HOW to GROW the LPG MARKET in

PAKISTAN

4TH INTERNATIONAL LPG CONFERENCE

25th March 2010, Islamabad

SOHAIL A. QURAISHI
CHIEF EXECUTIVE

SHV Energy Pakistan

 LPG GLOBAL MARKET

• Total Size of World Market:

– Year 2008 242 Million Tons
– Year 2012 270 Million Tons

• Total Size of Pakistan Market

– Year 2008-09 Sales was 570,000 Tons
– This is 0.25% of World Market
– It is at a low level of 2.6 Kg/Capita

SHV Energy Pakistan

LPG Per Capita Consumption (Kg)

80 75.47
70

60

50

40

30 28.8

20 18 15.5
12.03
10 7.3
2.6
0
Malaysia Thailand Iran China Philippines India Pakistan

SHV Energy Pakistan

 GLOBAL LPG PRODUCTION
TRENDS
Million Tonnes

SHV Energy Pakistan

 GLOBAL LPG CONSUMPTION
TRENDS
Million Tonnes

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 MAJOR LPG EXPORTERS

• Major LPG Exports are from Mid-East

– In Year 2010 33 Million Tons
– In Year 2012 40 Million Tons

• Global Consumption in Year 2012 is 267

Million Tons
• A surplus of 3 Million Tons is expected in
Mid-East

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 MAJOR LPG EXPORTERS
Million Tonnes

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 GLOBAL CONSUMPTION BY
SECTOR

• Domestic and Commercial 46%

• Feedstock 32%
• Transport 9%
• Industry 11%

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Global Consumption by Sector
2008

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 PAKISTAN LPG MARKET

• Total Market is Contracting

– (23%) over last four years

• No. of Marketing Companies has grown

– From 16 in 2004 to 83 Now (Increase of +500%)

• Major Conversion of Auto Market to CNG

• Smuggling of Substandard LPG from
Iran/Turkmenistan etc.

SHV Energy Pakistan

 LPG Sales Volume
700 649
600 583 602
567
500 500 (*)
452
415
400
Tons

300
200
100
0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Local Imports

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(*) Annual projections based on Jul-Dec’09 volume – 250 K
Low Level of LPG Imports (2003-10)

Imports
8%

Local 92%

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 REASONS FOR LPG MARKET
CONTRACTION
• CNG Market Expansion
• NG Expansion in Domestic Market
– 4 Million Consumers in Year 2004
– 5.6 Million Consumers in Year 2009
• Lack of Investment in Cylinders in LPG
Downstream Market
• Imports Uneconomic and Uncompetitive
• Decline in local LPG Production

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 Auto Fuel Comparison
8
7
6
5
Rs/Km

4
3
2
1
0

LPG MOGAS CNG

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Data based on commonly used kits for use in 1000 CC Car
 GOP POLICY CHANGES TO
GROW THE BUSINESS
• Import Parity Pricing thru reduced GST both at
Import & Supply Stage (No Revenue Loss to
GOP due to higher imports)
– To allow all players to have adequate volume
– To control prices through competition
• Clear Policy on Comparative Fuel Taxation and
Pricing
• Legislate against cross-filling of Cylinders
• Controls on Smuggling of LPG
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LPG Competitiveness with Other
Fuels
11% 12%

0%

-1%
-3%

-18%

-40%
-47%

-70%

CNG FO COAL LDO KERO HSD LPG PMG ELEC

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Fuel Prices as at 3rd March’2010
 OGRA REQUIRED INITIATIVES

A LPG Consumer requires a safe, economic and

correctly filled cylinder. For this:
• Cylinder Cross-filling needs to be stopped by linking Company sales to stock of
cylinders available*
• Correct LPG weight is filled
• Ban on Manufacture and Sale of small non-company owned cylinders
• Re-qualification of cylinders
• Control Sub-standard LPG Smuggled from Iran/Turkmenistan etc
• Control ‘Decanting’

*For current market conversion to domestic from Auto about 3 Million more
cylinders are required costing 5.5 Billion Rupees

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 LPG SAFETY

• Compliance to Codes & Standards throughout the Distribution Chain

– Pressure Vessels to be manufactured with prescribed steel only
– Use of genuine UL Listed valves only for LPG Plants / Vessels
• LPG Tankers to comply with International standards like ADR,
COP2 and BS 7122 etc.
• Re-qualification of all LPG Vessels (Both Static / Mobile) to be
carried out only by API 510 certified inspector.
• 3rd Party Inspection Bodies with foreign accreditation
• Only certified inspectors to be authorized by OGRA for inspection of
pressure vessels.

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 Recommendations

To Grow the LPG market, support from Government and

Regulator is required for:

– Increased LPG supplies thru imports by rationalizing

GST structure
– Safety Implementation throughout the LPG
distribution chain
– Clear Policy on Tax/Price on different fuels to allow
investment by companies
– Control Smuggling

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