Nairobi — Kenyans will have to wait longer for the promise of cheaper cooking gas after the government confirmed that a highly anticipated deal with a Saudi Arabian firm collapsed, stalling a key plan to boost supply and lower prices.
Energy Cabinet Secretary Opiyo Wandayi told the Senate Energy Committee that the government failed to reach an agreement with Saudi Aramco, dealing a blow to efforts aimed at expanding the country's liquefied petroleum gas (LPG) infrastructure.
Appearing before the committee chaired by Siaya Senator Oburu Odinga, Wandayi said the planned Memorandum of Understanding 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 intended Memorandum of Understanding... was not executed as expected given that parties were not able to amicably agree on the terms," Wandayi told senators.
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The fallout means the Oil Sustainability Programme (OSP), which was expected to finance the distribution of about 8.4 million LPG cylinders, will no longer proceed as initially planned.
Wandayi disclosed that the proposed $20 million (Sh2.5 billion) financing package from the Saudi side came with serious conditionalities, including demands for exclusive supply rights for LPG terms the government found untenable.
"The so-called $20 million was coming with serious conditionalities, one of which was exclusive supply of LPGs, which we found untenable," he said.
"In any event, these funds were not coming in one tranche but in multiple tranches, which did not make sense to us."
The CS said the government opted to abandon the deal in favour of more viable options.His remarks come amid concerns raised by Elgeyo Marakwet Senator Kisang, who told the committee that during a visit to Saudi Arabia, Aramco officials indicated Kenya had declined to sign a letter of authorisation that would have allowed the project to proceed.
"We visited Aramco in Saudi Arabia and they told us the MOU that Kenya was not willing to sign."
"They said they were ready to supply the infrastructure but you refused to sign. So maybe you need to tell us why, but what was the reason for Kenya to refuse to sign the letter of authorization so that they can proceed?" he posed.
Following the collapse of the deal, the government is now turning to private investors to salvage its ambitious LPG expansion programme.
Wandayi said the ministry had already issued requests for proposals and identified four local firms to participate in cylinder manufacturing as part of efforts to scale up domestic capacity.
"The Ministry is further exploring the possibility of engaging private sector participants to get funding for the programme," he said.
He added that Parliament's recent approval of enhanced petroleum levy collections would provide critical funding to support LPG infrastructure, including import and storage facilities.
Lawmakers approved an increase in the Petroleum Development Levy from 40 cents to Sh 5.40, a move expected to raise billions of shillings to support the rollout of the gas programme.
The collapse of the Aramco deal is a setback to President William Ruto's plan to make clean cooking energy more affordable and accessible.Since 2024, Kenya has been negotiating with Saudi Arabia to secure a floating LPG storage and processing facility to be stationed off the port of Mombasa.
According to Kenya Pipeline Company CEO Joe Sang, 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.
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The project was 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.
If implemented, the facility would have complemented existing initiatives such as the Taifa Gas programme launched in 2023, while supporting the construction of a long-term LPG plant expected to take three years to complete.
With the Saudi-backed financing now off the table, the government faces a longer and potentially more complex road to achieving affordable cooking gas for households.
Wandayi maintained, however, that the State remains committed to developing the LPG sector despite current fiscal constraints.
"We will continue to engage very productively with private entities in the development of this LPG gas sector, particularly infrastructure for import and storage," he said.
