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Why refilling your gas cylinder will soon be one arduous task

By Macharia Kamau | Published Tue, August 7th 2018 at 10:03, Updated August 7th 2018 at 10:08 GMT +3
Cooking gas cylinders

In summary

  • Energy sector regulator says there is a unanimous agreement to abolish the LPG cylinder exchange pool and have consumers tied down to one dealer

Kenyan consumers will not enjoy the convenience of refilling cooking gas cylinder at any petrol station or retailer next door in the next few months.

Instead, oil marketers will only accept cylinders that bear their brand.

This is unlike the current scenario where a user can walk into any Liquefied Petroleum Gas (LPG) dealer, including the small-scale neighbourhood retail outlets, and buy cooking gas with no questions asked about the brand of their cylinder.

This is as the Ministry of Petroleum finalises the review of the regulations governing trade in cooking gas, which propose doing away with the cylinder exchange pool.

The Energy Regulatory Commission (ERC) said it has concluded a public consultation phase and is now reviewing feedback.

It, however, noted that there was a near-unanimous agreement from stakeholders on the abolishment of the LPG cylinder exchange pool. This will see the sector revert to the previous status where a consumer was tied down to one dealer.

Strike a balance

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It could at times mean going for long distances in search of the marketer’s outlets.

In case the firm has run out of LPG, the user will have to make alternative arrangements to cook their meal.

“We are looking at the consumers’ interests as well as those of the industry and trying to strike a balance. It can never be one-sided. Following the consultation with the public, the consensus was that the mandatory cylinder exchange pool will go away,” said ERC Director-General Pavel Oimeke

“In its place will be a mutual exchange pool where willing brands join in. The exchange pool will remain but in a different format whereby it will be made up of willing players.”

“It is a model used in other markets and has worked. We will set a minimum number of players that can be in one pool to prevent against anti-competitive behaviour.”

The Commission started the public consultation phase in May and concluded in June. Oimeke said the regulations would be ready for implementation in a few months, replacing the 2009 regulations.

“We have received public comments and we have included them in the proposed regulations that we are currently taking through various stages of approval. It will then be presented to the Commission’s board next month,” he said.

The Ministry of Energy late last year formed a committee to review the LPG Regulations of 2009 that saw the introduction of the unified valve and the exchange pool, enabling consumers to buy gas from any marketer and even retailers next door irrespective of the brand. The committee recommended doing away with the exchange pool.

Oil marketing companies have in the past argued that ‘liberalised’ LPG regime has led to the proliferation of illegal gas refilling business.

Although this was an unintended development, marketers believed that the policy needed to respond to the reality on the ground.

The ease of access to gas may have however led to growth in the use of cooking gas in Kenya, moving from 80,000 tonnes per year in 2010 to 189, 300 tonnes last year.

Despite the huge amount of LPG consumed locally, more than doubling over the eight years that the rules have been in place, the per capita consumption of gas in Kenya is still low compared to other countries in Sub Sahara Africa such as South Africa, Senegal and Botswana

Oil marketing firms note that the looming changes in the LPG regulations will spur more investments in the sector.

They say this will, in turn, increase access to cooking gas in the country.

Vivo Energy Chief Executive Joe Muganda noted that investors had held back their investments due to little control they had over their gas cylinders. “You cannot invest when you do not have control over your cylinders,” he said.

While the proposed regulations have a raft of changes for the LPG industry, they are however silent on the price controls for cooking gas, something that the Government has promised over time.

As the cooking fuel gains currency, especially in the wake of high charcoal prices and rising kerosene cost as Government increases taxes on the latter fuel to fight adulteration, price control would cushion users.

A recent analysis by ERC showed that LPG marketers are making a killing, with the retail price almost twice the wholesale price.

According to ERC, the wholesale price of LPG is about Sh90 a kilogramme but retails at about Sh150.

The regulator, however, said limited LPG handling facilities for importers in Mombasa have prevented it from instituting price caps in cooking gas.

The industry relies on a private facility owned by Africa Gas and Oil Ltd. Being privately run, Oimeke notes that the Government cannot dictate terms and when the cargo is brought in, the marketers have an upper hand in determining market prices.

The Kenya Pipeline Company (KPC) is however in the process of putting up gas handling and storage facilities in Mombasa and Nairobi.

KPC said it is evaluating bids for the building of the LPG facilities that will be accessed by all LPG marketers, with construction set to start late this year and set for completion in 2020.

Through the common user facility, oil marketing companies will be able to import large shipments of cooking gas.  

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