Kenya contracts US firm to find cheaper sources for liquefied gas

The government of Kenya has contracted a US firm, K&M advisors to conduct a feasibility study for gas power generation in Mombasa County.

The move follows the country’s desire to cut its reliance on Dar es Salaam for liquefied petroleum gas (LPG), which has seen the Tanga plant in Mtwara service nearly half of the Kenyan market, trucked via Namanga and Holili border posts.

Despite Kenya and Dar signing an agreement to start working on a gas pipeline from Dar es Salaam to Mombasa, as part of a long-term project to share energy resources, Kenya remains open to other options including importing the commodity.

This means, that the agreement between Kenya and Tanzania might be nullified if the company recommends cheaper means to get natural gas to generate power. The US-based said that Kenya will go for the cheapest option as it seeks to develop a liquefied natural gas (LNG) import terminal in Mombasa.

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“K&M Advisors has been engaged by the Kenya Electricity Generating Company PLC (KenGen) on behalf of the Kenyan government and the country’s energy sector to conduct a feasibility study for natural gas power generation in Kenya. The feasibility study will examine the technical, economic, financial and environmental and social feasibility of project,” said K&M Advisers in a statement.

The study will examine the potential to create a domestic natural gas market for power generation and industrial use via importation with the aim to help diversify the country’s energy mix, improve energy security, reduce the cost of electricity and reduce greenhouse gas emissions.

The study, organised into 17 tasks that will be implemented over 12 months, will examine the technical, economic, financial and environmental and social feasibility of the project. It will cover the development and operations of a LNG import terminal in Mombasa, conversion of Kenya’s 10 existing heavy fuel oil (HFO) and kerosene power plants to natural gas.

K&M will start with assessing the LNG demand from converting existing power plants to natural gas, building a new power plant, and displacing HFO or diesel used industries and it will then identify and cost viable LNG sourcing, shipping, import terminal logistics and transportation options. Various LNG import terminal sites in Mombasa; floating and onshore configurations will also be analysed.

K&M will assess whether natural gas sourced from an LNG import terminal in Mombasa could produce electricity at a lower cost than HFO or kerosene. LNG transportation using trailers or rail will also be considered.

The study will review contractual arrangements for the implementing the project, including contracts for LNG or gas offtake from power plants. LNG or gas transport, LNG import terminal development and operations, and LNG supply ex-ship.

The US team will also analyse how to procure the various components of the LNG supply chain competitively. In parallel, K&M Advisors will evaluate the feasibility of converting the existing HFO and kerosene plants to natural gas as well as construction of a Greenfield natural gas plant.