Consumers pay more for cooking gas

KBy Macharia Kamau

The shortage and hike in the prices of LPG is worrying, and the two are becoming a bigger hurdle in the uptake of the fuel product and even pushing consumers back to charcoal and firewood.

The prices of LPG has risen by more than 100 per cent and expected to climb further as the Christmas season approaches.

Kenya’s uses 100,000 tonnes of cooking gas a year. This is projected to increase to 300,000 tonnes by end of next year. The country’s storage capacity is 7,000 tonnes lower than 13,000 tonnes required.

The price hike is an unfortunate turn of event for the petroleum industry and economy as well. LPG has been advanced as a cleaner fuel and one that can help reduce use of wood fuel that depletes forest cover.

Cooking gas can also help reduce usage of kerosene that has been reported to be detrimental to human health.

The hike in prices and frequent product outages are, however, reversing the little gain that may have been made in increasing usage of LPG.

Prices have gone up by about 100 per cent while there have been severe shortages, with the major recent one having been experienced in September and this month.

A Weekend Business survey show that the price of a 6kg gas cylinder has gone up by more than 100 per cent in just under a year.

In March, it retailed at Sh900, but today, it costs between 1,900 and Sh2,300. The 6kg cylinder is commonly used because of the lower initial acquisition cost of a cylinder and cost of refilling.

Budgeting

The high cost of living has also pushed many Kenyans into buying goods – including consumer goods – in small quantities. In the LPG industry, it is feared that this could fuel illegal refilling of cooking gas.

Price of a 13kg cylinder has gone by similar margins to retail at about Sh4,000 at some outlets, from Sh2,200 in January.

Other than the hike in retail prices, Kenya has experienced numerous severe shortages this year, with the latest shortage lasting more than two weeks last month.

Despite what seemed to be a crisis, the Government appears helpless in containing the frequent product outages and regular increase in prices.

Officials from the ministry and agencies charged with regulating the sector blame capacity constraints – especially inadequate storage facilities, as the root cause of the problems afflicting the LPG industry.

Patrick Nyoike, Energy Ministry Permanent Secretary, said the shortage is likely to end next week, with two LPG cargoes expected to discharge its products in Mombasa.

"The current LPG shortage is expected to ease once a ship carrying 2,500MT completes its discharge at the port. Another ship carrying 1,700 metric tonnes of gas is waiting to discharge," he said in a statement Thursday addressing both LPG and fuel shortage.

The PS, however, did not say what long-term measures the Government is undertaking to ensure that the chronic shortage is addressed or even whether there are measures to address pricing.

Martin Heya, Commissioner for Petroleum at the ministry said the frequent problems in the industry are due to capacity constraints.

Kenya does not have a bulk LPG handling facility and imports are usually discharged and taken straight to the market. Which means the industry is left with little or no gas in the system for a rainy day.

Storage facility

"The LPG storage facilities are inadequate and this has affected the supply of gas as we cannot import huge cargoes of the product," he said in an interview last week.

Heya said capacity constraints would reduce with the operationalisation of a privately run LPG handling facility in Mombasa next year, which will significantly increase the country’s LPG handling capacity.

Africa Gas and Oil Company is constructing a 7,000 metric tonne storage facility in Mombasa, which is expected to start operations during the first half of next year.

"Once we have a large facility operational, we can import using super tankers and the supply situation will significantly improve and even see prices come down," he said.

"We heavily rely on private imports by oil marketers. But once we have a large storage facility, we can procure it through the open tender system like in the case of fuel. That way, we can have control of supply and even do emergency tenders in instances of acute shortage."

Kaburu Mwirichia, the Director General Energy Regulatory Commission, said the capacity constraints have been mainly to blame for the frequent shortages.

"Right now, what we have is that we are not able to bring in big ships for LPG. So if there is a small delay it results in a major a shortage," he explained.

During an LPG conference held last week, Mwirichia said ERC is working on implementation of a clause in the LPG regulations of 2009 that will require marketers to maintain an operating stock of up to 15 days of sales.

Storage facility

This, he said, will minimise the market shocks experienced in instances where there is delay of discharging LPG products by importers.

"The commission is making arrangements for enhanced inspection of LPG sales business to ensure compliance with Legal Notice 121 of 2009," he said. Both the LPG laws of 2009 and a 2008 legal notice on minimum operating stock require companies importing petroleum products for marketing in Kenya to maintain specified minimum operational stocks.

The price of cooking gas is not capped and the regulator is said to be considering starting capping prices to cushion consumers from the sudden price hikes.

"If this comes to pass, it means that ERC will set maximum prices that oil marketers can charge for cooking gas, just as is the case with diesel, petrol and kerosene," said Mwirichia.

The regulator is, however, non-committal about regulating prices of LPG, but reckons that it would do so if it was deemed necessary, and only after the country’s LPG handling capacity improves. This may come into effect once the Africa Gas and Oil Company puts up its 7,000MT storage facility in Mombasa.