The Kenyan government is mulling introducing open tendering for liquefied petroleum gas (LPG) as it seeks to infuse competition in the sector and reduce the cost.
In a meeting, Energy Cabinet Secretary Davis Chirchir stated that 75 percent of LPG is brought into the country by one supplier, yet the country’s climate change agenda necessitates the need for more LPG to reduce pollution.
“There is going to be a serious competition in a short while”, he noted.
The competition is from Tanzania’s Taifa Gas, owned by billionaire Rostam Aziz.
“What we will be working on is to bring LPG under an open tender system. This will ensure we subject the cost of gas into the country, we can then regulate. We think LPG should even be selling at half-price what it is selling in the market”, Chirchir affirmed.
Earlier today, Mr. Aziz broke ground in Dongo Kundu, Mombasa and wants to build a 30,000-tonne liquefied petroleum gas (LPG) handling facility in the country.
Kenyan cooking gas market that remains under the tight leash of Mombasa-based tycoon Mohamed Jaffer operating under Africa Gas and Oil Ltd (AGOL).
Consumption of LPG is growing owing to population growth, costlier alternative fuels due to a ban on logging that raised the cost of firewood and charcoal, and high kerosene prices as well as lower gas prices compared to a decade ago.
Data from the Energy and Petroleum Regulatory Authority (Epra) shows consumption hit 373,865 tonnes in 2021, a 13.9 per cent increase from the 320,909 metric tonnes recorded in 2020.
At the launch, President Ruto stated that the government intends to do away with all taxes in LPG.
The Finance Act 2022 cut the tax on liquefied petroleum gas (LPG) supplies from 16 percent to eight percent.
Kenya imports about 40 percent of gas annually from Tanzanian liquefied petroleum gas (LPG) firms via the Namanga and Holili border posts and the remainder is imported through the Port of Mombasa.
The LPG cost in Mombasa is much higher than in Dar es Salaam LPG because the offloading and storage infrastructure at Dar es Salaam or Tanga ports is more efficient.
In an open tender system, EPRA awards tenders to the lowest bidder to bring in LPG into the country in a monthly or quarterly basis. The supplier then supplies in the market and EPRA can calculate the price a consumer should buy it, just like petroleum products at fueling stations.
The Energy Cabinet Secretary also confirmed that EPRA has licensed different players to bring in LPG and build storage facilities. “This is the way to go to reduce pollution and introduce clean cooking,” he added.
