East Africa next frontier for LPG use

May 16, 2011
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, NAIROBI, Kenya, May 16 – A lobby group that advocates for the awareness and use of cooking gas says East Africa is poised to be the next frontier for the Liquefied Petroleum Gas (LPG) market.

World LP Gas Association Deputy Managing Director Michael Kelly disclosed on Monday that for many of their members, Africa is the place where the future growth of LPG will come from and hence the desire to position themselves strategically in order to take advantage of the opportunities.

The association is collaborating with the Petroleum Institute of East Africa (PIEA) to host a summit this July to examine the market conditions in the LPG industry to inform investments in the sector.

"We are driven by our members who want to know how the market is going to evolve in this part of the world and how they can invest.

They see it as a growth market and they want to figure out how they can get into it now before it starts to take off and before their competitors can get into it," he said adding that they foresee a scramble for investment in the continent.

During the meeting which will bring together government officials, representatives from LPG companies, refiners, equipment manufactures and other stakeholders, Mr Kelly said they would also deliberate on the models that could help to increase the usage of LPG in the region.

Although there are many mechanisms that can be adopted, the manager said a successful model that was implemented in Indonesia and one that targeted poor people would probably work in East Africa as well.

The project which involved the sale of small cylinders that low income earners could afford saw about 254 million households shift from using kerosene to cooking gas in just over three years.

With proper implementation, this model could work, he emphasised.

In Kenya, LPG consumption is estimated at around 10 percent largely because the price is prohibitive for a majority of Kenyans.

By increasing its penetration, however, in a country where majority depend on wood and kerosene for cooking and lighting, would be able to reduce its over reliance on wood fuel and increase its forest cover from the current two percent.

The shift towards this form of energy would augur well with the push to have the country adopt green energy particularly at a time when many Kenyans are suffering under the weight of skyrocketing fossil fuel prices.

For this objective to be achieved however, the country would need to address some of the bottlenecks that hinder the growth of this energy. Besides the regulatory environment being unfavourable, the country also lacks adequate storage capacities.

Kenya\’s total storage capacity is about 1,200 tonnes which includes the facilities of the oil marketers.

Viewed against the current monthly demand of 7,000 tonnes and a potential of about 240,000 tonnes, this points to the need to put up the necessary infrastructure to ensure availability of gas and also enable Kenyans to benefit from this form of energy.

There have been many plans to put up storage facilities in various parts of the country but most have not borne fruit. Efforts to construct a 6,000 metric tonnes storage plant for instance have been in the works since 2006 as it has not received support from the private sector.

In March 2008, the government through the Kenya Pipeline Company signed a joint venture agreement with an Indian company Bharat Petroleum Corporation to construct LPG storage and handling facility on a 30-acres land in Athi River.

Expected to cost an estimated $13 million (Sh1.1 billion), it was estimated that the project would help to bring down the cost of cooking gas by about 35 percent.

Three years later, the projected facility with a handling capacity of 44, 000 Metric Tonnes per annum and a storage of 2,000 tonnes is yet to kick off largely due to a row over land acquisition.

Follow us TWITTER @CapitalFM_Kenya and the author at https://twitter.com/Cirunjoroge

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