Rush to set up LPG plants
Surging demand for liquefied petroleum gas (LPG) from the fast-expanding housing sector is forcing entrepreneurs to quickly install plants and grab a share of the growing market.
About a dozen companies are in line to join the existing six, which include two state-owned firms. But some 30 companies have applied to the government, seeking permission to install LPG plants, according to the energy and mineral resources ministry.
Business groups such as Orion and MJL Bangladesh are to hit the market soon while Navana, Amin Mohammad and Sanwara are also in the pipeline. Partex Group plans to come into the business too. Most plants are being set up in Mongla Port areas.
“Many private companies are coming up to grab a share of the growing domestic market. Gradually, LPG may be used commercially in Bangladesh,” said Salman Karim, managing director of Orion Group, the parent company of Orion Gas.
The Tk 150-crore Orion Gas is likely to start commercial production next year.
LPG, which is considered a safe, eco-friendly and healthy cooking fuel, is derived from both crude oil and natural gas. Along with domestic use, LPG is also used as an efficient source of energy in various industrial and commercial applications. But it costs several times more than natural gas and 20 percent more than kerosene.
The concept of LPG is relatively new in Bangladesh, arising after it was believed that there was not enough natural gas both for household and industrial consumption. At present, many companies are affected by the gas crisis and new ventures are not getting gas connections. As a result, many are incurring huge losses and bearing the burden of bank interests.
Different estimates show demand for LPG is 500,000 to 600,000 tonnes a year against a supply of only about 75,000 tonnes. The supply is backed by imports of 50,000 tonnes.
The huge demand and supply shortfall often leads to a dramatic rise in prices of the product at local markets, according to industry players. A 12 kilogram cylinder costs nearly Tk 1,500 at the retail level.
“A cut in VAT and duty reduction for imports have encouraged investors to come into the business,” said Muhammad Sofir Uddin, head of operations of Orion Gas.
Importers can now easily import gas from Abu Dhabi, Singapore, Malaysia and Indonesia, he added.
“Hundreds of flats in different cities remain unsold or the buyers cannot reside in the flats due to the non-availability of gas connections,” he said.
Fazlur Rahman, who is in charge of LP Gas Ltd, a subsidiary of state-owned Bangladesh Petroleum Corporation, said more companies in the private sector can help reduce the price of LPG at the consumer level.
“The present business model dominated by a few will be hit hard if more companies come into the business,” said Rahman, citing an example where they sell a 12.5 kilogram cylinder to dealers at Tk 631 only, which is sold at more than Tk 1,200 at the user-level.
A senior official of Premier LP Gas Ltd that markets the brand TOTALGAZ also said the high price deters the growth potential of the market.