Abdul Hamid, the proprietor of Hamid Ceramic Factory in Chattogram's Chandpur district does not have pipeline gas connection in his factory. To run his facility, he has to rely on diesel fuel, resulting in higher production costs compared to others.
The situation exacerbated after the government increased the price of oil, including diesel last month, which eventually pushed the production cost up even more.
To bring down unsustainable costs and to run production uninterrupted, Abdul Hamid has begun using Liquefied petroleum gas (LPG).
"I have set up a tanker for LPG and successfully brought down the cost of production and company expenses," said Hamid, who installed a 20-tonne capacity tanker at his factory and now gets LPG supplied regularly to his factory by the Unitex company.
Kamrul Hasan, head of finance and accounts at Unitex LP Gas Limited said that many factories have been opting for LPG to ensure that they get uninterrupted gas supply.
The lack of gas has been a major headache for companies, a problem arising from the rise in oil price hike and natural gas (liquified natural gas - LNG) supply crisis in the country.
Chandpur's Abdul Hamid is not alone in looking for an alternative fuel. Many entrepreneurs and industrialists across the country are moving to LPG in the face of rising fuel prices.
"Factory owners have been reaching out to LPG companies wanting to convert their boilers and tanks to LPG," Unitex's Hasan said.
In Sirajganj, about 200km up north from the south-eastern Chandpur, Nahar Agro set up a 20-tonne capacity LPG tanker to cut the cost of running the factory.
Even with the amount of LNG these factories do get amid scarcity, they cannot use it efficiently because of low pressure of the LNG supplied through the line.
Owners are increasingly opting for LPG as a result and its use is rising across the country to ride out the energy crisis. LPG suppliers are seeing a growing demand for the fuel.
Suppliers are ready to meet demand
Bashundhara LP Gas Limited, which pioneered LPG supply in the country, was the first private investor to bottle and market liquefied petroleum gas (LPG) in 1999.
With a significant portion of the country's population lacking access to gridded natural gas supply, LPG at the time became an important fuel for cooking across the country.
It was then adopted for use in industrial, commercial, as well as transport sectors.
Currently, 54 companies have licences to supply LPG – out of which 28 companies are in operation, with a combined capacity for supplying 19.38 lakh tonnes.
The big players including Bashundhara, Beximco, Navana, Omera, and Orion have pumped Tk30 thousand crore into the country's LPG sector thus far.
The annual consumption of LPG in the country is around 13 lakh tonnes presently, with the market size being around $3.2 billion, according to a study by Bangladeshi market research firm Apprentice Consulting.
Industry insiders say the sector has around 50% more supply capacity compared to current demand.
In Bogura, which is one of the major industrial districts in the country, a total of 42 industries currently use gas as fuel for production, according to Pashchimanchal Gas Company Limited (PGCL), a company of the state-run Petrobangla company.
Out of the 42, two companies are using LPG. One of these two, ABC Tiles Factory started using LPG a few years ago when the fuel became available in Bogura, said manager of the company Kamruzzaman. The fuel is used for production in two of the factory's units out of a total four units they run.
The other company, Sajal Ceramics Industries, runs its ceramic production facility with LPG.
Masroor Hussain, Lead Consultant and founder at Bangaldeshi market research organisation Apprentice Consulting, said that LPG has become the go-to alternative energy source for industrial usage, especially as the industrial sector rebounded after a two-year setback due to the Covid-19 pandemic, posting a healthy 10.4% year-on-year growth in FY22.
With the nation's diminishing natural gas reserves and rising electricity cost, LPG has become a key fuel, the researcher said.
"We are seeing increasing LPG application in various local industries including textile, ceramic, food processing, metal processing and chemical production," said Apprentice Consulting's Hussain.
"Since the government has set an export target of $100bn by 2026, it will be crucial for industrial players to proactively weigh-in and make the transition to LPG for uninterrupted production."
He believes that LPG manufacturers will have a key role to play in ensuring reduced lead time and effective supply-chain.
LPG companies seek policy support to realise huge potential
The demand for LPG has been on the rise with an annual growth of 10% due to its multi-sectoral adoption, ranging from uses in domestic to transport sectors.
Demand for LPG began to grow when the government stopped providing new natural-gas connections to households and commercial establishments, due to the supply shortage of natural gas in 2009.
The shortage of natural gas has spurred state-run Petrobangla to ration new supplies to industries, fertiliser factories and power plants since 2009.
With fast-growing demand for LPG as bottled cooking gas, Bangladesh Petroleum Corporation (BPC) has taken the initiative to build a very large LPG bottling terminal to meet the demand.
The state-run BPC plans to build the facility in Moheshkhali of Cox's Bazar in collaboration with a foreign company, to offer bottled gas at much cheaper prices than present.
A former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Shafiul Alam Mohiuddin said that they have to contend with energy shortages at garments factories.
The garment factory owners constantly find themselves trying to find ways to heat up boilers in the face of natural gas shortage. The former BGMEA president says the garment factories will have to use LPG if the shortage becomes more acute.
LPG also has a big role to play in providing access to clean cooking fuel, as per a Sustainable Development Goal (SDG) target and leading LPG producers say this segment also has huge potential.
SDG aims to ensure clean cooking fuel – natural gas, electric cooker, biomass, solar, and LPG – for 70% of the people.
Currently around 20% people have access to a clean cooking fuel, with LPG accounting for 6-7% of this 20%, thanks to the rapid penetration over the second half of the last decade. "By replacing diesel in industries and dirty cooking fuels [for household or commercial use], LPG may see an increased annual demand of 15 million tonnes in the future. If CNG (natural gas) subsidy is rationalised in the coming days, more and more vehicles will opt for automotive LPG or auto gas," said Engr Jakaria Jalal, Head of Division, Bashundhara LP Gas Ltd.
Industry insiders said that to keep production afloat, these factories need to rely on LPG, even if it is costlier. Currently, the industrial usage cost for LPG is five times higher than natural gas.
"Because factories do not get enough natural gas supply, LPG has become an important alternative fuel," said Rokonujjaman, Head of Corporate Sales of the company, Omera Petroleum Limited.
Industry leaders said that they are trying their best to make LPG a popular fuel by keeping the price reasonable.
They believe that the present price for LPG, which is an imported substance, can be reduced if there is policy support, mainly through removing VAT costs and other government fees.
These include licence renewal fees by the Bangladesh Energy Regulatory Commission (BERC), Bangladesh Petroleum Corporation (BPC) licence renewal fees, fees charged per filling unit by Bangladesh Standards and Testing Institution (BSTI), and fees by the environment department, etc.
The Vice President of Orion Gas Limited, one of the leading suppliers of LPG, Anup Sen, says that updating regulatory policies is essential to bring down the cost, which respective government bodies should do by removing unnecessary compliance requirements in order to help the sector.
Testing for sulphur oxide (SOx) and nitrogen oxide (NOx) pollution is unnecessary, said Sen, given that the LPG companies only bottle the fuel, posing no risk of serious air pollution.
"Our LPG plant is in the green category and we do business only by filling LPG in cylinders. So, it is not necessary to test SOx and NOx four times a year. We are paying test fees of Tk55,200 annually just for this," said Anup Sen.
Projections show that the LPG market will grow to 30 lakh tonnes by 2030 from its current size of 13 lakh tonnes per year.
The Orion Vice President says that policymakers should step in and review policies relating to costs, including the "huge amount of money for licence renewal" that LPG companies need to pay.
While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.
Main Office -4/A, Eskaton Garden, Dhaka- 1000
Send Opinion articles to - [email protected]