Md. Tarique Aziz

 Abstract The basic purpose of this study is to understand the market environment of LPG steel cylinder in Bangladesh, since the national energy demand for LPG is skyrocketing and most of the business leaders are surging towards this emerging industry. The study focuses on the market environment of LPG along with all the domestic and international forces which significantly influence the market at its peak. 1.0 Back drop of Bangladesh Economy: Bangladesh economy has expanded by a remarkable 7.86% to USD 275.8 billion in 2018 compared to 20171, resulting from strong private consumption, public investments and remittance inflows. The country is set to become the second best-performing economy in 2019, with an estimated economic growth rate of 7.9%2 compared to 2018. Tangentially, consumption rate will keep rising in tandem with the robust economic growth, driven by income upgrade and industrialization, as more people will be joining the middle-income status and migrating to urban areas within 2025. Rising prosperity has brought forth a multitude of structural challenges for sustaining future growth. Growing secondary and tertiary sectors have increased appetite for resources critical for fueling future growth. Infrastructural deficiencies, however, remain key bottlenecks to achieving sustainable growth, compounded by the gradually depleting domestic natural gas supply. Taking into account the growing demand for energy from both industrial and residential users, the government has no option but to ration natural gas. As a short to medium term solution, the government has started importing the expensive Liquefied Natural Gas (LNG); while supporting the development of Liquefied Petroleum Gas (LPG) sector through investment friendly policies. Bangladesh is one of the few countries in the world which provides piped gas connections to households for cooking purposes. Although LPG (Liquified Petroleum Gas) containers have been available for sale since 1980s, supplied by state-owned BPC (Bangladesh Petroleum Company), it failed to grab market share until the enactment of government’s policy restricting fresh connections in households. 1.1 Demand side The rising demand for LPG and other energy sources is a consequence of depleting gas reserves of the country. As of 2015, the natural gas reserves of Bangladesh is 14.16 trillion cubic feet and is enough to last till 2031, if current rate of extraction is maintained, according to Government statistics. The rapid use of natural gas in power production has been the main source of gas consumption, since it contributed to 56% of domestic energy demand, depleting gas fields and putting pressure on energy sector. Titas gas is already rationing gas connection to higher priority areas as of 2016. The current gas production from the 20 operating gas fields within the country yield about 2,500 mmcdf (million cubic feet per day), and is speculated to reach peak production of 2,700 mmscfd within 2017, and then decline. In FY 2015-16, overall gas demand in the country has been estimated to be 3,200 mmscfd (Petro Bangla data), which means a 30% deficit on total demand. An annual shortage of 500 mmscfd natural gas shows the need for diversifying the energy requirements. The deficiency of Natural Gas (NG) will only increase and it will have an overall impact on electricity generation, fertilizer, transportation and domestic sector. LPG is mainly used by households for cooking and by some light engineering workshops, as fuel for wielding. Increase in LPG demand has been contributed by unavailability of fresh NG connections households, increasing price of kerosene and decreasing accessibility of firewood.  Bangladesh’s LPG demand is only 2% of total oil demand, and less than 0.01% out of the total energy demand. However, LPG demand is expected to grow significantly as an alternative to households’ cooking fuel and transportation fuel (in the form of Autogas). Source: Bangladesh Bureau of Statistics.3 Gas demand forecasts for Bangladesh is expected to grow with increasing number of industries and households in future. While LNG import is expected to compensate for the industry gas demands, LPG is expected to be an alternative for household gas use. Currently, the residential sector occupies about 13% of total natural gas consumption. In terms of number of consumers, about 2.8 million household consumers are now using 330 mmcfd gas (13.06%) of total gas production according to the national Energy Division. Even with a power conservation policy, the projected demand for gas in 2030 will be at least three times of demand. 