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Economy

Exit of two firms leaves gas cylinders pool at a crossroads

A worker inspects gas cylinders. Local LPG marketers are demanding a bigger stake in the decision making organ of the Cylinder Exchange Pool. Photo/FILE
A worker inspects gas cylinders. Local LPG marketers are demanding a bigger stake in the decision making organ of the Cylinder Exchange Pool. Photo/FILE 

A clearing house for cylinders meant to make cooking gas more affordable has run into headwinds following a Sh100 million debt inflicted by two firms that have pulled out.

The scheme, known as the Cylinder Exchange Pool, began in 2009 to improve the uptake of liquefied petroleum gas (LPG) in the face of environmental degradation arising from reliance on firewood.

It entails the 22 members of the pool 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.

A battle for its control has ensued among oil marketers even as they seek to recover Sh100 million owed by Quality Gas Limited and Pan African Petroleum Ltd, a firm associated with a relative of former prime minister Raila Odinga.

Local LPG marketers are demanding a bigger stake in the decision making organ of the scheme, which has 16 joining (domestic firms) and six initial (oil majors) as members.

“All critical cylinder exchange pool decisions are made in the management committee, which does not cater for the interest of joining members. Even on voting, it will definitely go in favour of initial members,” Jackson Kariuki, chairman of the local LPG marketers, said in a letter to Energy and Petroleum principal secretary Joseph Njoroge last week.

The Petroleum Institute of East Africa (PIEA) manages the scheme’s accounts with five initial and one joining members as the steering committee.

Mr Kariuki said the management of the pool should be detached from PIEA for transparency. “We propose the pool should engage a complete separate office with its own accountant and administrator,” Mr Kariuki said.

PIEA general manager Wanjiku Manyara, however, said the marketers should follow the laid down procedure for raising complaints.

The Energy Regulatory Commission (ERC) said the legal notice that established the pool would be reviewed to give each member an equal vote irrespective of the market share.

“We appreciate the role played by the original members to baby sit the process during the transition period, which is now over. All Members interest will be taken on board and the pool will be free from direct control of individual members. We expect the pool to play a key role in policing its members,” ERC head of petroleum Linus Gitonga said

Last month, the committee warned of a dip in standards amid concerns that some players were engaged in illegal refilling, selling and hoarding of cylinders owned by rivals.

The majors said use of universal valves undermined the safety standards required in the LPG business.

“Kenya must write a policy to get out of the universe valve. That way LPG becomes safe and players in the industry accountable,” Polycarp Igathe, managing director of Vivo, Kenya said.

He said the universal valve had lowered entry barriers and allowed unscrupulous players into the market, leading to household deaths from unsafe and unvalidated LPG cylinders.

The wrangling comes as members prepare to institute legal action against Quality Gas Limited and Pan African Petroleum Ltd for recovery of Sh100 million and cylinders. The move follows unfruitful appeals for ERC help in having the dues settled.

ERC’s petroleum licensing committee ruled on December 30, 2013 that the LPG licences of the two companies had expired, making their their membership in the exchange pool untenable.

Mr Gitonga advised members to seek compensation for refundable cylinder deposits as provided in the pool agreement or through any other legal means. Efforts to get comment from Quality Gas Ltd and Pan African Petroleum Ltd were fruitless.

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 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.

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