By Thuita Gatero,
In a move that has sent ripples through Kenya’s energy sector, the government has scrapped the Kenya Pipeline Company’s (KPC) ambitious plan to construct a Liquefied Petroleum Gas (LPG) storage and handling facility in Mombasa. Instead, the project has been handed over to Asharami Synergy, a Nigerian energy conglomerate, under a 31-year lease agreement.
This decision, while aimed at accelerating LPG accessibility and affordability, has raised eyebrows and ignited debate about transparency, national interest, and the role of private sector involvement in strategic infrastructure projects.
KPC’s Initial Vision and the Abrupt Change
KPC, a state corporation mandated to transport and store petroleum products, had initially proposed the Mombasa LPG facility to address the country’s growing demand for clean cooking energy.
The project was envisioned as a key component of Kenya’s strategy to reduce reliance on biomass fuels like firewood and charcoal, which contribute to deforestation and indoor air pollution.
The facility was expected to boost LPG storage capacity, improve supply chain efficiency, and ultimately lower consumer prices.
However, the government’s decision to abruptly cancel KPC’s project and transfer it to Asharami Synergy has left many questioning the rationale behind this change.
The official explanation cites the need for faster project implementation and the private sector’s efficiency in delivering such infrastructure. Yet, critics argue that KPC, with its extensive experience in pipeline and storage infrastructure, was well-positioned to execute the project.
Asharami Synergy: A New Player in Kenya’s LPG Market
Asharami Synergy, a subsidiary of Sahara Group, is a prominent player in the African energy sector, with a strong presence in downstream petroleum operations.
Their entry into the Kenyan LPG market through this lease agreement signals a significant expansion of their regional footprint. The 31-year lease grants them exclusive rights to develop and operate the Mombasa LPG facility, implying a long-term commitment to the Kenyan market.
The company’s expertise and financial muscle are touted as key advantages in accelerating the project’s completion.
However, questions remain about the specific terms of the lease agreement, the level of local participation, and the potential impact on domestic LPG suppliers.
This handover has several critical implications for Kenya’s energy sector and the broader economy:
- National Interest vs. Private Sector Participation: The decision raises fundamental questions about the balance between national interest and private sector participation in strategic infrastructure projects. While private investment can bring efficiency and innovation, concerns exist about the potential loss of control over critical assets.
- Transparency and Accountability: The lack of transparency surrounding the decision-making process has fueled speculation and mistrust. Stakeholders are demanding greater clarity on the criteria used to select Asharami Synergy and the terms of the lease agreement.
- Impact on Domestic LPG Suppliers: The entry of a major international player like Asharami Synergy could potentially disrupt the domestic LPG market, affecting local suppliers and distributors. Concerns exist about fair competition and the potential for market consolidation.
- Energy Security: The reliance on a foreign company for a critical energy infrastructure project raises questions about energy security and the potential vulnerability to external factors.
- Long Term Pricing: The 31 year lease will have a long term effect on pricing of LPG in the country. There is a concern that without proper regulation, this could lead to higher prices.
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Moving forward, several key actions are necessary to ensure that this development benefits Kenya’s energy sector and its citizens:
- Transparency and Disclosure: The government must release detailed information about the lease agreement, including the selection criteria, financial terms, and performance benchmarks.
- Regulatory Oversight: Robust regulatory oversight is crucial to ensure fair competition, prevent market manipulation, and safeguard consumer interests.
- Local Content and Participation: Mechanisms must be put in place to ensure meaningful local content and participation in the project, including employment opportunities and technology transfer.
- Long-Term Strategy: This event should prompt a review of Kenya’s long-term energy strategy, with a focus on diversifying energy sources, promoting renewable energy, and ensuring energy security.
- Stakeholder Engagement: Continuous dialogue and engagement with all stakeholders, including domestic LPG suppliers, consumer groups, and civil society organizations, are essential.