1.2 Supply side Availability and improving the supply system are two major constraints for the supply side. The current demand for LPG in 2015 was 150,000 Tonnes and currently more than 80% of the LPG demand is met by import and the state-owned BPC supplies the rest 15-20%. The source for government supply are from government oil refineries, since LPG can be produced as a by-product of oil extraction. Private sector imports are from Singapore, Malaysia, Saudi Arabia, Abu Dubai and Kuwait. The standard import price is the Saudi Aramco (the state-owned oil company of of Saudi Arabia) monthly contract price. When buyers order bulk LPG from international market, they have to pay that month’s Aramco Contract Price and add the freight per ton charge (for shipment to Bangladesh). While the government subsidizes their portion of LPG, the importers sell their products in line with import price. 2.0 LPG Operations The current operations of the companies can be broken down as: Buying bulk LPG from foreign refineries or traders – Shipping the bulk LPG to their terminals in Bangladesh via seagoing gas carriers – Storing the bulk LPG into spheres or bullets via jetty pipeline – Finally filling the gases into pressurized cylinders for onward distribution to the final consumers. Ideally, once the customers use up all the gas, the empty cylinders are sent back to their respective operators for refilling. 2.1 Procurement & pricing Since the contract price is transparent and remains static for a month, the buyers who pay the most competitive freight charges becomes advantageous. The freight charges are reduced with the increasing size of the Bulk LPG Cargo. For example, the freight per ton cost of a LPG carrier of 5000 MT capacity is much lower than the freight per ton cost of a 1500 MT LPG gas carrier (Based on similar length of travel). Since the discharge terminals for the current LPG import companies are beside rivers with severe draft restrictions (e.g. Chittagong and Mongla), their jetties can receive gas carriers of maximum of 2,500 MT capacity. So LPG operators have to pay higher freight per ton charge for Bulk LPG cargo, compared to international operators. However, if the new LPG licensees set up their plants near high draft water bodies e.g. South of Chittagong City near Moheskhali or Mongla port, their jetties will be able to discharge large gas carriers up to 5,000 MT Capacity reducing the price of the end-product LPG cylinders. Since a large part of fuel demand is served by CNG & natural gas which will soon be replaced by LPG with positive government reinforcements through favorable policies. New players are expected to enter market, accelerating penetration within the urban, semi-urban and rural areas. Alongside, growing urbanization led by rising income and living standards, will increase potential demand for LPG among households. 2.3 Population vs. fuel consumption In 2005, 26.8% of the total population lived in urban areas, increasing to 34.3% in 2015. By 2025, 42% of the population will be living in urban areas4. People residing in the newly established townships will keep relying on energy sources such as natural gas and LPG, which will drive demand for cooking fuel even higher. When an economy shifts towards industrialization rapidly, it needs increased supply of energy to support growth. Bangladesh has been relying on its reserves of natural gas for fueling power plants and industries. However, the natural gas reserve is plummeting while demand for energy is soaring. Therefore, the economy is in need for alternative energy source. Decrease in natural gas repository is creating unmet vacuum. Major natural gas usage include cooking fuel for household & commercial consumers, energy source for power plants and industrial factories. Due to the growth in user base and usage volume, the demand for natural gas is skyrocketing while reserves are shrinking. Bangladesh is home of the eighth largest population in the world. In spite of stagnating exports (RMG) and slightly