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15 July, 2016 00:00 00 AM

LPG and the Bangladesh perspective

LNG price needs to be affordable through government intervention, if necessary, considering the income level of the common people of Bangladesh
AKM Asaduzzaman Patwary
LPG and the Bangladesh perspective

The primary energy shortage is nowadays a mostly discussed issue in Bangladesh in the wake of widening energy and fuel crisis. Predominantly energy sector comprises of imported crude and processed fuel mix and extracted gas has been struggling ages to accommodate the diverse energy demand. Domestic consumption of Natural gas accounts for 9 percent of total gas which allowed six percent of population to pipelined natural gas. The demand of natural gas is on continuous increase to meet domestic needs in urban, suburban area alongside Industrial, commercial, power generation and diverse usage against the scarcity of gas. The aggregate gas shortage is minimum 600mmcfd against daily need though the demand and supply gap grows alarmingly. Amidst of crippling primary energy dearth, many alternatives of energy have been widely discussed i.e. LNG, LPG and Coal. Among them, LPG has been already in existence in Bangladesh.
LPG is a derivative of wet gas/crude oil and is extracted through condensate fractionation processes in fractionation plants and refineries. LPG consists of a predetermined mix of Propane & Butane and contains higher calorific value than natural gas. Autogas, another form of LPG, is widely used as a "green" fuel with lower CO2 emissions around 15 per cent compared to petrol. One litre of petrol produces 2.3 kg of CO2 when burnt, whereas the same amount of autogas (1.33 litre due to lower density) produces only 1.5*1.33 = 2 kg of CO2 when burnt. Autogas enjoys great popularity in numerous countries including Australia, the European Union, Hong Kong, India, the Philippines, Macedonia, South Korea, and Turkey, UK and USA.
Bangladesh Petroleum Corporation earns BDT.1100 crore from domestic gas at the current tariff but this earning could be maximized to BDT 80000 crore if it could be used for Industry and captive power.
Domestic use of gas is always alleged to be more expensive than other form of use.
The double burner domestic use consumes 4000 MCF at the price of BDT650 which is BDT.3700 in market price considering the imported LNG price. A four-member family requires minimum of two 12 KG LPG cylinders cost @BDT 1250. But the pipe gas let unlimited gas consumption for lower price.  
Government is struggling to balance among diverse sectoral needs as demand from diverse stakeholders is mounting. Arguments for more gas allocation from various stakeholders are apparently rational. Against this backdrop, Policy leaders, consumers group and stakeholders and energy experts are negotiating for the roadmap to address the rational use and allocation of limited gas with priorities. Of the few energy alternative sources, the most discussed are LPG and imported LNG to meet crucial needs.
Against this backdrop, recent initiative of gas price hike for domestic pipe gas to equalize the LPG and realize fund for meeting cost of escalating gas demand. Petrobangla argues for doubling gas tariff of domestic consumers in order to establish parity among the pipe gas users, non-users and reduce waste of gas whereas there is no remarkable move in liquid energy price reconciliation for multiple benefits for all stakeholders.  
Crisis-stricken state of energy supply encountered by the cross section of business community, business demand for LPG demands nearly 1 million tonnes a year which is on rise. The existing capacity of the government is only 100,000 tonnes and another 500000 tonnes of Private sector import from Singapore, Malaysia, Saudi Arabia, Abu Dubai and Kuwait with 5 per cent customs duty, 15 per cent VAT, 5 per cent advance income tax and 4 per cent advance VAT. To encourage LPG use, GoB proposed the Duty, VAT rationalization on imported LPG in the FY2016-17.
BPC has been marketing LPG as the lone company in the country. With growing demand, the government in mid-90s allowed private sector to import and sell LPG in the local market. The state-owned LPG producers now supply 20,000 tonnes of LPG of the total market demand while private players supply remaining 80 per cent by importing LPG. There are six LPG operators in the private sector of Bangladesh. Their operation can be broken down as: Buying bulk LPG from foreign refineries or traders - Shipping the bulk LPG to their terminals in Bangladesh via seagoing gas carriers - Storing the bulk LPG into spheres or bullets via jetty pipeline - Finally filling the gases into pressurized cylinders for distribution.
A LNG bottling plant with capacity of 100,000 million tones and a cylinder manufacturing unit will be set up in the country under PPP initiative to meet the growing demand for LPG increased by 60 per cent in last couple of years as the government suspended fresh gas connections to households since July 2010. The government is supposed to allocate BDT284.41 crore to implement the project. BDT 181.60 crore will be foreign currency sourcing and rest sourced locally.
The new LPG plants are to be installed on 10 acres of land at Kumira in Chittagong with import and storage facilities. Another LPG cylinder and accessories plant will be in Tangail. The ADP of FY2016-17 has not addressed the growing need of LPG project development even though squeezed the allocation in energy sector.
