Tanzania firm presses on with Kilifi gas plant amid safety fears

Principal Secretary for the State Department for Petroleum Mohamed Liban before the Public Accounts committee at Parliament buildings, Nairobi. May 23rd,2024 [Elvis Ogina, Standard] Lake Gas is pushing ahead with its bulk cooking gas terminal project in Kilifi County, risking running afoul of the High Court's ruling halting construction and revoking the firm's environmental licence. The Tanzanian firm has been positioning itself as a key player in Kenya's cooking gas market. A planned 25,000 metric tonne liquified petroleum gas (LPG) storage plant is expected to boost its Kenyan operations, including retail sales of cooking gas. The firm said tanks with a storage capacity of 10,000 tonnes are ready for use and is preparing to start operations "within the month" despite a court ruling that revoked its environmental licence and halted all project activities. But beyond the legal drama, industry insiders are questioning the facility's actual preparedness. A botched gas shipment last year exposed gaps in marine discharge infrastructure after a vessel carrying 19,000 tonnes of LPG failed to discharge at the plant in Kilifi and was forced to sail away with most of its cargo. Environmentalists note that key safety components, including breakwater protections and proper discharge jetties, remain missing or untested. The project has faced several hurdles, with both the community and county government citing the firm's failure to follow rules during the project development phase. The county government had at some point shut it down in March last year, saying the company had failed to comply with "environmental and safety regulations." Kilifi residents also lodged a suit at the National Environmental Tribunal last year seeking to stop the project, claiming that the company failed to undertake proper public participation. This followed a previous attempt at the High Court to stop the project, which was referred to the Environmental Tribunal. On March 10, the Tribunal cancelled the plant's Environmental Impact Assessment (EIA) licence, citing inadequate public participation and found the developers-Lake Gas and Vipingo Development, where the project is located-in contempt for continuing construction in breach of a January order suspending the project. The Tribunal imposed a Sh2 million fine on the company directors and ordered the police to preserve the site. Despite the orders, top government officials recently toured the facility and said it is ready for commissioning, a move that experts now warn may amount to contempt. Petroleum Principal Secretary Mohammed Liban, who two weeks ago led a multi-agency team on a tour of the plant, lauded the "top-quality work that had gone into the construction, the state-of-the-art security systems and safety measures, including fire suppression systems." The cancellation of the ESIA licence is a major setback for the firm in its quest to become a key player in Kenya's LPG sector. "The EIA Licence No. NEMA/EIA/PSL/8728 issued by the first respondent (Nema) to the second respondent (Vipingo Development Limited) on December 10, 2019 is hereby cancelled/revoked for want of adequate public participation," said the Tribunal in a March 10, 2025 ruling. The Tanzanian firm has since appealed the ruling by the environmental tribunal. It, however, appears to be preparing to start operations at the plant, noting that tanks with a capacity of 10,000 metric tonnes are ready to start receiving imported cooking gas. Lake Gas two weeks ago hosted PS Liban, after which the ministry issued a statement, saying the firm is gearing up to "commission the first phase of its state-of-the-art 10,000 metric tonnes LPG facility." While it did not divulge more details, the statement said the commissioning "is set to be officially launched within the month." PS Liban was accompanied by a multi-agency team comprising representatives from the Kenya Pipeline Company (KPC), Energy and Petroleum Regulatory Authority (Epra), National Environment Management Authority (Nema), Kenya Bureau of Standards (KEBS) and officials from the ministry. "(The delegation) toured Lake Gas' onshore and offshore facilities to assess their readiness ahead of the facility's commissioning," said the ministry in the statement. The plant can store 10,000 metric tonnes of LPG, made up of four storage spheres-each with a 2,500-tonne capacity. The site is also equipped with four gantries capable of handling 1,000 metric tons of LPG per day within a 10-hour operating window. Lake Gas management said it plans to increase the capacity by an additional 15,000 metric tonnes, raising the capacity to 25,000 tonnes. "The construction quality is impressive, with top-tier security systems, automated monitoring for both onshore and offshore operations, and comprehensive fire suppression infrastructure that can be powered by either electricity or generators," the PS said. He also noted that the facility had complied with all key regulatory requirements and recommendations from the relevant authorities, aside from what he termed "minor pending adjustments." These, he assured, would be finalised before full commissioning, with rigorous safety tests to be conducted due to the flammable nature of LPG. Lake Gas did not respond to Financial Standard's query on the status of the project, including when it expects the plant to start operations and what sort of impact it expected it to have on the local cooking gas market. An environmental activist, however, warned that the Energy Ministry and Lake Gas risked being cited for contempt of court by going ahead to commission the facility. Karanja Murai of People's Movement for Human Rights noted that the tribunal had made its recommendations public, and