Shipping & Logistics

Energy sector watchdog cites hurdles in cooking gas procurement

Liquefied Petroleum Gas (LPG) procurement cannot be undertaken through an Open Tender System (OTS) as is the case with other petroleum imports since there are no government-controlled storage facilities.

Energy Regulatory Commission director - general, Joseph Ng’ang’a, told the National Assembly’s Public Investments Committee that LPG was handled differently from crude oil at the Kipevu Oil terminal.

“The reason why this does not happen is because the country lacks a common user import terminal under the control of the government for LPG, bitumen and fuel oil,” he said. ERC has an OTS undertaken every month for petroleum products, which allows one marketer to import the country’s bulk supply for the month on behalf of others, allowing a uniform price.

When sector stakeholders met ministry officials in May this year with an agenda to increase the availability of the clean cooking fuel to households across the country, a proposal was made to follow a common user and open access supply logistics system managed by the Kenya Pipeline Company.

The plan, similar to one floated in 2006, would involve KPC constructing a storage terminal in Mombasa and additional storage facilities in Nairobi, Nakuru, Eldoret, Kisumu and Sagana that would be accessed by marketers and distributors across the country.

According to data from the Kenya National Bureau of Statistics, LPG uptake surged by 233 per cent in the first five months of the year due to falling prices, with households buying 76,800 tonnes compared to 23,000 tonnes for a similar period last year.

In June this year, the taxman cancelled the 16 per cent value added tax that had been levied on cooking gas to make it more accessible.

Mr Ng’ang’a told the committee that licence applications for those dealing with LPG was done through the online regulatory management information system.

“As a commission, we have undertaken an analysis of the LPG market and what people do not appreciate is that while we regulate everything else, we do not set the price of the LPG like we do for power and petroleum products, which we do every 14th of the month. This is why people perceive that we do not regulate LPG, but it’s only that we do not set the price,” he said. 

Mr Ng’anga said that there was a legal provision for ERC to regulate the prices of cooking gas and ensure adequate competition in the market.

“The challenge we are facing is lack of the OTS process, because with that we can look at the whole supply chain and the various components that form the actual retail cost,” he told the House committee.