Having hit an all-time high, the government unveils new plans to control gas and oil products in the country. Through the National Oil Corporation of Kenya, the State will import 30 percent of cooking gas, a move that will help control the price of the commodity.
A review of regulations was done where the State corporation is reserved 30 percent of cooking gas imports and will keep up its role of influencing market prices.
The corporation was formed to influence and stabilise fuel prices, however, private players had largely dictated the market forcing it to bow down.
The main aim of National Oil’s quota is to force greedy private importers to lower the cost of liquefied petroleum gas-LPG and ultimately retail prices.
Most influence for the current gas costs is drawn from the Russian-Ukraine war, where Russia is one of the largest world exporters of crude oil products. Others are the imposition of VAT by the government, and the search for higher profit margins by the dealers. All these factors combined have sent cooking gas prices to the highest ever in the country.
Cooking gas prices are controllable, unlike diesel, petrol and kerosene prices which are adjusted every mid-month(15th) and stay in place for one month.
“The Petroleum Products Quota Allocation shall be as set out in the First Schedule and the purpose of the quota allocation will be to ensure price stabilisation in an unregulated pricing regime,” says Energy and Petroleum Regulatory Authority (EPRA) in the Draft Petroleum (Importation) (Quota Allocations) Regulations, 2022.
As we speak, a 13kg cooking gas retails at Sh3,400 from Sh2,250 in June last, even before the 16 percent tax imposition by the government at the start of the new financial year. Definitely, this makes the commodity unaffordable for most households.
Construction of new terminal
The government is constructing Kipevu Oil Terminal, which is nearing completion. This is where National Oil’s gas imports will be stored. The government will be able to influence gas prices through control of wholesale prices at this terminal.
For a long time, firms had been locked from handling cooking gas imports at the port. Lack of a common-user State facility at Kipevu, with only one company handling over 91 percent of the LPG shipments.
Under the open tender system-OTS, like is the case with diesel, petrol and kerosene, the state will award one oil marketer the right to import gas in bulk every month on behalf of the entire industry, with large discounts.
The facility will have a common user berth for LPG and allow the State to also issue an OTS for gas imports, prompting the shift to control of cooking gas prices.
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Construction of the Kipevu Oil Terminal facility commenced in 2019 and will handle four vessels of up to 100,000 metric tonnes and an LPG line upon completion.
Shimanzi and the old Kipevu terminals were the only facilities but are too small to handle large quantities of imported oil and gas. The new terminal will supplement the two.
Originally, the cooperation had the authority to import 30 percent of the country’s petroleum products, including LPG, however, lost its rights in the 1990s when the government permitted private firms in the sector. it was debt-ridden hence unable to operate.
According to survey, cooking gas has become the preferred energy source for households. this is so because it’s cleaner than other cooking fuel, and can be afforded in major towns due to its convenience. Due to public outcry, the government had to step up and find a solution for its citizens.