declining remittance trend, the economy has grown due to rising consumption and increased government infrastructure investments. The country is experiencing demographic dividend with 60% of population aged below 30 years, and 2.2 million entering the work force each year. Middle and Affluent class (MAC) population are the surging consumer class with both the intent to buy (demand) and capacity to buy (affordability). This surging economic class is the major target group for companies. Currently 11.7 million as of 2015 statistics, BCG predicts MAC population to triple to 34 million by 2025. The energy sector is critical to securing sustained economic growth of the country. Natural gas has been the country’s main source of energy fuel. Although producing significant volume of natural gas, Bangladesh still cannot meet its local demand. As confirmed by Petrobangla, the country’s gas reserve has decreased to 12.88 TCF in the producing and non-producing fields. To counter the decreasing gas reserves of the country, LNG is scheduled to be imported and blended with domestic gas in the national gas pipeline. The LNG terminal is expected to be operational in the middle of 2018, at the rate of 500 mmscfd, which will correspond to 17% of energy demand. 3.0 LPG bridging the energy gap. The LPG market finally took off in 2009, after the government stopped providing new piped gas connections to households. Newly developed households and enterprises in townships since 2009 have been extensively using LPG as the cooking fuel. Bangladesh’s LPG market, having a triple digit growth rate, is set to grow three times from the current estimated market size of 1 million Metric tons (MT). Decentralized economic development, absence of natural gas connectivity in some parts of the country, and emergence of LPG as a vehicle fuel will be the major demand drivers for the industry in the coming years. Decentralized economic growth will push household LPG demand driven by better connectivity, infrastructural development and economic zone-led industrialization, by 2025 at least 33 cities across the country will have MAC (Middle class & Affluent Consumers) population of at least 300,000 each. Majority of these cities would not have readily available piped natural gas supply, and the only available energy source for cooking would be LPG. The potential market for LPG remains in rural regions. Rural consumers are mainly dependent on biomass and firewood as cooking fuel and use clay stoves. The advent of urbanization and industrialization is affecting the unavailability of firewood and on the other hand as people’s’ incomes are rising at a steady rate, the rural and semi-urban population are aspiring for an improved life-style, and many are transitioning into using gas-stoves with LPG connections, giving them a more modern and improved cooking environment. It should be noted that a 12KG LPG gas cylinder is equivalent to 180 KWh of energy which is equivalent to 25 KG of coal or 91 KG of Wood. Therefore in a nutshell, increasing household consumption expenditure, urbanization, depleting natural gas reserve, aspiring consumers from semi-urban and rural areas, unavailability of biomass are increasing the demand for LPG. Bangladesh is a populous country of about 164 million people. The country’s GDP was growing at 6-7 % till 2018 and is expected to maintain the same rate in future as well. The per capita GDP of the country is around USD 1952 in 2018 Energy Mix (2017 data): Unlike any other country, Bangladesh is largely a gas dominant economy and Natural Gas (NG) comprises of 47% of the primary energy mix (source EMRD, GoB). Due to depleting gas reserves in the country, domestic gas supplies for internal consumption is decreasing, in-spite of enhanced demand from multiple sectors. Major pie of gas consumption in in Power and Industrial sectors (62%) and the balance caters to domestic, commercial and transport sectors. To meet the growing demand of NG and to make up for the depleting reserves, Govt. of Bangladesh (GoB) is planning to import Liquefied Natural Gas (LNG). Currently, domestic NG is highly subsidized in Bangladesh and import of LNG would push domestic prices up, as Asia LNG spot price is approx. five to six times the domestic gas price. 