Why cooking gas prices are high

Despite a big drop in the cost of imported cooking gas (LPG) and new players entering the market, the price of cooking gas in Kenya has remained unchanged over the past two years.

However, industry data shows that Kenyans should already be paying much less for gas, as several factors have helped reduce the cost of bringing LPG into the country.

Several factors have helped reduce the cost of importing cooking gas to Kenya, including increased competition in import and storage facilities, which has reduced dependence on one main terminal. There has also been a general drop in global LPG prices.

Globally, LPG prices have been falling, following the same trend as crude oil and seasonal changes in demand.

This trend is shown in the Saudi Aramco Contract Price (CP), which is a key reference for LPG prices in the Middle East, Asia, and Africa.  Since the start of 2025, the CP has continued to drop. The average price of butane and propane, two key gases used to make LPG, fell from $620 (Sh80,000) per tonne in January to $505 (Sh65,650) per tonne in September.

As a result, Kenya’s import costs have come down. Industry players say the cost of landing LPG has dropped from about Sh100 per kilogramme in the past years to between Sh86 and Sh90 per kilogramme today.

“Landed costs have dropped by more than 10 per cent, but consumers have not benefited. The key question is why prices are not falling at the retail level,” said a source in the LPG industry.

Between January 2024 upto July this year, a 13-kilo cooking gas cylinder retailed between Sh3,100 and Sh3,200, according to data by the Kenya National Bureau of Statistics (KNBS).

At a landed cost of about Sh1,170 for the 13kg cylinder, this might mean that the oil marketing companies are making significantly high profit margins.

LPG is also exempt from several taxes that are applied to other petroleum products, including the 16 per cent Value Added Tax (VAT) and excise duty.

Following the removal of VAT on LPG in 2023, there were concerns that the companies had failed to pass the reduction to consumers.  In the past, the firms have cited the high cost of operation, including cylinder maintenance as well as storage, transport and distribution as the main reason why the consumers are not feeling the tax exemptions.

The Energy and Petroleum Regulatory Authority’s (Epra) Director General Daniel Kiptoo acknowledged the failure by major firms to pass down the benefit of falling prices to consumers.  He said the authority plans to start regulating cooking gas prices at the retail level, just like it does with other petroleum products.

However, this will only happen after the industry begins importing LPG through the Open Tender System (OTS).

“As a regulator, we want to bite into chunks,” he said, explaining that the government first wants to ensure there is enough local storage before fully rolling out OTS. Under this system, licensed importers will compete to bring in gas on behalf of the industry, with the importer who offers the lowest freight and premium costs winning the tender.

“We’ll start by bringing in the product through OTS, benefit from economies of scale, then regulate the storage terminals as common-user facilities. Eventually, we can set prices at wholesale and retail levels,” he added.

Epra has already developed a framework to convert privately owned LPG facilities into common user infrastructure, which will open up existing LPG storage and import facilities to multiple industry players. This move would allow any licensed importer to discharge cooking gas into shared storage terminals before it is distributed to the market.

This will enable industry players to import products through the expanding import terminals.

For years, Kenya has heavily relied on a single major import terminal in Mombasa, owned by Africa Gas and Oil Limited (Agol). The country is, however, diversifying in this aspect by operationalising the Lake Gas facility in Kilifi County. Other import terminals that are planned for in the coming years are Taifa Gas facility which has a 30,000 tonne capacity and the planned Sahara Energy 30,000 tonne facility at KPRL.

The increased competition is expected to enhance supply, reduce prices and intensify the overall LPG market rivalry. 

Other than the Agol facility, the other option has been the much smaller Shimanzi Oil Terminal (SOT), which connects to five  LPG bulk storage facilities owned by different oil marketing companies – Vivo Energy (50 tonnes), Hashi Energy (400 tonnes), Total Energies (240 tonnes), Ola Energy (450 tonnes) as well as the Kenya Petroleum Refineries Limited (1,195 onnes). 

In having the terminals become common user facilities available for use by LPG marketers based on their market share. “When it comes to the import terminal, we want to ensure that everybody gets capacity based on their market share. They have capacity in every vessel that comes and they also have capacity in the storage tanks. We will have to determine the tariff that will be charged by the storage terminal because at the moment, that is determined by the market,” said Kiptoo.

He added that they are still engaging with key players in the sector. OTS agreements are almost finalised, but before full implementation, they must be signed by all oil marketing companies (OMCs). The government is also in talks with terminal owners and working on finalising the logistics.

“We are also alive to the fact that there are existing commercial agreements among the players. If the government comes in, we have to give them time to get out of the commercial agreements and before the new regulations come into effect,” he said.