As Chittagong port has no land for setting up the proposed LPG plant along with construction of CMB bulk LPG receiving jetty, the Energy Ministry will purchase land as per the project proposal.
The proposal of bottling plant and cylinder manufacturing unit from Chinese investors under PPP would help ease the country’s energy crisis. Indian investment proposition of LPG bottling and supply plant at P2G for northeastern states of India defocusing Bangladeshi market doesn’t seem value additive to LPG business.
The LNG price needs to be affordable through government intervention considering the income level of mass people of Bangladesh. About 30 million people in India use the LPG at subsidized price for different weight of LPG however it is not being widely popular.
For Industry Use in Bangladesh, the centrally located safe tanker with security caution may be allowed in manufacturing plant but regardless of all manufacturing plants, LPG is not the right and efficient solution due to pressure of this Gas. There are manufacturing plants operational for 24/7 backed by Gas supply can’t operate using LPG as short and brief distance of Cylinder and gas burner is helpful. The wrong assessment of the LPG demand and supply may trigger higher cost of doing business across the manufacturing businesses.
The budget of FY2016-17 has rationalized the Customs and Supplementary duty which may bring in positive impacts on LPG cylinder price for end users.
The LPG auto gas cylinder could be alternative choice in the Transport sector in the wake of escalating demand of CNG and other fossil fuel for public and private transport vehicles. The high-trend of CNG-run vehicle can be replaced by the environment friendly, LPG run mass transport system.      
Global import market dependence on LPG is likely to be volatile due to frequent price changeover. That is why; the volatile import market may not guarantee the affordable price LPG supply for the end users since our users used to fixed tariff.
Solution the external dependence is high there. The volatile global energy market may not be able to give respite and consistent price to our end users all along. Once global producing economies embark low economic performance will not leave benefits for LPG importing countries.
The rate of escalating demand of natural gas in domestic use to reach out entire population will require almost 80 percent of natural gas at the current consumption rate though southern and northern parts of Bangladesh have inadequate transmission and distribution gas network.
Once Government is thinking for transition into LPG use to large scale for commercial, industrial and domestic use, safety, security, uninterrupted supply and relative affordability need to be addressed.
In Bangladesh, LPG, flexible, floating mode of gas supply having external risk is yet to be a proven, safe mode demands intensive awareness on safety matters. In the wake of deepening energy crisis, following recommendations can be followed for stimulus of LPG popularity:
•     Assessment of market demand of LPG as well as target market for local and FDI inflow in LPG capacity building.
•     Sectors are to be determined on priority for LPG allocation and gradual development.
•     Focused and customer oriented liquid fuel and energy tariff adjustment in line with the global trend.  
•     National LPG policy including sourcing, tariff, retail distribution and market management and Investment guideline and incorporate in seventh five year plan of GoB.
•     Since LPG is relatively new means in manufacturing industry in Bangladesh, concerned Industry need to be fully aware of the technicalities prior to full enforcement of LPG.
•     LPG users are subjected of private sector led monopoly which needs to be rationalised through Government intervention and allow rational engagement of private sector with Government in LPG processing, distribution business.
•     To cut the distribution cost of LPG, the existing pipe gas network may be used for high rise building gas supply.
•     Auto gas may be allowed to mass transport rather than private transports to benefit most of mass at the bottom rung of the ladder.
•     Engage BERC in tariff fixing and control alongside Auto gas licensing.
•     Being economical in consumption of gas either by prepaid meter or full transition in LPG as consumption in usual two burner pipe gas consumes more than 4000 MCF at much cheaper price than that of 12, 20 and 30 KG of cylinder of LPG.
Since LPG is fully import oriented, single energy dependence rather than primary fuel mix can't fully meet the growing and scattered needs of gas.
The urban and rural uniform price delivery backed by subsidy and rebuilding supply chain network across the country are key challenges to ensure LPG popularity alongside encouraging other energy mix without further tariff change. Considering the lower income capacity of majority population, 70 percent belonged to lower income group, industrial boom, transport network, dependence on the pricy LPG cannot be solely affordable and sustained way-out of primary energy crisis in long run towards inclusive economic development of Bangladesh.

The writer is a Research Fellow, DCCI


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Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
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Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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