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Boost to state LPG plans as key infrastructure takes shape

Construction of a new package The government’s liquefied petroleum gas installation will begin in two months, Kenya Pipeline Company said, moving closer to realizing the ambitious plan.

The facility will be built at 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 enable optimal utilization of KPRL’s 370 acres of land, including the defunct refinery whose tank has been converted into storage for refined imports.

Construction of charging facility at KPRL now underway is more than 70 percent complete and will begin serving the market from existing storage facilities.

“Construction of the main facility is expected to begin within two months,” KPC engineer Francis Kiptoo said during a visit to the facility.

This means that 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 Ministry of Energy, the The initial phase of the project will involve the construction of a 30,000 metric ton storage and handling facility.

KPC will also build a 10,000 metric ton inland LPG storage to facilitate inland distribution.

“Being a bulk storage facility for common users, it will facilitate the private sector in last mile distribution and penetration into public educational institutions and low-income households,” Energy CS Davis Chirchir had previously indicated.

These initiatives, the CS said, present a valuable opportunity for 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 the aim of increasing LPG consumption from 7.5 kg to 15 kg per capita, by 2030.

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

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

To start, the government is targeting 5,000 boarding schools and public 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 appropriate policy and legal framework.

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

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

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

The ministry has developed several initiatives that are being implemented in partnership with the private sector and involving a policy and legal framework for LPG.

The government is interested in transitioning around 4.4 million households that use 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 subsidized 6kg cylinders, grill, burner and cylinder smart meter that will enable small-scale LPG purchases based on disposable income to low-income households.

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

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

According to the Energy and Petroleum Regulatory Authority (EPRA), there are two main routes for importing LPG into the country: the Mombasa port and the Namanga border for imports from Tanzania.

Mombasa accounts for up to 66.7 percent of imports and Namanga accounts for approximately 29.9 percent of imports.

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

President William Ruto’s government has wanted to end the 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 company Taifa Gas SEZ Kenya Ltd is building a 30,000-tonne LPG storage facility at the Dongo Kundu Special Economic Zone in Mombasa, a project that began in February last year.

The government-owned Shimanzi oil terminal has a capacity of 1,400 tonnes and has another smaller facility at KPRL.

LPG demand increased eight percent to 360,594 metric tons in 2023, EPRA data indicates.

“This increase is attributed to government initiatives such as the elimination 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,” said the regulator in its latest industry update.

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

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

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