LPG digging its way to auto sector

Opportunity exists in Punjab for cheaper, alternative fuel.

LAHORE: Liquefied Petroleum Gas (LPG) seems to be making its way to become a cheaper alternative for motorists who are sick of high petrol prices, long queues and limited availability of Compressed Natural Gas (CNG) — at least in Punjab. This adds another market to the sector as LPG is already a widely used fuel in commercial, residential and industrial markets.

Though LPG is being consumed in Pakistan for other purposes, its use in public vehicles has been limited thus far. But this trend has now started to change especially for private vehicle owners. While there are over 12 million vehicles consuming LPG worldwide, in Pakistan, there are just over 10,000 using it.

“In the coming years, the use of LPG in vehicles is likely to increase at a tremendous pace,” said LPG Association of Pakistan (LPGAP) Chairman Farooq Iftikhar, while addressing journalists. “But this sector lacks focus and needs attention from both the government and LPG distribution companies to form a mechanism which best serves the interests of the public and the people associated with this sector.”

The association represents around 90 licensed LPG marketing companies.

The government deregulated the LPG industry in 2000 to encourage private sector investments and allowing market forces to determine demand, supply and consequently, the price.

LPG producers, 11 in number, are free to determine price — OGRA can only intervene if they feel the price is much higher.

The LPG industry in Pakistan is a developing one and contributes around 1% of the country’s total primary energy supply mix. The government is the largest LPG producer in the country through its share holdings in Oil and Gas Development Company Limited, Pak Arab Refinery Limited (PARCO), Pakistan Petroleum Limited, Pak Refinery Limited and Sui Southern Gas Company that account for 63% of annual LPG production.

Pakistan’s current LPG production stands at 511,000 tons per annum. Along with this local production, around 80,000 tons per day is imported. Another 30,000 tons, according to LPGAP, is smuggled into the country annually.

The country’s LPG production is expected to reach 620,500 tons per annum with an additional production of 109,500 per annum added from the Makori field, which started in March this year. The domestic production is going to increase almost 30% this year and will, likely, replace imports.

Published in The Express Tribune, April 9^th, 2014.

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