News

Mombasa mega gas terminal to ease prices in upgrade

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Ships dock at the Port of Mombasa. FILE PHOTO | NMG

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Summary

  • Africa Gas and Oil Ltd (AGOL) will have a storage capacity of 25,000 tonnes of liquefied petroleum gas (LPG) from March when the upgrade of the facility initially built in 2013 is complete.
  • The AGOL facility was built to allow for bulk imports of cooking gas to lower unit costs through economies of scale and curb shortages, which had been made difficult by the smaller import terminal at Shimanzi.
  • It had a storage capacity of 10, 000 tonnes that will grow to 25,000 tonnes—making it the largest terminal in sub-Saharan Africa.

Supply of cooking gas is set to increase following the upgrade of an import handling and storage terminal in Mombasa, setting the stage for a further drop in the cost of the commodity.

Africa Gas and Oil Ltd (AGOL) will have a storage capacity of 25,000 tonnes of liquefied petroleum gas (LPG) from March when the upgrade of the facility initially built in 2013 is complete.

The AGOL facility was built to allow for bulk imports of cooking gas to lower unit costs through economies of scale and curb shortages, which had been made difficult by the smaller import terminal at Shimanzi.

It had a storage capacity of 10, 000 tonnes that will grow to 25,000 tonnes—making it the largest terminal in sub-Saharan Africa.

The import handling and storage unit has helped relieve demand pressures through reduction of stock-outs, effectively reducing the price of LPG.

“The upgraded facility will be complete in March and it will be able to handle 100, 000 tonnes per month,” said AGOL in a statement.

“The infrastructure investments will play a key role in boosting supply and lowering LPG prices. Previously, investment in import handling and storage was the key missing ingredient in the sector which had suffered decades of under supply, poor storage and weak distribution at the port of Mombasa.”

Previously, the oil marketers import cooking gas individually in small quantities due to inadequate gas discharge facilities.

This led to cooking gas shortages and expensive LPG due to high import premiums and demurrage, which are penalties marketers pay shipping companies when tankers fail to offload in the stipulated time period.

The Shimanzi terminal has a capacity of just 1,400 metric tonnes.

The tankers would queue for up to two months, leaving the marketers with a daily fee of $20,000 (Sh1.7 million).

But AGOL’s Sh12.9 billion facility has helped deal with the problem of demurrage and lowered gas prices together with removal of tax on the commodity.

The facility comprises a fixed marine jetty unit in the Port Reitz waters and an LPG tank storage farm—which will have a capacity of 25,000 metric tonnes.

“The investments spurred demand in Kenya and Uganda. The market has grown to 400,000 tonnes from 60,000 tonnes in 2012 and this is projected to grow to 1,000,000 tonnes by the year 2025,” says AGOL.

The price of the 13-kilogramme cooking gas has fallen from Sh3,200 in August 2014 to the current average of Sh2,000, according to the Kenya National Bureau of Statistics, reflecting a drop of 37.5 per cent.

This has helped wean households off dirty fuels like kerosene and charcoal for cooking.

Consumption of gas in Kenya more than doubled in the five years to 2019 from 148,000tonnes in 2015 to 345,000 tonnes in 2019, says the bureau.

The widespread use of dirty fuels also contributes to climate change and deforestation.

The World Health Organisation says three billion people cook with solid fuels such as charcoal and coal on open fires or traditional stoves globally, producing high levels of carbon monoxide, which kills about four million people a year.