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LPG: Survival fuel for Bangladesh

The nation is preparing to roar in the world economy very shortly, international news about Bangladesh confirms such: The World Bank ranked Bangladesh as the top 8th in remittance receiving country in the world with more than US$ 15 Billion in 2015.

Goldman Sachs’ has predicted that Bangladesh will soon become one of the largest economies of the world.

A Bloomberg report has cited Bangladesh to be on track to log in the second best economic growth figure in 2016 around the world. CNN Money has forecast Bangladesh’s growth is going to be the 3rd highest for next five years.

As per the above opinions from globally reputed institutions, there is no doubt that we Bangladeshis are going to create waves in the international economy. However, are we truly prepared to do that? What are the bottlenecks to achieve that golden mark?

What could be the possible reasons for not achieving that mark? Have we considered our potential threats? The major obstacles which the common man of Bangladesh considers are factors such as political instability, social conflicts, literacy rate and uncontrolled environment pollution etc.

However as technically knowledgeable people, we need to realize that the most challenging obstacle that we are going to face for gaining a credible position within world economy is the Energy Crisis.

Mistakes of the Past

We had the options in our hand to avert this crisis (oil, coal, Natural Gas). However, lack of proper management with each of these resources are forcing us to rethink what we have done so far. We have consumed our limited resources (such as Natural Gas) and provided almost half of the resource to all sectors of the country; whereas this non-renewable resource’s use should have been limited to only the best uses.

We did not initiate the second refinery project whereas we are losing more money to purchase finished oil. We have adequate coal reserves but we don’t have the proper regulation to crack it, yet on the other hand we are importing coal to run the power station. Bangladesh doesn’t have any pricing formula for petroleum products which basically leads our state owned Petroleum Corporation to exist as a losing concern. Considering all these less than optimum results regarding our energy resources, we are now planning to go for LNG and nuclear energy options, which are both highly technical as well as investment intensive.             

The present condition

As per International Energy Statistics, Bangladesh has around 8.5 TCF proven gas reserve as of 2015 and we have already consumed around half of that. With socio-economic development of the country, demand for energy is rising very fast. Present sector-wise gas consumption is presently 2700 MMSCFD gas and is being consumed by the Power (41%), Fertilizer (7%), Industry & Tea-Estate (17%), Captive Power (17%), CNG (5%), Commercial (1%), and Domestic (12%) sectors.

About 2.5 million customers of different sectors presently use natural gas in the country. There are 72 gas-based power plants in the country. Out of them 31 grid connected and 5 non-grid power plants, having total capacity of more than 2300 MW has been installed in the last 5 years.

It may be mentioned that out of 25 gas fields so far discovered in the country, 19 gas fields are presently in production. By 2016-20 overall gas demand in the country is estimated to be 4500 MMSCFD. Yet it may not be possible to meet this demand fully from the production from existing gas fields.

If we look into the consumption segment of natural gas above mentioned, we will find that around 17% of all consumption falls under domestic and CNG segment. If we can reduce these two segments initially we will have some additional time to deplete our natural gas resources.  

The most probable solution for the future

The solution that we have available to us to cater the domestic and CNG segment: it is obvious that we have only one option in hand which is LPG. Around the world LPG is the most popular cooking fuel and Autogas (LPG used in vehicles) is considered the world’s safest and best alternative fuel to octane.

LPG has a very wide variety of uses: it is mainly used via cylinders across many different markets as an efficient fuel source. It is used in the agricultural, recreation, hospitality, calefaction, construction, sailing and fishing sectors.

It can serve as fuel for cooking, central heating and for water heating and is a particularly cost-effective and efficient way to heat off-grid homes. On the safety front, LPG cylinders must be updated to new standards regarding safety and user experience. All these steps will provide a huge contribution to the energy demands for domestic usage.

The challenges of the LPG Industry

Even though technically LPG is the most viable solution, the current capacity of the industry to cater to the upcoming demand has to be considered as well. 

Even a few years ago, the LPG industry was not in a position for this purpose, but over the years, the industry has evolved. Many new investors, both local and international, are playing a vital role in this sector as well.

The current capacity of the industry is not optimum to fulfill the energy demands, more investment and better structure is an immediate requirement to serve the potential upcoming demand. Currently, apart from the state owned BPC supplied LPG from oil refinery and gas condensate fraction plant, six more private companies are importing LPG at their own terminals in Mongla and Chittagong through LPG carrier ships.

Among them two are foreign investors, LAUGFS (formerly known as PETREGAZ and Kleenheat) from Srilanka LPG giant and TOTAL GAZ from France.

Four other local organizations are Bashundhara, JamunaSpacetech, Omera and BM, LAUGFS, Bashundhara, Jamuna, Omera have their own terminal in Mongla and TOTAL GAZ, BM are operating their terminals in Chittagong.

Within a very short time few other local entrepreneurs like SenaKallyanSangstha, Orion group, Intraco, Navana and Beximco will start their operation and all terminals have been planned to setup in Mongla. There is no doubt that the upcoming new infrastructure will strengthen the LPG supply chain. Existing companies are also in expanding mode and will streamline their LPG logistics capability.

Role of the government

Investors are very eager to cater to this energy demand, but their investments alone will not be enough to satisfy the target market through LPG. This particular industry needs the proper legislative steps from the government to completely bring about the growth of this market.

LPG has been promoted by different countries around the world by respective local government though different rules and regulations. LPG industry in Bangladesh is still suffering from lack of proper and business friendly rules, the industry is not streamlined and safety culture has not been well defined. Bureaucratic malfunctioning, slow decision making process, lack of unity among the players are now main obstacles to the growth the LPG industry itself.

As most of the LPG suppliers are Mongla based, it is a matter of time before Mongla would be declared as ‘LPG CITY’. Regular dredging in ‘Poshur channel’ is now essential for the purposes of receiving large cargo vessels at the plant terminal, which will reduce the cost of the product.

Structured distribution channel model is an immediate requirement to strengthen cylinder distribution throughout the country. Proper pricing of the Natural Gas and subsidy to LPG through national level will inspire people to convert from Natural Gas to LPG.

Autogas business is now an immediate alternate for the current CNG station owners, as they are desperately looking for the alternative to serve their customers but unfortunately there are no definite regulations to direct them.

It is to be if such a step is given the go ahead from the Government, we can save 5% of national NG consumption thus reducing the dependency on the natural gas.

Worldwide LPG is called available fuel; as long as oil will be refined, refined LPG will be one of the byproducts.

The number of LPG carriers and traders are increasing rapidly to serve a country like ours, where we have lack of oil as a natural resource. We need to merely capitalize current pricing of LPG which is lowest ever in our industry.

Once we make the people accustomed with this product, then it will be easy to spread its uses for different purposes.

Looking forward to the positive attitude of government for declaring new LPG business-friendly legislation not only to propagate this business but also to remain at least a bit safe in energy balance.

We are heading to an unknown destination regarding energy security where we need be more focused and have to find the survival fuel: for which the possible, immediate and best fit solution is ‘LPG’.

Engr Md. Jakaria Jalal, DGM (Business, Operations and Planning), Bashundhara LP Gas Ltd.

 

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