Investors stir LPG sector with Sh4b cash injection
Kenya’s booming LPG market has attracted a Sh4 billion worth of investment coming on the back of a 74 per cent surge in demand compared to last year.
Kenya Gazette notice on Friday last week says the deal by Aevitas Investment Company is awaiting approval by the National Environmental Management Authority (Nema).
“The Project proponent Aevitas Investment Company will construct a 30,000 metric ton LPG mounted Storage Depot on plot number MN/VI/4794,” the latest Kenya Gazette issue shows.
The new depot to be situated at Kibarani in Mombasa is expected to increase competition with players such as Africa Gas and Oil Limited, Huskar Trading, National Oil Corporation of Kenya, and Rubis which is formerly Kenolkobil, among others.
High demand for LPG
The high demand for LPG in Kenya is being driven by rising prices of charcoal and kerosene following a government policy that seeks to reduce deforestation by encouraging use of LPG.
The 2020 economic review says the rise in demand is partly attributed to significant increase in illuminating kerosene retail prices that the state believes will discourage adulteration of diesel.
Kenya’s economy, which is growing at an average of 5 per cent, has seen increasing demand for LPG on account of a burgeoning middle class.
However, the prices of cooking gas remain significantly above the ability of many Kenyans, making a case for more affordable LPG.
The new project will be constructed in two phases, the first one will involve the construction of 25,750 metric tonnes capacity mounted storage tanks in the next two years.
Phase two will involve the construction of 4250 metric tonnes capacity mounted storage tank.
The second phase will commence upon operationalisation of the first one.
The entire project will sit on a 19 acre piece of land in Changamwe.
Data from the Kenya National Bureau of Statistics shows that demand for LPG rose by 74 per cent in the first six months of the year compared to the same last year. It grew by 60 per cent in 2017.
“The construction of this depot and subsequent operationalisation shall employ over 250 people directly.
“Indirectly it is meant to employ over 1000 people,” Nema said in its environmental and social impact assessment report on its website.
The heavy demand is attracting huge capital investment in the LPG market from players and international financiers such as the International Finance Cooperation (IFC).
The project comes just 2 years after Dubai-based Milio International Limited invested in a Sh2 billion storage depot in Mombasa, the depot has a capacity of 22,000 metric tons.
Last year Mansa East Africa started the construction of a Sh7.5 billion filling facility at Liwatoni, Mombasa.
It is a partnership between the US company Petredec and Kenya Rift gas.
The government of Tanzania is also constructing an LPG pipeline connecting Mombasa and Dar es Salaam which is expected to supply cheaper gas to Kenya.
