Oil marketer Hashi Energy will from next year connect homes to piped gas in a process that will not only revolutionise the way cooking gas is sold in Kenya but also open a new battleground for control of the lucrative market.
The firm says it is targeting long-term contracts with real estate developers – especially gated residential estates – to provide gas to their housing units, offering the marketer guaranteed sales.
Piping for the gas will be rigged into the buildings during construction and payment done at the end of the month according to consumption.
While cooking gas in Kenya is currently sold in cylinders ranging from three to 50kg, the entry of piped gas will see Kenya join western countries, South Africa and Egypt that deliver cooking and heating energy through this model.
“We have already penned two agreements, a Sh50 million one for upcoming estates expected to be completed by end of next year and another whose details will be made public early next month,” Ahmed Hashi, Hashi Energy CEO said yesterday.
“Transporting gas in bulk form as opposed to individual cylinders reduces the cost by about 15 per cent,” he added.
This comes after the cost of cooking gas more than doubled over the past year on increased demand, weakened Kenya shilling and reduced supply of the commodity. The 13kg gas is retailing at Sh4,000 at some outlets from Sh2,200 in January.
Demand for LPG increased to 87,800 tonnes last year from 64,600 tonnes in 2006.
The introduction of piped gas to residential homes is expected to spur interest from other marketers as players race to grow their marketshare in this segment of the oil market whose price is not controlled by the government.
“Given the number of customers housed in such residences, the supply of piped gas is indeed a viable project but whether we will pursue it is a matter of business strategy,” said Jimmy Mugerwa, the country head of Kenya Shell, adding that safety concerns remain a challenge for firms.
Home owners will be required to pay for piped gas at the end of the month, a billing system similar to that employed by utility providers like Kenya Power and water service providers.
Automated meters will be attached to the gas pipes and cash due paid directly to the supplier or contracted agents.
Piped gas will offer customers a cheaper source of gas as well as have them do away with the cumbersome task of refilling and transporting heavy cylinders.
In Kenya, the move to offer piped gas has been informed by the increased supply of well-planned environment of manicured homes, office blocks, shopping malls and industrial parks as opposed to building stand-alone homes—a shift that makes it easy to supply the commodity in bulk.
Some of the gated community projects that have come up in the past year or are in the pipeline include Migaa, Thika Greens, Tatu City, Kihingo Village and La Nyavu Gardens Karen.
Rapid urbanisation, population growth and expansion of the middle class remain the main drivers of this shift in Kenya’s property market that is riding on nearly three decades of under-investment in mid-tier housing.
This is what firms such as Hashi Energy—whose marketshare of Kenya’s oil market stood at 1.5 per cent in September—are targeting for a larger footprint in the market.
The firm is banking on its 420- tonne gas storage facility in Mombasa and its 150-tonnes Nairobi facility to take in players such as Shell, Total and Kenolkobil.
It sells its gas in bulk to rival oil marketers, hotels and hospitals, but recently launched its branded gas for a piece of the retail market.