New LPG storage facility to be launched next month

A liquefied petroleum gas storage facility that was being constructed in Mombasa by the Africa Gas and Oil Company (AGOL) will be launched in a month, signalling the possibility of a significant reduction in the prices of cooking gas.

The Energy Regulatory Commission said that AGOL, during its recent presentation to the regulator, indicated that it was putting the final touches to the facility and that it would be ready for launch in a month.

The facility will create additional storage capacity for LPG and hopefully offer a solution to gas supply shortages, which have been blamed for escalating prices. Also, it will allow for offloading of large vessels at the Port of Mombasa.

Currently, only vessels carrying cargo of between 1,000 and 2,000 tonnes can be accommodated at the port because of limited storage capacity.

Demurrage costs

This has led to delays in offloading vessels, attracting demurrage costs that are passed on by importers to end consumers.

Demurrage refer to costs that shipping lines charge on importers for the extra time spent beyond the grace period allowed for offloading cargo.

The new facility will enable importers to enjoy economies of scale by bringing in large cargo and saving on unit freight costs.

The storage terminal, which consists of both an inland and a floating unit that is located offshore has a collective capacity of 14,500 tonnes.

Initial estimates indicated that the facility would be constructed at a total cost of Sh12.5 billion and that it could be ready by mid this year.

Attempts to establish whether the project has run into additional costs as a result of the delayed construction did not yield much as AGOL declined to give any details regarding the project.

“I cannot say anything regarding this project at the moment,” said Ezra Pakter, AGOL managing director.

Data from the Kenya National Bureau of Statistics indicates that the annual national consumption of LPG is estimated to be about 87,000 metric tonnes which translates into a monthly consumption of about 7,000 metric tonnes.

The existing storage capacity estimated to be only 13,000 metric tonnes only supports supply for a month hence with the launch of the new facility, the country will be assured of more than two months supply of the product.