LPG demand falls due to high prices

OGDC stock swells as companies fail to take delivery.

ISLAMABAD:

As sales of liquefied petroleum gas (LPG) drop due to high prices, leading producer Oil and Gas Development Company (OGDC) finds it difficult to dispose of the stock.

“We have a stock of 626 tons of LPG at different fields, but companies are not interested in lifting the gas,” a senior official of OGDC said, adding only the Kunnar-Pasakhi Deep field held a stock of 585 tons.

He said the company offered LPG from Kunnar-Pasakhi field to all 91 marketing companies, but only five companies were purchasing the product. “Five marketing companies have deposited the money, but they are not willing to take delivery of gas due to high prices,” the official said.

In February, OGDC commenced production of 130 tons per day from the Kunnar-Pasakhi field, increasing the country’s daily output by 12% to 1,150 tons. The official proposed the setting up of a price review committee comprising representatives of LPG producers to set prices according to demand and supply in the market.

Saudi Aramco contract price, with which the domestic market is linked, touched record highs for March delivery at $1,230 per ton for propane and $1,180 for butane.

“March contract price has increased by $182 per ton compared to February. This is attributable to continuing tensions in the Persian Gulf and a surge in demand from Japan,” said Belal Jabbar, spokesman for the LPG Association of Pakistan. “Domestic LPG price may rise by Rs16 per kg,” he said.

On February 27, the Lahore High Court suspended petroleum levy of Rs11,486 per ton on domestic production of LPG to bring its prices on a par with those of imports. In a welcome gesture, marketing companies immediately slashed retail prices to Rs130 per kg from around Rs165.

Published in The Express Tribune, March 1^st, 2012.