Tanzanian gas exporters have termed Kenya’s ban on imports as
protectionism, as its oil marketing firms lose their share of the
market.
They say the move is against fair competition practice as set by the EAC Common Market rules.
However,
the exporters may have to wait till the end of the year for a possible
resumption of business after Kenya indicated that it will take up to six
months to install a gas-testing facility at its border points.
The Tanzania LPG Association said that the ban has benefited select companies in Kenya.
“We
don’t see any plausible reason for the ban on LPG trade between Kenya
and Tanzania, save for undue influence by a few oil firms in Kenya keen
to monopolise the LPG business in Kenya,” the association said in a
statement.
“This decision is already having a major
impact on Tanzanian LPG companies since these companies trade a large
part of their volumes with their Kenyan counterparts. This ban will
affect Kenyans as it will allow select firms to operate in a
monopolistic set-up.”
The traders say they can readily supply the Kenyan market.
“The
LPG cost in Mombasa is much higher than in Dar es Salaam. Monopoly and
protectionism have pushed prices up in Mombasa. The main reason why LPG
from Dar es Salaam or Tanga is cheaper is because the offloading and
storage infrastructure at these two ports is more efficient. Firms in
Kenya have higher storage unit costs due to facilities like floating
storage, which need fuel to run, and higher maintenance cost compared
with fixed storage facilities.
“Firms without floating
storage incur demurrage charges due to delays in offloading of product
at Mombasa port, unlike Dar es Salaam where occupancy is relatively low
and Tanga port where there are no demurrage charges. This means that the
gas coming from Dar es Salaam and Tanga is likely to be cheaper than
that from Mombasa,” said the statement.
Tanzanian LPG
companies export about 40 per cent of their annual volumes to Kenya. Dar
imports 100,000 tonnes of LPG from the Middle East.
Data
from the Petroleum Institute of East Africa shows that in March, when
the ban was imposed, Lake Gas, owned by Tanzanian billionaire Ally Etha
Awadh who recently acquired Kenya’s Hashi Petroleum, was Kenya’s biggest
importer of gas, controlling 23.5 per cent of the LPG market. The firm
became a big player in the LPG market last September.
Huge loss
But
now, after the ban, the company is facing huge losses given that it
trucks its products to the region from its Tanga terminal, which opened
in July 2015.
The Tanga terminal can store up to 1,000
tonnes of LPG. Gas is re-exported from there to other markets like
Kenya, Zambia, the DRC, Rwanda, Uganda and Burundi.
Hashi
Energy has seen its market share drop from 22.2 per cent in September
last year to 16.4 per cent in December, then further to 8 per cent in
March. Lake Gas has been selling its branded gas locally, but this is
mostly supplied through independent re-fillers.
The
Tanzanian exporters have also taken issue with Kenya’s claims of
adulteration, arguing that such issues should be dealt with on a
case-by-case basis.
“We doubt if the issue of illegal
refilling will be solved through a blanket ban on road importation of
gas from Tanzania, as illegal refillers can still use LPG from Mombasa
port. LPG imported into Kenya through Mombasa is distributed within
Kenya and also exported to other East African member states by road. If
illegal refilling is fuelled by product movement by road, then the
concern above cannot be attributed to product coming from Tanzania
alone,” the traders said.
Last week, Kenya said that it
would be purchasing two gas testing facilities, to be installed at the
border Custom points of Namanga and Voi, before the end of the year, in a
bid to unlock the trade stalemate with Dar.
Energy
Regulatory Authority acting director-general Pavel Oimeke said the
country only has one functional machine at the Kenya Petroleum
Refineries Ltd.
“The purchase of the additional two
machines will ensure that all LPG entering the country through road
border points is sampled and tested. The cost of the equipment will be
$800,000,” Mr Oimeke said.
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