3.0LPG Business Market Environment In order to reduce the dependency on NG, GoB is actively supporting and promoting use of LPG in the country, particularly in domestic, commercial and transport sectors. GoB is also bringing in changes to the regulations so as to make LPG more accessible to the common masses. At present, LPG market in Bangladesh is majorly catered through private imports. With a sales volume of 16.3 TMT in 2017, its market share in the energy mix pie (Fig 1) was meagre 2.9 The Bangladesh LPG industry is dominated by private players which import, store, distribute and market LPG in a highly fragmented and unregulated market. With new LPG policy in place, stipulating a minimum 5000 MT storage facility by June 2020 for an LPG terminal, only major LPG operators are expected to stay in the market. As on date, over 50 entities have been granted license for LPG business, of which 35 licensees are not yet operational. Due to the new regulations in place, small LPG operators are expected to gradually fade away. In order to understand the energy requirement, Bangladesh mainland has been divided into four zones i.e., Zone 1 to Zone 4 comprising of 8 Divisions as per Fig. 2 The south-western and north-western parts of Bangladesh (i.e., Zone 2 - Khulna and Barisal and Zone 4 – Rangpur and Rajshahi Division) are relatively less penetrated by NG due to non-availability of NG reserves and limited pipeline coverage compared to eastern and central regions (i.e. Zone 1 – Chittagong & Zone 3 – Mymensingh, Sylhet and Dhaka Divisions). 3.1LPG Demand in Bangladesh The factors that are expected to drive LPG demand in Bangladesh are: Depleting Natural Gas reserves. Limited pipeline coverage of Natural Gas in Zone 2 & 4. Increase in household income at CAGR of 8% (from BDT 7203 in 2005 to BDT 16623 in 2016) and expenditure at CAGR of 9.4 % (from BDT 5964 in 2005 to BDT 16040 in 2016). Government interventions to promote LPG by suspending new PNG / CNG connections and prioritizing NG to Power and Industrial sectors. Increasing demand from commercial and industrial sectors as LPG is an alternate and reliable source of energy. Growing urbanization as urban population has increased from 19.2 % in 2011 to 35.2% in 2015. 3.2 The sector wise LPG Demand in Bangladesh is plotted up to 2030 and is as under: From the above it is evident that the demand for LPG is expected to grow at a CAGR of 11 % i.e. approx. four times from current level of 1191 TMT in 2018 to 4147 TMT in 2030. The demand for LPG is expected to grow at a CAGR of over 10% in domestic and industrial segments, 6.7% in commercial and 30% in Auto LPG segment. When analyzed zone wise, highest growth is observed in Zone 3 which comprises of Dhaka, Mymensingh and Sylhet divisions; followed by Zone 1 - Chittagong division. Zone 1 & 3 are rich in NG reserves and well-developed pipeline network hence the potential for LPG growth. These areas are major demand centers of the country, owing to industrialization, urbanization and tourism. Govt. is trying to bring in policy changes to reduce the gap in price between LPG and PNG. Currently, PNG rate for household is BDT 850 for unlimited consumption, while the cost of typical 12 KG domestic LPG cylinder is BDT 1000. Petrobangla, a GoB entity, has proposed increase in PNG rate to BDT 1400 per month per household which will be a big boost for penetration of LPG as cooking fuel. 3.3 Operators in LPG Industry The LPG industry in Bangladesh is highly fragmented and unregulated. There are about 22 players in the business, of which 12 are major importers. Ten importers have their import terminals near Mongla, whereas, only two have at Chittagong. The players importing LPG at Mongla primarily cater to western and Northern Bangladesh, where availability of natural gas is minimal. Importer wise volume is as below: 3.4 National LPG import data for last six (06) Months starting from (Jan-June) 2019. SN Months-019 Quantity (MT) International Bulk Suppliers in Bangladesh 01 January- BB Energy Malaysia Ltd. Vitol Asia Pte Ltd. Laugfs Gas Plc Srilanka. Shell International Eastern Trading Co EXXON. Siam Gas. 02 February- 03 March- 04 April- 05 May- 06 June- Total import 299,071.00 Data Collected from National Board of Revenue (NBR) 4.0 LPG industry competition is intensifying with new entrants Considering the potential of the LPG sector, new players are