therefore, the ministry had no option but to comply. "This is a straightforward matter, and both the company and the ministry must abide by it; otherwise, we will be moving to court to oppose any attempt to disregard the Tribunal's verdict," said Mr Murai. Other than the cancellation of the EIA licence, the Environmental Tribunal on March 20 further found the firm to be in contempt of orders it had issued on January 20 this year, halting the project until the matter was heard and determined. It ordered the directors of Vipingo Development, where the project is being developed, and Lake Gas to pay a fine of Sh2 million by April 20 (Sunday). "The Tribunal, on January 20, 2025 issued an order restraining the second and third respondents (Vipingo Development and Lake Gas) from proceeding with any activities related to the implementation of the bulk 22,000 metric tonne LPG storage facility on plot LR No. 4393/III/MN in Vipingo, Kilifi County, pending the determination of the main appeal. This order was clear, unambiguous and binding upon the second and third respondents," said the tribunal, adding that continued construction demonstrated deliberate disobedience of the Tribunal's order and their actions amounted to contempt of the Tribunal's authority. "The directors of the second and third respondents are hereby found to be in contempt of the Tribunal's order dated January 20, 2025... it is hereby ordered that they shall jointly and/or severally pay a fine of Sh2 million within 30 days of this ruling. "That further to the orders issued by the Tribunal on January 20, 2025, for purposes of preserving the site subject to the instant proceedings, an order is hereby issued directing the Officer Commanding Station within the jurisdiction of the project site to provide police assistance and supervise implementation of the preservation orders." Lake Gas is part of Lake Group, whose Lake Oil acquired Kenya's Hashi Energy and increased its footprint in the country, which is owned by Tanzanian businessman Ally Edha Awadh. In its quest to deepen its market share in the local lucrative cooking gas market, the firm is backed by an influential Kenyan billionaire with interests in, among other sectors, real estate, manufacturing, and banking. The businessman also holds a board position in a key government agency. The firm had been gearing up to start operations at the LPG plant and had reportedly bought an LPG cargo but experienced major logistical challenges, making it impossible to offload the cargo, and the ship had to sail away after discharging a fraction of the gas it was carrying. On August 8 last year, the ship carrying 19,000 metric tonnes of cooking gas arrived at the Kenyan coast. According to vessel tracking apps, the ship was expected to discharge the cargo at Kilifi, but on arrival, the vessel's crew were stunned to find that there were no marine discharge facilities. The ship would hover in Kenyan waters for a month, and it was only in September that it would attempt to discharge its cargo at the Shimanzi Oil Terminal (SOT) and Kipevu Oil Terminal. According to a Kenya Ports Authority (KPA) schedule of oil and LPG tankers discharging at the Kenyan different points at the port, Pasco Roni - the name of the Marshall Islands-flagged vessel - was put on the waiting list for ships that were to discharge at Shimanzi between September 7 and 21. It would discharge only 1,500 metric tonnes, but it stopped after it turned out it would take too long to discharge the entire cargo, with costs for the cargo owners already piling up after spending a month waiting. Cargo owners pay a penalty whenever they keep vessels waiting longer than the agreed time. The ship would sail away with the cargo. "The vessel did not discharge and sailed away with the balance of the cargo. The discharge at the facility is 35 metric tonnes per hour. It would, therefore, require 430 hours or 18 days to discharge the cargo," said a source. "The information was exchanged at the pre-discharge conference. The cargo owners made a decision not to continue with the discharge because of the time it would have taken." Another source noted the reckless nature of the venture, querying whether "there is a discharge point for LPG at Kilifi," but confirmed that the Lake Gas facility is not ready and that the "ship sailed away from SOT." KPA said the ship could not discharge at Kilifi and docked at SOT. "The cargo could not be discharged at the terminal in Kilifi because currently it doesn't have capacity for the docking of ships. It's still under construction, and please note this is a privately owned facility. The vessel docked at SOT at the Port of Mombasa, which is operated by oil marketers," said KPA, responding to queries by Financial Standard. The State agency clarified that its role is limited to guiding ships to harbours. "The role of KPA is to offer pilotage services and has no control over the management of what to discharge or not to discharge." Lake Gas did not respond to our queries on whether it had tried to discharge the cargo to its plant at Kilifi, the capacity of the discharge infrastructure, and the extent of losses it incurred on losing the cargo. Sources say the ship was delivering LPG that had been acquired by Lake Gas from a Turkish trader. The firm had expected to use a floating jetty to discharge the cooking gas from the ship. The captain of Pasco Roni, however, deemed the operation too dangerous, relaying to the cargo owners that they need to have certain minimums before discharge, such as breakwater infrastructure, which shelters a vessel from strong ocean waves as well as protect delicate marine life from spills.

Tanzania firm presses on with Kilifi gas plant amid safety fears

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