For a long time, Liquefied Petroleum Gas (LPG) was largely a niche product mainly used by middle-class and rich Kenyans for cooking and barbecues.
As such the market segment remained rather thin with little interest from investors who saw no value in pumping big money into it.
But with a major shift in government policy towards affordable cooking gas for the mass market, investment is now flowing into the local LPG sector to cater to the projected expanded uptake of the commodity—and taking the cue of a global trend where millions of poor households are switching from kerosene or wood burners to LPG.
Improved access to affordable cooking gas is part of President William Ruto’s Bottom-Up Economic Transformation Agenda (BETA) with the National Treasury already making key concessions in the Finance Bill 2023 aimed at making the commodity more affordable and easing pressure on the country’s forest cover by limiting the felling of trees for charcoal burning.
In line with the BETA philosophy, the Finance Bill 2023 proposes to exempt LPG from value-added-tax(VAT), Import Declaration Fees (IDF), and Railway Development Levy (RDL). LPG is currently subjected to taxes at the rates of 8 per cent VAT, IDF, and RDL.
A VAT exemption on LPG would be a buildup on gains from the Finance Act 2022 which cut the tax charged on cooking gas by half from 16 per cent-- handing consumers a major relief amid rising global prices of the commodity and other petroleum products.
With these major policy shifts, LPG has emerged as a bright spot, triggering a major pipeline of both public and private investments to tap into an anticipated jump in demand for the commodity in the mass market.
An assessment by Smart Business shows that LPG storage, handling, and distribution projects worth about Sh32billion are lined up by various players including Kenya Pipeline Company (KPC), Taifa Gas Investment SEZ Limited, Eleven Energy Ltd, Fossil Supplies Limited (FSL), and Ken PetroGas Limited.
KPC targets to install a new Sh17.73 billion LPG handling and storage facility with a capacity of 30,000 tonnes in Changamwe, Mombasa.
“The proposed handling and storage LPG facility will primarily receive LPG from pressurized LPG ships berthed at the newly constructed Kipevu Oil Terminal (KOT-2) Jetty, using a pipeline being constructed from Common User Manifold (CUM) located next to KPC,” the company said.
KPC has contracted a giant Pakistani firm, Petrochem Engineering Services to design the LPG import and storage facility in Changamwe
“KPC's effective project would not only augment their current LPG storage capacity at KPRL but also the overall capacity in Kenya by 30,000 tonnes, making it the largest installation in East and Central Africa. Given the urgent energy requirements of the country, and the growing use of LPG in the market, this would be a nationally important and landmark achievement” the State-owned firm said.
Taifa Gas in its part has lined up a Sh10.44 billion ($ 75.5 million) LPG import and storage terminal within the Dongo Kundu special economic zone. The proposed plant is designed to store propane, butane, and LPG mix of various grades for domestic, commercial, and industrial use.
“The terminal shall consist of the construction of five spheres with a maximum net capacity of 7,500 cubic meters each. This will provide a capacity for 20,000 tonnes, with an addition of four bullets to bring capacity to 30,000 tonnes,” the company said.
The Taifa Gas terminal will sit on a 30acre slot within the SEZ and include an office block and other buildings, warehouses, and those installations needed to fill, repackage and export LPG including, bulk loading gantries, heating and compression stations, control rooms, firefighting and safety systems, security installations and other amenities.
Another firm, FSL is also in the scramble for Kenya’s LPG bright spot with a planned Sh2.21 billion common user facility within Changamwe, Mombasa on a 3.5-acre land parcel leased from the Kenya Railways Corporation.
“The LPG facility, being a common user will enable the oil marketers an alternative for importation and supply of liquefied petroleum gas at a competitive price to the end users. This will also fulfill the Government’s blueprint of increasing the per capita consumption of liquefied petroleum gas to 15 kilogrammes from the current consumption of less than 4.5 kilogrammes” FSL said.
“Therefore, the project primarily entails establishing liquefied petroleum gas depot for storage and loading facility for LPG dealers,” the company said.
The FSL facility will have a storage area with four mounded bullet tanks each with a capacity of 3,000 cubic meters, giving a total capacity of 12,000 cubic meters equivalent to about 6,000 tonnes.
The company has also provisioned for future expansion to incorporate a rail transport cargo loading and unloading area, with a capacity for six wagons.
Ken PetroGas Limited in its part has scheduled a Sh1.13 billion project to construct and operate a cooking gas and liquid natural gas (LNG) terminal and jetty in Kibuyuni, Shimoni in Kwale County.
“The first phase of the proposed project will entail the construction of an LPG receiving and storage facility that will be able to store up to 10,000 tonnes of LPG. In the second phase an LNG handling facility of 140,000 cubic meters” the company said.
The first phase of the Ken PetroGas project will involve the construction and operation of an LPG terminal and open sea berth (floating jetty) with a total storage capacity of 10,000 tonnes. The second phase entails the installation of LNG tanks which will store up to 104,000 cubic meters of LNG.
Eleven Energy Limited plans to construct and operate an LPG storage terminal in Mombasa to supply consumers in Kenya and service the entire East African region in the future. The planned Sh467 million LPG terminal will have a capacity of 22,000 tonnes.
“The project will use a dedicated fleet of LPG ISO containers to move bulk volumes by rail to Nairobi and other population centres in the country. Currently, Nairobi accounts for about 65 percent of total LPG consumption, but an improved transport and delivery network will make LPG accessible in other population centres in the country” Eleven Energy said.
The new LPG facilities are expected to supplement and existing facility owned by Africa Gas and Oil Ltd in Shimanzi with an estimated storage capacity of 25,000 tonnes.
Separately, National Treasury has in its 2023/24 budget plan allocated Sh538.68 million towards an ambitious LPG distribution project. The amount assigned to the Petroleum Ministry for the new financial year starting July includes Sh461.63 million for the purchase of a specialised plant and equipment.
LPG is growing business in Kenya with a current consumption of approximately 400,000 tonnes which is expected to double by 2030.