huge investment capital incurred and running costs.

The 14,000 metric tonne Agol facility built at a cost of Sh12 billion is ten times the size of the existing Shimanzi terminal currently used by marketers, built to offload products directly from freight vessels.

The new facility marketed as an answer to the long sought after solution to facilitate reduction of cooking gas to consumers by eliminated demurrage costs incurred by LPG importers due to lack of ca- pacity at Shimanzi.

“I can’t understand why the mar- keters would rather continue pay- ing demurrage charges rather than use this new facility which is more efficient,” said Energy ministry per- manent secretary Patrick Nyoike The penalties run into millions of shillings per month as ships wait their turn to offload gas using smaller tanker vessels to shuttle to and from the terminal.

The Shimanzi LPG terminal has a capacity of only 1,400 metric tones, and the government has been encouraging private investors to in- vest in such facilities. Marketers pay penalties of about $34 (Sh2,890) per tonne per day in demurrage costs, which in turn is passed on to consumers translating to the high costs at the retail out- lets.

Nyoike said the offshore import handling terminal will also facilitate smooth market supplies due to its ca- pacity to hold larger quantities. “We have been waiting for this kind of investment to help bring down the cost of LPG to consum- ers, because the storage charges will eventually come down,” Nyoike said.

Nyoike said the oil marketers and consumers will be the ultimate beneficiaries in the long run because cost per unit will reduce. Oil marketers import their own cooking gas in line with demand, unlike the open tender system used to import other petroleum fuels where a winning bidder imports for all the marketers. The new facility is associated with Mohamed Jaffer who runs the bulk grain handling facility based at Mombasa.