State edges KPC out of cooking gas plant deal for Nigerian firm

The Ministry of Energy and Petroleum has quashed a plan by Kenya Pipeline Company (KPC) to develop a massive ="https://www.standardmedia.co.ke/article/2001508367/firms-in-cut-throat-competition-to-build-cooking-gas-plants?utm_cmp_rs=amp-next-page">cooking gas handling facility< in Mombasa and instead handed it to a private player. 

The private firm, Asharami Synergy, had given the Ministry a proposal to develop a similar plant on land owned by Kenya Petroleum Refineries Ltd (KPRL), which is owned by KPC.

The plant will be developed through the public-private partnership (PPP) model.

KPC, which completed acquisition of KPRL last year, has now been left to bear the costs of the work it had done as it prepared to start construction.

The company planned to build a 30,000-metric-tonne liquefied petroleum gas (LPG) facility on land owned by KPRL, which was viewed as a game changer in lowering the cost of cooking gas.

The common user facility would allow industry players to jointly or individually import huge volumes of gas, which they are unable to do due to a lack of adequate storage capacity. 

In a sudden change of plans, KPRL is now readying to lease the land to Asharami Synergy, which will then develop the 30,000 metric tonne LPG facility.

Asharami, a subsidiary of Sahara Group of Nigeria, was last year included in the list of firms that handle fuel imported into the country through the government-to-government import deal.

The firm, alongside Gulf Energy, One Petroleum and Galana Oil handle payments from local oil marketing companies on behalf of the three international oil firms—Saudi Aramco, Abu Dhabi National Oil and Emirates National Oil.

Asharami, which KPRL said was competitively selected to put up the LPG plant, will construct and operate it on a 31-year lease.

The firm will be leasing 23.19 acres of the land located at Changamwe, Mombasa.

KPRL in a statement yesterday, said the government had resolved to establish common user bulk LPG storage and handling facilities through private sector-led initiatives.

This, it explained, meant private sector players would lease KPRL land to set up the facilities. “Consequently, KPRL competitively procured a private sector player to undertake the project, in compliance with the relevant legislation and or circulars with respect to the lease of public land.

“KPRL hereby gives notice of the intention to lease… parcels of land to the successful tenderer for the development, construction, operation and maintenance of the facilities.”

The Asharami deal is a blow to KPC that had made early preparations to start building the plant, which it noted was “poised to significantly reduce the cost of cooking gas as well as help preserve the environment as more people switch from wood fuel”.

It had spent Sh192.64 million in undertaking studies including demand survey, environmental and social impact assessment, front end engineering designs and the cost estimate for the project.

KPC, however, discloses that in the course of 2024, it was directed to abandon the plan by the Ministry of Energy and Petroleum together with Treasury, who opted to bring on board Asharami Synergy.

The matter came up when the Auditor General audited KPC’s annual results for the financial year to June 2024, and queried the value for money of the Sh192.64 million spent in the studies. The Office of the Auditor General further questioned whether KPC would be refunded the money.