planning to enter the Bangladeshi LPG market every year. As of November 2018, 13 companies have been operating in the market, while seven companies are finalizing their market entry strategies for entering the market in 2019. Although 55 companies received licenses for carrying out marketing and distribution of LPG, not all of them secured the final approval. The seven companies, which received preliminary licenses for entering the LPG market, with a cumulative investment of BDT 1,500 crore, will further heat up the market. At present, the market is led by Bashundhara with a 24% market share, followed by Omera and Jamuna with a market share of 20% and 17% respectively. Public and private sector players jointly supplied 700,000 MT LPG against the estimated demand of 1 million MT in 2018. In order to reduce the existing gap, top players are enhancing both bottling and storage capacity. 4.1Imminent scopes of LPG industry The tax exemption policy for LPG import has played a major role in the growth of the sector. Additionally, import tax on equipment used for assembling LPG cylinders have been set below 5%. The previously imposed 15% duty on the import of LPG cylinders was waived in 2017. Another favorable government tax measure for the industry is the reduction in AIT (Advance Income Tax) from 5% to 2%. In the 2017-18 fiscal budget, importers of composite LPG containers composed of plastic and glass were provided exemption from VAT and the exemption was extended to the import of iron and steel-made LPG cylinders in September 2017 through an SRO. The VAT exemption will be applicable only for the cylinders having capacity below 5,000 liters5. However, a company wiling to set up a LPG bottling plant has to meet a long list of regulatory requirements. The entity has to secure permission and license from Department of Environment, Department of Explosives, Fire Service and Civil Defense, District administration, Local Government, Board of Investment (BoI), Bangladesh Standard and Testing Institution (BSTI), Bangladesh Energy Regulatory Commission (BERC), and Ministry of Commerce. Moreover, the layout of the storage facility, including the arrangement and location of plant roads, walkways, doors, and operating equipment has to be designed in a way so that it allows rapid escape in case of any explosion or fire hazards. Since the bottling and distribution of LPG cylinders involves dealing with extremely flammable materials, the regulatory compliances actually ensure the safety of both factory workers and end consumers. The Ministry of Power, Energy and Mineral Resources (MPEMR) published a gazette notification in 20176. Under this policy, entities will be able to import, produce, store, supply and export LPG cylinders after meeting the suggested compliances. Additionally, private sector players can set up LPG terminals, auto-gas filling stations, auto-gas conversion plants and LPG-bottling plants under the policy. 4.2 Market Projection Trends and Industry Drivers Depletion of Gas Reserves: Since natural gas contributes a major portion of electricity generation and thus contributes 56 percent of domestic energy demand; a necessity for alternative resources have come up and as a result LPG and other energy sources have appeared in the scenario. Unavailability of Fresh Natural Gas Connections: Due to government’s suspension on piped natural gas connections to households and industries, the demand for LPG has gone up to meet the daily gas necessities. Increasing Number of Households and Industries: Because of the increase in households and industries, there is a shortage in the projected domestic demand for gas, even if a conservation policy is undertaken. LNG is considered to be the possible alternative for industries. For households, LPG is expected to become a substitute for household gas usage. Price Subsidy: GoB is expected to provide the consumers with price subsidy for promoting LPG usage in the upcoming 2018-19 budget. Policymakers hold this belief that the demand for piped gas can be driven down if the use of LPG is promoted well for industrial and household use. The 12 companies that are in operation supplied 6.84 lakh tones of LPG last year at 57,000 tons per month, according to market players. “The main market for LPG is in Dhaka and Chittagong, but the households