The government is set to earn Sh22.5 million every month after leasing land owned by Kenya Petroleum Refineries Limited (KPRL) to Asharami Synergy Limited for the construction of a new liquefied petroleum gas (LPG) storage facility in Mombasa.
The project will see Asharami Synergy lease a 23.19-acre parcel of land for 31 years, generating more than Sh698 million in rental income annually over the lease period.
State Department for Petroleum Principal Secretary Kello Harsama told the Senate that the project has received all the necessary approvals, including a licence from the Energy and Petroleum Regulatory Authority (EPRA).
He said construction is expected to begin in October and will take about two years to complete.
Once operational, the facility will add 30,000 metric tonnes of LPG storage capacity, supporting the government’s bulk LPG import programme aimed at increasing supply and lowering the cost of cooking gas.
Harsama said the additional storage capacity is expected to help raise LPG usage in Kenya from the current 15 percent to 70 percent over the next four years while supporting the establishment of a Common User Facility.
He noted that the project is being developed entirely by the private investor, meaning the government will not share in its commercial profits during the lease period.
“The project is a private venture with Asharami taking the full risk of the business, hence no revenue sharing for the lease period apart from the expected reduction in the landed cost of LPG and, in turn, lower LPG prices,” Harsama said.
The Principal Secretary added that the government will still benefit through increased tax collections as more households adopt LPG for cooking.
“With increased LPG uptake, the Government shall generate higher Petroleum Development Levy collections on LPG, which is currently levied at Sh5.40 per kilogram. It is worth noting that the Government has exempted LPG from VAT to promote its uptake,” he said.
Harsama also assured lawmakers that measures have been put in place to ensure the project is completed on time and within the agreed terms.
He said a Project Oversight Committee will monitor implementation to address any delays, cost overruns or non-performance by the private developer.
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