Failed Saudi-backed deal and broken pledge: How Kenyans are being pushed back to charcoal use

Kenyans will have to wait longer for cheaper cooking gas after the government confirmed that a highly anticipated deal with a Saudi Arabian firm had collapsed, stalling a key plan to boost supply and lower prices.

At the same time, the government recently raised the Petroleum Development Levy (PDL) on cooking gas to Sh5.40 per kilogramme from 40 cents, setting up households for higher costs while possibly driving others back to use of dirty fuels such as charcoal and firewood.

Energy and Petroleum Cabinet Secretary Opiyo Wandayi yesterday revealed that the government had failed to reach an agreement with Saudi Aramco, dealing a blow to efforts aimed at expanding the country’s liquefied petroleum gas (LPG) infrastructure. 

Wandayi, who appeared before the Senate Energy Committee, said the deal between the Government of Kenya and Aramco Trading Fujairah FZE, an entity nominated under Saudi Arabia’s Oil Sustainability Programme, was never signed due to disagreements over key terms. 

“The planned memorandum of understanding was not carried out as expected, given that the parties involved were not able to amicably agree on the terms.

"The fallout means the oil sustainability programme, which was expected to finance the distribution of about 8.4 million LPG cylinders, will no longer proceed as initially planned,” Wandayi told senators.

He said the proposed Sh2.5 billion financing package from the Saudis had stringent conditions, including demands for exclusive supply rights for LPG, that the government found untenable. 

"It was also clear that these funds were not coming in one tranche but in multiple tranches, which did not make sense."

But even as the government was hitting a dead end on the Saudi deal, it seems to have shot itself in the foot on one of its key pledges of driving the adoption of clean energy by providing cheaper cooking gas. From the President's speech during International Women's Day in 2023, when he announced a huge reduction of LPG prices by doing away with taxes and offering incentives to the current state of affairs, the going is bound to get tough on Kenyans.

The PDL Order 2025 increased the levy on propane and butane to Sh5.40 from 40 cents, which are combined to produce LPG.

The increase on PDL was a departure from the past, where the government had tried to stay away from taxing LPG in its bid to grow usage across households and institutions, and even withdrew a recent plan to impose 16 per cent value-added tax on LPG.

With the new rise, analysts see a pattern where the government has always looked to petroleum to raise tax revenues but warn this hurts the economy as all sector are dependent on petroleum for transport and production processes. 

“For years, successive governments have promoted LPG adoption as a clean cooking alternative to charcoal and firewood, ostensibly for environmental and public health reasons,” said Consumers Federation of Kenya (Cofek) secretary general Stephen Mutoro in a statement last week protesting the increase. 

“To levy it at this rate is policy contradiction at its most cynical: the government preaches clean energy with one hand and prices it out of the reach of ordinary households with the other. Women and children, who bear the greatest burden of indoor air pollution, pay the ultimate price. 

“This order…represents yet another audacious assault on the pockets of ordinary Kenyans.”

Cofek further took issue with lack of public participation in implementing the higher PDL, saying it was executed in the shadows of subsidiary legislation, far from the scrutiny of Parliament and the public.

The lobby argued that while the CS for Energy and Petroleum exercised delegated legislative power, it is not absolute and regulations that are implemented through these powers should not impose a financial burden on Kenyans.  

“The manner in which this levy amendment was effected is as troubling as its substance. A financial burden of this magnitude was imposed through a quiet gazette notice, without parliamentary debate, public participation and stakeholder consultation.

"This is a direct affront to Article 10 of the Constitution of Kenya, 2010, which binds all State organs to the national values of transparency, accountability, and public participation,” said Mutoro. 

“Cofek demands the… immediate suspension of the Petroleum Development Levy (Amendment) Order, 2025, pending a comprehensive parliamentary review and public participation process as required under Article 10 of the Constitution.”

PDL across all petroleum products had for years stagnated at 40 cents per litre.

In 2020, the government increased it by 1,250 per cent to Sh5.40 per litre for different products, with the noticeable impact being on super petrol and diesel that are heavily used in the transport, manufacturing, agriculture and other sectors. 

Kenyans at the time argued that the rise was too steep and should have been phased to enable them to absorb the shock. 

It was through the 2020 regulations that the Ministry of Energy and Petroleum expanded the mandate of the levy to include stabilisation of fuel prices, and has since then been applied to cushion motorists from a sudden spike in the cost of petroleum products. 