there are running on natural gas. We cannot grow by selling LPG to semi-urban and rural areas,” said a senior official of one of the two foreign companies operating in this segment. Totalgaz and LAUGFS Gas Bangladesh (formerly known as Petredec Elpiji) are the two foreign players in the field. As of April, a tone of imported LPG cost $594 (about Tk 50,000), including freight charge of $110. A tone of gas yields 83 12-kg cylinders. So, the production price of a 12-kg cylinder stands at Tk 610. Companies sell the gas at Tk 750-Tk 780 to wholesalers, who then sell it at about Tk 1,000 to consumers.”7 4.3 Existing cylinders in market SL No. PERMITTED LPG PLANT OPERATION IN MARKET LAUNCHING YEAR TOTAL CYLINDER IN MARKET(05-11-18) STORAGE CAPACITY(M.T) MARKET DEMAND IN LPG 2018(M.T) 1 BASHUNDHARA LP GAS BASHUNDHARA- OMERA PETROLIUM LTD OMERA- 3 BIN HABIB BD. LTD. BIN HABIB  - 4 UNIVERSAL GAS UNIVERSAL GAS  - 5 SUPER GAS(T.K) SUPER GAS  - 6 ENERGYPAC POWER G. GAS- 7 SENA KALYAN SENA LPG- 8 PADMA LPG PADMA LPG- 9 NAVANA NAVANA LPG- 10 PETROMEX LPG PETROMEX - 11 INDEX POWER BEXIMCO - 12 ORCHID ENERGY NEWAZ LPG- 13 LAUGFS GAS LAUGHS GAS- 14 JSJVL JAMUNA- 15 BM ENERGY B.M. LPG- 16 ORION GAS LTD ORION GAS- 17 PREMIER GAS LTD TOTAL GAS- 18 BPC BPC   350000   19 EURO PETRO GAS EURO GAZ- 20 JMI LP GAS JMI LP GAS-   21 PROMITA OIL & GAS POGL-   22 GREEN TOWN LPG Green lpg-     23 UNITEX LP GAS           24 DUBAI BANGLA LPG           25 DECAN LPG           26 CRYSTAL ENERGY           27 COASTAL GAS           28 MEGHNA LPG           29 STAR LPG           30 ABUL KHAIR           31 KARNAFULI LPG           32 ASTRAL LPG           33 SYNERGY PETROCHEM           34 INTRACO ENERGY           35 PETROLIUM PRODUCTS           36 DELTA LPG Delta lpg-     37 BAY GAS           38 ASIA OIL & GAS           39 GOLDEN LPG           40 SL KARNAFULLY LP GAS           41 UNITED LPG           42 TMSS LPG           43 BENGAL GAS           44 MIR LPG           45 ASHTA LPG           46 AMIN ENERGY           47 BANGLADESH ENERGY           48 MUSTAFA PETROCHEMICAL           49 ORGANIC GAS           50 R & R LPG           51 VIRGO LPG           52 ESTERN LP GAS           53 SAAMOOR ENERGY           54 M.M ENERGY           55 HAZI NAZIR AH LP GAS     225000   Satellite plant 56 H. M RAHMAN LPG     100000   Satellite plant 57 A. A ENERGY GAS LTD           58 INTRACO LPG           59 ORCHID ENERGY ( U - 2)             TOTAL    -     LPG Plants in Mongla     Basundhara Omera BM Total Gaz Laugfs Jamuna Sena Beximco Orion G-Gas Navana Petromax PLANT INFORMATION Own Jetty & 1 Barge Own Jetty & 3 Barge 9700 mt storage & own jetty at chittagong  Own Jetty Own Jetty & Self LPG Vessel Own jetty at Mongla Own jetty at Mongla Own jetty at Mongla & Lpg carrier of 2700 mt on international water. Own jetty at Mongla Own jetty at Mongla Own jetty at Mongla Own jetty at Mongla & 2 Barge -/Operation started on 3 July,- 5000 M. T.(Mongla) 3600 M.T.(Mongla) + 4000 MT Ongoing (Mongla) 6500(Ctg)+3000(Chalna)=-(Satellite) M.T.=9700 M.T. 3000 M.T. 1800 M.T.(Mongla) + 3500 MT Ongoing (Mongla-(Satellite)= 2850 M.T. 3000 M.T. 3000(Mongla)+5000(Satellite)=8000 M.T. 3000 M.T.(Mongla) 3000 mt with extended 2000 mt under construction 4500 M.T. 6500 M.T.(Mongla) Manual / Carousel Carousel Fully Automated & High Capacity Fully Automated & High Capacity Fully Automated & High Capacity Manual Fully Automated & High Capacity Fully Automated & High Capacity Fully Automated & High Capacity Fully Automated & High Capacity Fully Automated & High Capacity Fully Automated & High Capacity 7 Gas Storage Tank 5 Gas Storage Tank Mounded in Mongla Not in Mongla 2 Gas Storage Tank 3 Gas Storage Tank 2 nos sphere 2 nos sphere 2 nos sphere 3 nos sphere 3 nos sphere 3 nos sphere CYLINDER MANUFACTURING PLANT DOT 4BA-240 DOT 4BA 240 & DOT 4BW 240 DOT 4BA 240 DOT 4BA & DOT 4BW AS:NZS::1596:2008   DOT 4BA & DOT 4BW Composite cylinder DOT 4BA 240 & DOT 4BW 240 DOT 4BA 240 & DOT 4BW 240 DOT 4BA 240 DOT-4BA-240 45 Lac 32 Lac 22 Lac 9 Lac 16 Lac 28 Lac 6 Lac 4 Lac 6 Lac 7 Lac 5.50 Lac 6 Lac Own Cylinder Manufacturing Plant at Mongla & Keranigonj, Dhaka Own Cylinder Manufacturing Plant at Hobigonj Own Cylinder Manufacturing Plant at Ctg Nill Nill Nill Nill Nill Nill Own Cylinder Manufacturing Plant at Chalna, Khulna Own Cylinder Manufacturing Plant at Mongla, Khulna Own Cylinder Manufacturing Plant at Mirzapur, Tangail, Dhaka. 