Investment in Kenya’s liquefied petroleum gas (LPG) supply business is set to rise this year, as companies rush to meet the growing demand.
Hunkar Trading, Addax Kenya, Hass Petroleum, the National Oil Corporation of Kenya (Nock) and listed oil marketer KenolKobil will, in total, spend over Ksh1.7 billion ($20 million) to build new, or expand existing LPG plants.
The Petroleum Institute of East Africa (PIEA) has projected a sharp rise in gas usage, as more households abandon traditional sources like firewood and charcoal.
Last year, Total Kenya installed two bulk LPG storage tanks at the company’s depot in Industrial area in Nairobi, effectively doubling the storage capacity from 150 to 300 metric tonnes (MT).
Kenya used 62,499 MT of LPG in 2011, with Vivo Energy, previously Kenya Shell, commanding the biggest market share at 28.5 per cent between January and September 2012.
PIEA’s data shows Total had 22.3 per cent, Oil Libya 18.3, KenolKobil 11.5, Hashi Energy 5.1, Cape Suppliers 3.3, and Addax Petroleum and Hass Petroleum 2.3 and 2.1 per cent respectively.
By the end of March, Hunkar Trading hopes to have completed automation of a cylinder-filling plant, and expansion of an LPG storage facility from 50 to 200 MT at a cost of Ksh80 million ($919,540). The plant is located on Mombasa Road in Nairobi.
Chairman Jackson Kariuki said Hunkar has erected a weighbridge for tankers delivering gas in bulk to clients. He said standardisation of cylinder valves has encouraged new players to enter the LPG market.
The Energy (LPG) Regulations Act of 2009 requires gas to be packaged in standardised vessels fitted with 20-millimetre valves.
To create order in the supply chain, the LPG Exchange Pool Secretariat has been facilitating the exchange of cylinders of three, six and 13kg among marketing firms, since October 2009.
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Hass Petroleum plans to invest $5 million for the construction of cylinder-filling plants in the next two years, and the firm is looking for sites in Nakuru and Kisumu to start work before the end of the year.
“It will serve our local and transit market needs. We are already in the Kenyan market and plan to introduce branded cylinders of six and 13kg in Uganda this year,” said Hass managing director Issa Mohammed.
Hashi Energy has put up cylinder-filling facilities in Mombasa, Nairobi and Eldoret at a cost of $6.5 million.
Nock plans to introduce mobile units that allow partial filling of cylinders with gas according to what the consumer can afford.
Managing director Sumayya Athmani said, “Nock is working on setting up a modern high capacity LPG plant at its Industrial Area depot in Nairobi. The recruitment process for the contractor is at the tender stage.”
By May 2013, Addax Kenya hopes to have completed a new LPG depot with a capacity of 200 MT, and a cylinder-filling plant, all at a cost of $4.7 million. The plant is located at Syokimau on the outskirts of Nairobi.
Edward Rutto, the projects and assets manager of Addax, said storage capacity of the terminal, occupying five acres, of land will be increased to 400 MT.
Construction of the terminal started in October 2012 and the gas will be transported from Mombasa by road tankers.
Kisumu, Kenya’s biggest town on the shores of Lake Victoria, is set to host KenolKobil’s Ksh120 million ($1.4 million) LPG depot and cylinder-filling plant. The absence of a bulk depot in the region has pushed up the price of cooking gas.