Tanzania exporters protest Kenya’s gas ban

Saturday July 22 2017

Mombasa port. The cost of gas at the port of

Mombasa port. The cost of gas at the port of Mombasa is said to be higher than that in Dar es Salaam. FILE PHOTO | NMG 

By ALLAN OLINGO
More by this Author

Tanzanian gas exporters have termed Kenya’s ban on imports as protectionism, as its oil marketing firms lose their share of the market.

They say the move is against fair competition practice as set by the EAC Common Market rules.

However, the exporters may have to wait till the end of the year for a possible resumption of business after Kenya indicated that it will take up to six months to install a gas-testing facility at its border points.

The Tanzania LPG Association said that the ban has benefited select companies in Kenya.

“We don’t see any plausible reason for the ban on LPG trade between Kenya and Tanzania, save for undue influence by a few oil firms in Kenya keen to monopolise the LPG business in Kenya,” the association said in a statement.

“This decision is already having a major impact on Tanzanian LPG companies since these companies trade a large part of their volumes with their Kenyan counterparts. This ban will affect Kenyans as it will allow select firms to operate in a monopolistic set-up.”

The traders say they can readily supply the Kenyan market.

“The LPG cost in Mombasa is much higher than in Dar es Salaam. Monopoly and protectionism have pushed prices up in Mombasa. The main reason why LPG from Dar es Salaam or Tanga is cheaper is because the offloading and storage infrastructure at these two ports is more efficient. Firms in Kenya have higher storage unit costs due to facilities like floating storage, which need fuel to run, and higher maintenance cost compared with fixed storage facilities.

“Firms without floating storage incur demurrage charges due to delays in offloading of product at Mombasa port, unlike Dar es Salaam where occupancy is relatively low and Tanga port where there are no demurrage charges. This means that the gas coming from Dar es Salaam and Tanga is likely to be cheaper than that from Mombasa,” said the statement.

Tanzanian LPG companies export about 40 per cent of their annual volumes to Kenya. Dar imports 100,000 tonnes of LPG from the Middle East.

Data from the Petroleum Institute of East Africa shows that in March, when the ban was imposed, Lake Gas, owned by Tanzanian billionaire Ally Etha Awadh who recently acquired Kenya’s Hashi Petroleum, was Kenya’s biggest importer of gas, controlling 23.5 per cent of the LPG market. The firm became a big player in the LPG market last September.

Huge loss

But now, after the ban, the company is facing huge losses given that it trucks its products to the region from its Tanga terminal, which opened in July 2015.

The Tanga terminal can store up to 1,000 tonnes of LPG. Gas is re-exported from there to other markets like Kenya, Zambia, the DRC, Rwanda, Uganda and Burundi.

Hashi Energy has seen its market share drop from 22.2 per cent in September last year to 16.4 per cent in December, then further to 8 per cent in March. Lake Gas has been selling its branded gas locally, but this is mostly supplied through independent re-fillers.

The Tanzanian exporters have also taken issue with Kenya’s claims of adulteration, arguing that such issues should be dealt with on a case-by-case basis.

“We doubt if the issue of illegal refilling will be solved through a blanket ban on road importation of gas from Tanzania, as illegal refillers can still use LPG from Mombasa port. LPG imported into Kenya through Mombasa is distributed within Kenya and also exported to other East African member states by road. If illegal refilling is fuelled by product movement by road, then the concern above cannot be attributed to product coming from Tanzania alone,” the traders said.

Last week, Kenya said that it would be purchasing two gas testing facilities, to be installed at the border Custom points of Namanga and Voi, before the end of the year, in a bid to unlock the trade stalemate with Dar.

Energy Regulatory Authority acting director-general Pavel Oimeke said the country only has one functional machine at the Kenya Petroleum Refineries Ltd.

“The purchase of the additional two machines will ensure that all LPG entering the country through road border points is sampled and tested. The cost of the equipment will be $800,000,” Mr Oimeke said.