Kenya has walked away from a proposed liquefied petroleum gas (LPG) agreement with Saudi Aramco after rejecting conditions that would have granted the supplier exclusive rights to supply cooking gas to the country.
- •The decision to cut off the Saudi state-backed oil entity stalls a program that had been central to the government’s plan to cut the cost of household gas.
- •The proposed arrangement, negotiated since 2024, included a KSh2.6 billion financing package tied to the distribution of roughly 8.4 million LPG cylinders and the development of new storage and handling infrastructure.
- •The funding, however, was structured in multiple tranches and came with conditions that would have locked the country into a single supplier, according to disclosures made to lawmakers.
“The intended Memorandum of Understanding was not executed as expected given that parties were not able to amicably agree on the terms. The US$20 million was coming with serious conditions, one of which was exclusive supply of LPGs, which we found untenable,” Energy Cabinet Secretary Opiyo Wandayi told a Senate committee.
Officials opted to abandon the agreement rather than accept exclusivity terms at a time when the government is trying to expand the LPG market and increase the number of importers supplying the country.
The agreement had been linked to Saudi Arabia’s oil sustainability initiative and was expected to support a floating LPG storage and processing facility off the Port of Mombasa capable of handling as much as 30,000 tonnes of gas. The facility was intended to function as a temporary import, storage and bottling platform while Kenya develops a permanent onshore storage system.
The government had tied the project to a broader push to reduce the price of a standard 6-kilogram gas cylinder and expand the use of cooking gas as an alternative to charcoal and kerosene. Demand for LPG has been rising in urban areas, but limited storage capacity and the high upfront cost of gas cylinders have slowed adoption.
CS Wandayi also told lawmakers the country’s LPG storage capacity has already been expanded in recent years, rising from about 25 metric tonnes to 85 metric tonnes since 2022, though the planned Saudi-backed facility was expected to add far larger volumes if it had proceeded.
With the Saudi financing no longer available, the government is shifting the program toward private-sector funding. The government said it has already issued requests for proposals and identified four local firms to support domestic cylinder manufacturing as part of the rollout plan.
The collapse of the agreement also coincides with a major change in how the government intends to fund LPG infrastructure. Parliament recently approved an increase in the petroleum development levy from 40 cents per litre to KSh 5.40, a move expected to generate billions of shillings that will be used to finance LPG import, storage and distribution projects.
