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Economy

Launch of Kipevu oil terminal sets stage for gas prices control

Daniel Manduku
Kenya Ports Authority managing director Daniel Manduku. FILE PHOTO | NMG 

The construction of the Sh40 billion Kipevu oil terminal at the Mombasa port has started, setting the stage for control of gas prices.

The new terminal will have the capacity to handle four vessels of up to 100,000 metric tonnes and a liquefied petroleum gas (LPG) line that is expected to ensure steady supply of the commodity.

The common user gas storage facility will enable the ministry to issue single gas tender commonly referred to as the open tender system (OTS) and prompt a shift to control of gas prices.

Under the OTS, the ministry will award one oil marketer the right to import gas in bulk every month on behalf of the entire industry, enjoying huge discounts, like is the case with diesel, petrol and kerosene.

“The relocations works have started,” Kenya Ports Authority managing director Daniel Manduku said in a phone. The project is set to take 30 months.

The Kipevu terminal will supplement two facilities in Shimanzi and the old Kipevu terminal.

Last year, the KPA awarded China Communications Construction Company a contract to build the Kipevu oil terminal at the Mombasa port.

The port currently has only two ageing oil terminals that are too small to handle large quantities of imported oil and gas.

This has made it difficult to control gas prices.

The gas price regulation would be similar to the one introduced on diesel, petrol and kerosene costs in 2010. The shift to price control regime would result in affordable consumer prices and boost uptake, especially among low-income earners.

Cooking gas prices have increased to a near three-year high, returning to levels last seen before the government removed value-added tax (VAT) on the clean fuel.

Official data shows that the cost of refilling a 13-kg gas cylinder rose to an average Sh2,193 in December up from Sh2,141 in November and Sh2,073 last July.

December’s cost is the highest since June 2016, when the Treasury scrapped VAT on gas to cut costs and boost uptake among poor households that rely on dirty kerosene and charcoal for cooking.

Prices stood at an average Sh2,231 in June 2016, and fell to below Sh2,000 in October, four months after the scrapping of the 16 percent VAT.

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