Sh1.1 billion debt threatens free LPG cylinder exchange

Attendants offload cooking gas cylinders from a truck on November 4, last year. at an Oil Libya Petrol Station in Mombasa. The price of cooking currently averages Sh2,300 for a 13kg cylinder. FILE PHOTO | NMG 

In Summary

• Dealers pushing for removal of the current pool system, which has seen consumers get gas easily

By MILLICENT MWOLOLO

An estimated Sh1.1 billion debt which energy companies owe each another is threatening the LPG cylinder exchange programme.

By 2016, there was a backlog of about Sh500 million that the dealers owed each other with the figure rising by the day.

The exchange pool system requires oil marketers to accept their rivals’ empty cylinders when a customer wants to refill, making it convenient for consumers.

“Some of the members, when invoiced by the other party, do not pay for the services. This has caused a big stand-off,” said Mr Peter Macharia, the chairman of the Energy Dealers Association (EDA).
The debt has necessitated the review of legal notice NO. 121 so that players can revert to the old days of different valves.

“If the regulation goes through, the pool will be removed and LPG brands will operate individually,” said Kepher Odongo, the secretary-general of EDA.

To make it easy to run their businesses, the 24 members of the association have signed agreements among themselves so that they can make it easier for their consumers to access cooking gas.

“We freely exchange gas cylinders among ourselves, without invoicing each other as we do not have the capacity,” said Mr Macharia, adding “This is a hospitality agreement where members fill and return the cylinders to the brand owner.”

The association also allayed fears that there is LPG in the market, whose quality has been compromised.

“We sell the same gas as the multinationals. We just repackage and it is only the brands that you see. The content comes in one ship, and most of the times, from the same source,” said Mamo Ahmed Hassan, the director at Global Energy Holdings, and a member of EDA.

Kenya has 48 LPG gas brands in the market, out of which 24 are members of EDA, a lobby group for cooking gas brands in the market.

Members are licensed by the Energy Regulatory Authority, comply with the Kenya Bureau of Standards (Kebs) safety regulations, and each has a gas brand of their own that they fill into cylinders.

READ: ERC races to overhaul gas cylinder exchange

In 2017, EDA members toured Tanzania’s LPG sector where they found that all local companies who supply gas cylinders, have got own receiving terminals and also import gas. This is unlike in Kenya where multinationals — mainly six — control the local cooking gas sector.

“We buy from our competitors who also sell to the market at less than the cost price,” said Mr Hassan.

As a result, some EDA members are now importing gas from Tanzania, for strategic reasons.

“We cannot support some players who are undercutting us. The government must come in and ensure that there is fair play,” said Mr Hassan.

Most of the gas consumed in Kenya, about 60 per cent comes from Mombasa, while 40 per cent originates from Tanzania.

Unlike petrol, diesel and kerosene, cooking gas prices are not regulated by the ERC.

Gas has become the preferred energy source for middle-income households since it’s convenient and clean.

Oil marketers have been pushing for more rigorous checks on unlicensed gas operators whom they accuse of undercutting the market through irregular refilling.