1500/Day 1000/Day 200/Hour             200/Hr 120/HR 220/HR 5.0 Facts & figures about LPG steel cylinder. The household market for the liquefied petroleum gas is growing amidst intense competition among new players coming into the market every year. The competition is helping consumers get a new cylinder at less than half the production price, but it is increasing financial burden on the companies.The loss we incurred from the sale of a cylinder takes at least 4 years to make up by refilling gas,” On an average, a consumer refills gas four times a year.There are already 12 companies in the market and another one -- Petromax -- has entered the fray recently. But the number of players does not just end there. Seven more companies -- Euro Petro, Universal, JMI, Bengal, Meghna, S Alam and Promita -- are set to roll out their LPG business aggressively to capture the household segment of the market.The combined investment of the seven companies would be about Tk 1,500 crore. “It is not just cylinders; companies are selling gas at a very competitive price due to competition among too many players,” said Nurul Alam, chief executive officer of BM Energy that came into the market last year.The company used to make gross profit of about $200 by selling a tonne of gas, but it has now come down to $100. “It has become very tough to sustain in this condition,” At present, natural gas is piped to households in Dhaka, Chittagong and some other big cities as cooking fuel. But the supply is fast depleting, which has encouraged businesses to step into the market. LPG is a mixture of propane and butane that becomes liquid under pressure, which can then be stored in pressurized containers for use. It is relatively new in Bangladesh and the market is still small. Bangladesh consumed 1.6 lakh tonnes of LPG in 2015, according to industry insiders. Of the quantity, 1.42 lakh tonnes were imported and 18,000 tonnes generated from different government factories as by-product. The 12 companies that are in operation supplied 6.84 lakh tonnes of LPG last year at 57,000 tonnes per month, according to market players. “The main market for LPG is in Dhaka and Chittagong, but the households there are running on natural gas. We cannot grow by selling LPG to semi-urban and rural areas,” said a senior official of one of the two foreign companies operating in this segment. Totalgaz and LAUGFS Gas Bangladesh (formerly known as Petredec Elpiji) are the two foreign players in the field. As of April, a tonne of imported LPG cost $594 (about Tk 50,000), including freight charge of $110.A tonne of gas yields 83 12-kg cylinders. So, the production price of a 12-kg cylinder stands at Tk 610. Companies sell the gas at Tk 750-Tk 780 to wholesalers, who then sell it at about Tk 1,000 to consumers.8 6.0 Marginal cost of production of steel cylinder SWOT Analysis Strength & Opportunities Weakness & Threats Worldwide acceptance & preference of LPG consumption for higher calorific value & lowest carbon emission flame. Energy deficiency & skyrocketing demand. Wide range of application in commercial & industrial sector. LPG demand is expected to grow significantly as an alternative to households’ cooking fuel and transportation fuel (in the form of Autogas). Positive government reinforcements through favorable policies. Sky rocketing demand with rapidly increasing population. Big invest is the key to capture market share. Lack of deep sea port development. Geographical concentration on operations like changing climate, delivery location etc. Lack of deep sea port makes it impossible to berth VLGC. Increasing competition. Government regulations significantly influence the market environment. Import oriented supply chain network. Falling behind to bring new technologies before the competitors. The government is actively considering reduction of duties and taxes on import of LPG and LPG cylinders to boost import and to expand its usage to ease mounting gas crisis. The budget of FY 2016-17 has rationalized the Customs and Supplementary duty which has had a positive impacts LPG cylinder price for end users. The government had been planning to raise gas prices for aligning with international LPG prices. In 2017, gas prices were hiked twice, by an average of 22%.