The 2020 rise has been among the numerous instances where the government has increased taxes and levy on petroleum products, which has proved key for raising government revenues. 

In 2024, the government increased fuel taxes and levies by nearly Sh8 per litre of fuel. This was through the hiking of the Road Maintenance Levy by Sh7 to Sh25 per litre of super petrol and diesel as well as the 200 per cent increase of the Epra levy to 75 cents from Sh25 cents. 

Earlier, the Finance Act 2023 had doubled VAT to the standard rate of 16 per cent, which had been introduced at eight per cent in 2018. 

Mutoro said there was a need for a review of taxes and levies on fuel that would rationalise all levies, duties and taxes on petroleum products into a coherent, accountable and consumer-sensitive framework. 

“Kenya's fiscal architecture has developed an unhealthy and structurally dangerous dependency on petroleum revenues precisely because they are easy to collect and politically diffuse — the pain is spread across millions of consumers who rarely connect rising pump prices to specific gazette notices made in November.

This opacity is not incidental; it is the point. The government counts on consumer ignorance to shield itself from political accountability,” said Mutoro in the statement.  

It is not the first time that there have been calls to review Kenya’s taxes on petroleum products. 

Kiharu MP Ndindi Nyoro last week called for a reduction of taxes, including reducing the most recent addition. This would mean halving VAT to eight per cent and reducing the Road Maintenance Levy (RML) by Sh7 to Sh18 per litre of diesel and petrol. 

“The government must intervene. Consumers have done their bit by paying additional VAT and fuel levy when prices were coming down; now it is time for the government to reciprocate by removing the eight per cent additional VAT and the Sh7 fuel levy,” said Nyoro.

He said, despite being more than 1,000 kilometres from Mombasa, retail prices were cheaper in Kampala and Kigali compared to Kenya because of higher taxes. 

“Our economy cannot afford to shoulder all these levies and taxes at this time, in consideration of the global dynamics. Kenyans must be shielded. The economy must be supported,” Nyoro said. 

The impact of higher PDL and the effect of the US-Israel war on Iran might slow down the growth in the uptake of cooking gas. 

The government says it has a target of increasing per capita consumption to 15 kilogrammes by 2030 from the current level of about seven kilogrammes. 

Wandayi told the Senate committee that the government plans to achieve clean cooking for all by 2O28, within the United Nations Sustainable Development Goals on ensuring access to affordable, reliable, sustainable and modern energy for all by 2030. 

Last year, Kenyans consumed 475,950 metric tonnes of cooking gas, a 15 per cent increase from 414,900 tonnes consumed in 2024. 

Uptake has increased by more than 200 per cent in the last decade, from 150,000 metric tonnes in 2014. 

Imposing Sh5.40 per kilogramme of cooking gas is expected to add another Sh2.6 billion to the PDL kitty, going by last year’s consumption of 475.95 million kilogrammes.

Over the year to June 2025, the kitty collected Sh25.54 billion, but there have been concerns about the management of the funds.

The Auditor General has, in several reports, called on the Energy and Petroleum Ministry to put in place a governance framework for overseeing the management of funds, including what is released to subsidise pump prices. 

In auditing the Petroleum Development Levy Fund for the year to June 2025, the Auditor General noted that the Ministry had failed to act on earlier recommendations to put in place structures to manage the Fund sustainably. 

“Review of the status during audit of the Fund in 2024-25 revealed that lack of governance framework for stabilisation of petroleum prices remained unresolved as management was still awning for appearance before the Public Accounts Committee,” said the Auditor General in the report, adding that these are among the i

Mutoro called for a detailed report on what has been done with the money collected from motorists and other users of different petroleum products through the PDL. 

“Cofek demands that the Cabinet Secretary for Energy and Petroleum publicly account for the revenues collected under the existing PDL — how much has been collected, and what development outcomes have been delivered,” he said. 

The collapse of the Aramco deal is a setback to President William Ruto’s plan to make clean cooking energy more affordable and accessible, with the country having been negotiating with Saudi Arabia since 2024 to secure a floating LPG storage and processing facility to be stationed off the port of Mombasa. 

“The proposed floating facility was expected to handle up to 30,000 tonnes of LPG and serve as a temporary storage and bottling plant as the country builds a permanent onshore facility with the project being central to the government’s broader plan to increase supply, stabilise prices and deliver on a 2023 pledge to significantly cut the cost of a 6kg gas cylinder,” said Wandayi. 

He maintained that the State remains committed to developing the LPG sector despite current fiscal constraints.