‘Develop LPG sector without sacrificing the CNG industry’

By Kazim Alam, The Express Tribune

KARACHI: Office-bearers of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Thursday asked the government to develop the Liquefied Petroleum Gas (LPG) sector without damaging the Rs500 billion CNG industry of the country.

FPCCI’s Standing Committee on LPG Chairman Malik Khuda Buksh, who also happens to own 17 CNG stations across Pakistan, has said the government should not throw investors in the industry under the bus while trying to promote alternative fuels. “It will be foolish to believe that the government can attract investment in the LPG sector after wreaking havoc in the CNG industry.”

Total local production of LPG stands at roughly 450,000 tons per year, he said; adding that refineries accounted for 55% of this figure, while gas fields contribute about 45%. “Up to 80,000 tons of LPG is imported, while another 25,000 tons are smuggled into the country from Turkmenistan and Iran,” he noted.

According to estimates, the use of LPG in automobiles accounts for over half of total consumption of the fuel in the country. Domestic consumption takes up another 35%; commercial consumption about 10%; and the the rest is used by the industrial sector.

According to the Oil and Gas Regulatory Authority, LPG contributes less than 1% to the total energy supply mix in Pakistan. Out of 27 million households, 6.1 million are connected to the natural gas network, while the rest rely on LPG and conventional fuels such as coal, firewood, kerosene oil etc.

Last month, the Oil and Gas Regulatory Authority (Ogra) allowed Pakistan State Oil (PSO) to set up 26 LPG filling stations at its retail outlets to cater to automobiles. While the government has imposed a ban on issuing licences to set up new CNG stations, it is expected that the use of LPG in automobiles will witness a significant rise in the medium to long term.

A representative of National Refinery Limited said the pricing mechanism for LPG was unfair, as it left refineries at a disadvantage. “With the market dominated by the likes of Pakistan Petroleum and the Oil and Gas Development Company, we are merely price-takers. We lose when prices are slashed, as we buy crude about 30 days in advance,” he said.

Progas Energy Managing Director Abbas Bilrami said the government should stop fiddling with the LPG policy. “Once formulated, the policy should stay in place for a reasonable period so that investors do not lose confidence,” he said.

A sub-committee of the Standing Committee on LPG was formed on the occasion, with representatives from PSO, Hascol Petroleum Limited, Byco, Progas Energy and others. The sub-committee will meet on August 28 to finalise its recommendations. The standing committee will review these and forward them to relevant authorities in Islamabad.

The government is expected to announce the LPG (Production and Distribution) Policy 2012 – which will replace the LPG (Production and Distribution) Policy 2011 – in the first week of September.

Published in The Express Tribune, August 10, 2012.

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