Kenya on Tuesday offered a Tanzanian billionaire the licence to set up a cooking gas plant and storage facilities at the Mombasa port, averting a potential trade spat between the two neighbouring countries.
The energy regulator cleared Taifa Gas, which is owned by tycoon Rostam Aziz who had previously lamented that Kenya had gone quiet over his enquiries to build a 30,000-tonne liquefied petroleum gas (LPG) handling facility in the country.
The entry of the business magnate, who was ranked the first dollar billionaire in Tanzania by Forbes in 2013, signals a vicious battle for control of the Kenyan cooking gas market that remains under the tight leash of Mombasa-based tycoon Mohamed Jaffer.
“Yes, we have already issued them with the licence to build the plant,” Epra Director-General Daniel Kiptoo stated. The entry of Taifa Gas into Kenya is part of a trade deal agreed upon by Kenya’s former President Uhuru Kenyatta and Tanzania’s Samia Suluhu in 2021.
Mr Aziz had in 2021 complained that Nairobi went mute on his 2017 enquiry to build an LPG plant, lamenting the barriers for Tanzanian entrepreneurs seeking a presence in Kenya.
Taifa Gas is the largest LPG supply company in Tanzania and has been feeding the Kenyan retail market via road. Now, Mr Aziz is seeking a large share of Kenya’s LPG market. It also sets the stage for a billionaires’ fight pitting Mr Jaffer and Mr Aziz, 58, that is first expected to cut the cost of handling and evacuating cooking gas from the ships to the mainland, allowing dealers to transfer the cost reliefs to consumers.
Just like Mr Jaffer, Mr Aziz has invested in building political networks that saw him serve as MP and treasurer of the Tanzanian ruling party, Chama Cha Mapinduzi (CCM).
Mr Aziz’s ambitions to establish a retail cooking gas presence in Kenya look set to trigger another market fight with oil dealers like Vivo, Rubis and Total, for control of the 2.87 million households (23.9 percent of Kenyan households) that use the fuel for cooking. Taifa Gas wants to build the 30,000-tonne Kenya facility at the Special Economic Zone in Dongo Kundu, near the port of Mombasa. It was earlier estimated to cost $130 million (Sh16.25 billion).
This will be right at Mr Jaffer’s doorstep, with his firm Africa Gas and Oil Ltd (AGOL) operating a multi-billion shilling facility in the same area. Construction of the Taifa Gas facility offers Kenya an opportunity to lower cooking gas costs in the absence of price controls.
LPG prices have hit new highs, with the 13-kilogramme container retailing at an average price of Sh3,266 in Nairobi while the six-kilogramme one has crossed Sh2,000. It is unclear what AGOL charges oil firms for handling cooking gas but the lack of other players in the business suggests a lack of significant competition that has kept the fees high.
AGOL has a storage capacity of 25,000 tonnes of LPG following an upgrade last year of the facility initially built in 2013. The plant was built to allow for bulk imports of cooking gas to lower unit costs through economies of scale and curb shortages, which had been made difficult by the smaller import terminal at Shimanzi.
It had a storage capacity of 10,000 tonnes and the 25,000 tonnes unit is ranked among the largest terminals in sub-Saharan Africa. The import handling and storage unit has helped relieve demand pressures through the reduction of stock-outs, effectively easing pressure on LPG prices.
Previously, the oil marketers imported cooking gas individually in small quantities due to inadequate discharge facilities. This led to cooking gas shortages and expensive LPG due to high import premiums and demurrage, which are penalties marketers pay shipping companies when tankers fail to offload in the stipulated time period.
The Shimanzi terminal has a capacity of just 1,400 metric tonnes. The tankers would queue for up to two months, leaving the marketers with a daily fee of $20,000 (Sh1.7 million). The AGOL plant and Proto Energy, the maker of Pro Gas, have offered Mr Jaffer a firm grip on the lucrative cooking gas market.
The business mogul is also the owner of Grain Bulk Handlers, which has a near monopoly in the discharge and handling of bulk grain cargo at the Port of Mombasa. Private companies have been angling to benefit from the growing use of cooking gas in Kenya in the absence of investments by the government via import and storage facilities.