Consumers to buy gas for as little as Sh50 in new mobile gas refill concept

Kenyans will soon buy cooking gas for as little as Sh50 if a plan by State-owned oil marketer National Oil sees the light of day.

Sources within the firm said under the plan, the cooking gas will be dispensed through the mobile gas refill concept in small quantities going for as little as Sh50, in what is hoped will increase uptake of the more environment-friendly energy source.

National Oil is keeping details of the initiative close to its chest ahead of the launch set for as early as next week.

Various models of dispensing the Liquified Petroleum Gas (LPG) in small quantities will be used help poor households to meet their daily demands, especially for lighting using special gas refillers.

If successful, National Oil could pull a major coup in the retail gas market, which is not affected by the current price controls on fuel that have capped the margins for oil marketers.

The oil marketer has been testing various approaches over the years to try and increase the use of cleaner energy in the country, but the upfront costs of acquiring the gas cylinder and refilling costs have seen the product remain a preserve of upmarket consumers, especially those in urban areas.

At Sh50, even users in the informal market who are used to buying paraffin and firewood to take care of their daily cooking needs are expected to be easily persuaded to start using gas.

It is not yet clear how the plan will work, but it is understood the firm is currently finalising talks with some of its distributors on how to implement it.

It will also appeal to the kadogo economy, where buyers prefer to buy smaller quantities in many frequencies rather than in bulk.

The strategy has been employed by big companies such as Safaricom, which at one point had credit for as low as Sh5 and Sh10, targeting low-end consumers.

Leading brands

Consumer goods manufacturers such as Bidco and Unilever have also employed this strategy to penetrate the low-income market segments.

National Oil launched its SupaGas brand of cooking gas in 2008. Since then, SupaGas has grown to become one of the leading brands in the country, commanding a sizeable market share.

The firm launched a 3kg cylinder, the smallest cylinder in the market in 2011.

The standard retail cylinders in the market are the 6kg, 13kg and 50kg. The 6kg gas is currently retailing at between Sh800 and Sh1,000, depending on the brand and location while the 13kg is currently retailing at between Sh2000 and Sh2200.

The introduction of the smallest cylinder in the market was part of a broad strategy to ensure that LPG was affordable to a majority of Kenyans unable to afford the standard cylinder sizes.

In the current budget, the National Treasury has allocated Sh3.84 billion to support the exploration and distribution of oil and gas in the country.

In the overall LPG project for the country, National Oil is expected to import at least three million gas cylinders.

The gas project is being marketed as a pro-poor initiative aimed at fostering the competitiveness of LPG as the fuel of choice to minimise the usage of biomass and kerosene in safeguarding the environment.

An initial plan seen was to provide 75 per cent of subsidy for the 3kg and 6kg cylinders and accessories to encourage uptake.

The project needs a budget of Sh5.6 billion annually for administration and provision of discounts.

The plan will see the development of a Sh4.2 billion jetty and import facility, storage, rail and road unloading and bottling plant at Mombasa.

It will also see other storage and bottling plants built in Nairobi, Eldoret, Kisumu and Sagana at a cost of between Sh1.7 billion to Sh2.8 billion per location.

In November 2011, National Oil commissioned a mini LPG plant at its Nairobi National Terminal situated in Industrial Area. The filling plant is the first of its kind in the country and can fill even 1kg into existing cylinders.

The launch of the plant was a plus for the SupaGas brand, which until then relied on hospitality filling arrangements.