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Shipping & Logistics

Gas dealers locked in row over damaged cylinders

A man walks past cooking gas cylinders displayed for sale in Ukunda, Kwale. Customers can only exchange their cyinders at licensed retail sites operated by exchange pool members. PHOTO | WACHIRA MWANGI
A man walks past cooking gas cylinders displayed for sale in Ukunda, Kwale. Customers can only exchange their cyinders at licensed retail sites operated by exchange pool members. PHOTO | WACHIRA MWANGI 

Cooking gas dealers are locked in a fresh row over the handling of ageing and damaged cylinders under a clearing house system launched in 2009 to make the energy source more affordable.

The latest standoff follows the ongoing crackdown on illegal liquid petroleum gas (LPG) re-filling sites that has seen the recovery of large numbers of cylinders, some of them either too old, damaged due to poor handling or in need of validation.

And in a twist that threatens the future of the scheme known as the cylinder exchange pool, some dealers have rejected the cylinders despite a requirement that players jointly meet repair and validation costs.

“The situation is bad because some big players are acting unfairly. It is a way of throwing us out,” said Jackson Kariuki, managing director of Hunkar Trading Company Limited, one of the firms hit by the development.

The scheme entails the 22 pool members paying each other for extra gas cylinders held following the introduction of standard valves, which meant consumers could buy gas from any vendor, keeping prices low.

To join the pool a firm is required to have trained workers, have 5,000 cylinders, take a public liability cover of Sh50 million, execute a security bond of Sh5 million and fill the vessels in a licensed plant.

The companies are also required to maintain high environmental, health and safety standards. A company found guilty of committing an offence is liable to expulsion from the LPG exchange pool.

Mr Kariuki said the stand-off over cylinders is likely to continue as more are been netted in the ongoing crackdown on illegal traders.

“These cylinders can only come back to the respective OMCs (oil marketing companies) through the exchange pool as currently many customers are forced to exchange their cylinders at licensed retail sites operated by the exchange pool members,” he said in a letter to Energy and Petroleum principal secretary Joseph Njoroge dated September 9.

“Exchange pool members are obligated by the Legal Notice 121 of 2009 to accept cylinder brands belonging to other members of the LPG exchange pool and Hunkar Trading Company Limited has been in full compliance with the legal notice requirements.”

Under the exchange pool regulations, members are required to collect their cylinders at reasonable periods not later than 45 days. Due to the row, some members have opted to charge storage fees for collected cylinders that are not collected.

“Hunkar Trading Company Ltd is left with no option but to charge Sh100 per cylinder per day,” Mr Kariuki said.

An official at the ministry of Energy and Petroleum downplayed the claims by Hunkar but said investigations would be conducted to ascertain the truth.

“We cannot speak with certainty for now because this may be an isolated incident but we will look into it,” the official said on condition of anonymity.

The cylinder pool suffered a setback last year after two firms pulled out, leaving behind a Sh100 million debt and numerous cylinders unaccounted for.

The Energy Regulatory Commission’s petroleum licensing committee ruled on December 30, 2013 that the LPG licences of Quality Gas Limited and Pan African Petroleum Ltd had expired, making their membership in the exchange pool untenable.

Demand for LPG in Kenya and the east and central Africa region continues to climb amid push for safer and cleaner energy.

Data from the Economic Survey 2015 showed that demand for LPG has risen in the last 10 years from 49,400 tonnes in 2005 to 150,000 tonnes in 2014, an increase of about 204 per cent.

A study jointly conducted by the Energy ministry and the World Bank in 2005 recommended that LPG facilities with a total capacity of 8,700 tonnes be set up in Nairobi, Mombasa, Kisumu, Eldoret, Nakuru and Sagana.

The study had recommended development of LPG facilities at Mombasa (6,000 tonnes), Nairobi (2,000 tonnes), Nakuru (150 tonnes), Eldoret (200 tonnes), Kisumu (300 tonnes) and Sagana (50 tonnes).

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