Tax cut, promotion can make LPG an alternative industrial fuel

Policy support, including a tax break on the import of equipment needed to develop LPG supply infrastructure, and encouraging industries to shift to LPG can make it a viable option to address the deepening energy crisis in the industrial sector, industry leaders said on Monday.

Instead of counting production losses because of an inadequate supply of natural gas through the pipeline, industries can be benefited in many ways using LPG as they will not have to face production interruption and can access clean energy financing by shifting to LPG, they observed at a virtual webinar dubbed "LPG: An Alternate Energy Solution for the Industrial Segment in Bangladesh", organised by the Hydrocarbon Unit of the Energy Division.

The current shortfall in gas supply to industries can be met by liquefied petroleum gas as the infrastructure for LPG developed over the last six years can cater to up to three times the current shortages, added the industry leaders.

At present, the industrial sector has a daily demand for around 630 million cubic feet (mmcf) of gas per day whereas the supply is around 480 mmcf.

Due to the supply shortage, a large number of factories in the apparel, ceramics, cement, and steel industries have been suffering losses as they are failing to run their factories at full capacity, industry people told the online seminar moderated by Hydrocarbon Unit Director General Abul Khayer Md Aminur Rahman.

In his keynote presentation at the event, Azam J Chowdhury, president of the LPG Operators' Association of Bangladesh, said since the demand for natural gas is higher than availability, the government has started rationing gas to different sectors on a priority basis.

"But, it is unlikely that the growing demand for gas can be met through local production or import of expensive liquefied natural gas," he said.

In this situation, industries still can solve the energy crisis by shifting to LPG which would help factory owners avoid production interruptions which are a regular phenomenon at present, said Azam J Chowdhury, also the chairperson of East Coast Group that owns Omera Petroleum Limited.

Apart from these, LPG offers various advantages to industries – no compromise with machine performance, LPG is easy to obtain and readily available and safe, reliable and efficient, lower maintenance requirement, and environment friendly, he added.

For reducing dependency on the use of natural gas and to encourage the use of LPG in industries, Azam J Chowdhury urged the government to come up with some policy guidelines that include promoting the use of LPG in industries through Petrobangla and withdrawing all taxes on import of equipment required for development of LPG supply infrastructure in industries.

Tanzeem Chowdhury, chief executive officer of Omera Petroleum Limited, said depleting supply of natural gas and price volatility of LNG are pushing up the demand for LPG in the industrial sector gradually.

LPG is a competitive fuel source, he mentioned, adding that the price of each MMBtu (million British thermal unit) of LPG is around $22.40 whereas the price of per MMBtu LNG is around $30, diesel $29.36, octane $39.47, petrol $37.19, and furnace oil $24.37.

Therefore, industries including ceramic, garment, steel, pharmaceutical, food industry, and printing and packaging are shifting to LPG, he said. 

Engr Md Jakaria Jalal, head of division at Bashundhara LNG and Lube Oil, said around $3 billion has been invested in the LPG sector over the years which is capable of supplying the item anywhere in the country. 

Apart from household users who have been the top LPG consumers, different industries are now shifting to LPG since last August when diesel price was hiked. 

"But at present, the only problem for the LPG suppliers in providing the energy to other industries as an alternative to natural gas is price uniformity. If a fair price is set and other policy support is ensured, LPG can mitigate the industrial energy crisis," he said. 

Md Mahbub Hossain, senior secretary of the Energy and Mineral Resources Division, who attended the seminar as chief guest, said amid the LNG price volatility in the global market and depleting production of natural gas in the domestic fields, assessing the prospect and opportunity of LPG has become the need of the hour.

Speaking about government policies to encourage private investment, he said, "The development that was expected from the public sector has already been done and I believe the rest of the development will come from private sectors in the future. And we are in a mood to encourage the private sector in this respect." 

Participating in the discussion, Md Humayun Kabir, additional secretary (planning) of the energy division, said the division is relentlessly working to improve local gas production to supply the required amount of gas to industries. 

Sylhet Gas Fields Limited's Managing Director Md Mizanur Rahman, and Omera Petroleum Limited's Manager (Corporate Planning) Engr Sajidul Islam, among others, spoke at the seminar.   

At present, households alone account for 83% of total national LPG consumption whereas the industrial and commercial sectors use 12%, and the automotive industry takes 5%. 

The LPG market in Bangladesh is mostly catered through private imports – around 98%, and the rest of the portion comes from local gas fields in the form of a byproduct of natural gas. 

Due to the depleting supply of natural gas, there has been a drastic increase, 35.99% year-on-year growth, in private LPG import volumes. 

In FY17, the volume of total LPG sales in the country was 0.32 million tonnes, which jumped to 1.44 million tonnes in FY21. 

Stakeholders forecast that the total LPG demand in the country would reach 3.05 million tonnes by 2030.