PROGAS EMERGING STRONG IN LPG BUSINESS

Pakistan's first fully integrated LPG marketing company

By AMANULLAH BASHAR
Jan 03 - 09, 2005

Prime Minister Shaukat Aziz recently inaugurated the second phase of Progas Pakistan Limited, which are Pakistan's first fully integrated LPG company and the largest in terms of investment in the LPG sector.

The $39 million project is being constructed at the strategic location of Port Qasim. Progas is a 100% foreign-owned company, created as a Joint Venture company of KUB Malaysia Berhad and Sterling Ventures International Limited, U.K.

Abbas Bilgrami, the Managing Director of Progas, while giving the background of the project said that the first phase of Progas Pakistan's project is currently under construction at Port Qasim Authority by a local engineering firm and will include a 2,030 M.Tons of LPG storage facility and a fully automated 24 head Kosan Crisplant filling plant, capable of handling 5,000 M.Tons of LPG per month. Progas Pakistan has also awarded the "Engineering Procurement Construction Contract" for the second phase of its LPG project at Port Bin Qasim Karachi to SNC-Lavalin International Inc., of Canada and China Shanghai (Group) Corporation for Foreign Economic and Technological Cooperation (SFECO), Shanghai, Peoples Republic of China. The second phase of the Project includes the expansion of the storage facility at Port Bin Qasim by a further 4,500 M. Tons and the construction of an LPG import handling terminal. This facility will be capable of handling vessels between 1,500 to 50,000 DWT. At the same time additional regional distribution centers will be set up in Quetta, Islamabad and Muzaffargarh with bulk storage and semi-automated LPG bottling facilities. This phase of the Project is expected to be commissioned by the second quarter of 2005.

Progas Pakistan has signed an Implementation Agreement with Port Qasim Authority to build and operate an LPG import terminal for a period of 30 years extendable by a further 30 years. The Company has also been given permission to build storage and bottling facility by the Ministry of Petroleum.

Progas will be the first fully integrated LPG Company in Pakistan by virtue of the fact that it will handle LPG from importation, storage, bottling, transportation, distribution and delivery to end users. This will reduce the overall cost of handling LPG, the benefit of which will be passed on to the consumers. The Project will be the single largest investment to date in the LPG industry in Pakistan. On completion, it will be a large infrastructure project of national importance and will make a significant contribution in providing employment throughout Pakistan and the increase in usage of LPG will help in conserving national forest resources and reducing pollution in the country.

A lot of construction activity carried out on the seafront of Port Qasim adjacent to the FOTCO Oil Terminal. This is where the first phase of Progas Pakistan's LPG bottling and filling plant is located. Prior to the coming up of the plant, there were only shrubs and sand dunes on the 10 acre plot at Port Qasim. It was then leveled to what looked like a large football field. Now the whole area has undergone a dramatic transformation from a deserted sandy land into a prestigiously developed state-of-the-art "LPG Bottling and Filling Plant".

The first phase of the project has a storage capacity of 2,030 M.Tons and a 24 head fully automated Kosan Crisplant filling and bottling facility.

Progas Pakistan will market LPG throughout the region in its specially designed cylinders and will also offer hospitality arrangement for other LPG marketing companies. Progas Pakistan has special relations with LPG producers worldwide and will use these relations to ensure adequate and economical supply of LPG. Plans are also being made to set up regional distribution centers in Rawalpindi, mid-country and Quetta, with bulk storage and Kosan Crisplant semi-automatic filling plants. This will ensure supplies to all areas of Pakistan where LPG supply is critical for the domestic and commercial sectors.

With a team of 45 highly qualified and experienced professionals from the LPG industry Progas is ready to change the trend of marketing and distribution of LPG in Pakistan.

Besides construction of the LPG terminal, SNC-Lavalin and SFECO will also undertake the fabrication of 4,500 Tons pressurized tanks for storage of LPG. The components of the tanks have been specially imported from Malaysia.

PQA has been chosen by Progas to setup the LPG terminal and bottling facility as it is ideally situated in close proximity to LPG industries and the road network. PQA has established a special dedicated LPG Industrial Area in the North Western Industrial Zone. Besides Progas Pakistan's state-of-the-art bottling facility, several other LPG marketing companies have established units there and new units are also coming up.

To cater for the shortage of LPG in Pakistan, supplementary supplies need to be obtained through imported LPG. The terminal and storage capacity will allow progas sufficient stocks of LPG for its marketing and also bulk sale of LPG to other marketing companies. This will ensure that the shortage of LPG which occurs from time to time in Pakistan, especially in far flung areas, will be eliminated.

Progas has awarded the EPC Contract for construction of LPG terminal at QP-5 to SNC Lavalin of Canada and China Shanghai (Group) Corporation for Foreign Economic and Technological Cooperation (SFECO), Shanghai, Peoples' Republic of China.

Besides construction of the LPG terminal, SNC-Lavalin and SFECO will also undertake the fabrication of 4,500 Tons pressurized tanks for storage of LPG. The components of the tanks have been specially imported from Malaysia.

PQA has been chosen by Progas to setup the LPG terminal and bottling facility as it is ideally situated in close proximity to LPG industries and the road network. PQA has established a special dedicated LPG Industrial Area in the North Western Industrial Zone. Besides Progas Pakistan's state-of-the-art bottling facility, several other LPG marketing companies have established units there and new units are also coming up.

To cater for the shortage of LPG in Pakistan, supplementary supplies need to be obtained through imported LPG. The terminal and storage capacity will allow Progas sufficient stocks of LPG for its marketing and also bulk sale of LPG to other marketing companies. This will ensure that the shortage of LPG which occurs from time to time in Pakistan, especially in far flung areas, will be eliminated.

Currently, 56 companies have been issued marketing licenses in Pakistan.

Under the Implementation Agreement signed with Port Qasim Authority, Progas will be setting up a terminal for handling LPG vessels between 1,500 to 50,000 DWT. The award of this contract to SNC Lavalin, a leading engineering firm from Canada and China Shanghai (Group) Corporation for Foreign Economic and Technological Cooperation (SFECO), Shanghai, Peoples Republic of China, also coincided with the 30th anniversary of Port Qasim which is the second port in Karachi. The construction of a dedicated LPG import terminal by Progas will be significant for the industry as this infrastructure will allow LPG Abbas Bilgrami, while giving an overview of the market in Pakistan said that the future of the LPG industry in Pakistan is looking brighter with new entrants and new investment flooding in with the long awaited deregulation of the industry.

He was of the view that market growth over the next few years will be explosive; at the same time the number of services and products will grow. Actually it is a healthy development especially for the consumers as well. Since over 70 percent of the population is rural based, LPG is a fuel of choice for the rural population. Besides the rural market, the transport consumers of LPG in the urban areas of the country also offer a huge market for LPG; however, there is a need for legislation to regularize the consumption of LPG in the transport sector. So far, the LPG being used as fuel by cabs and auto rickshaws was illegal and calls for immediate steps for regularization of LPG in transport consumption.

Production of LPG locally will see a boost once the Jamshoro Joint Venture is commissioned, the Oil & Gas Development Corporation's Bobi and Adhi gas plants are expected to increase production of LPG locally from the 900-1,000 Mt/ day to over 1,400 Mt/ day. Our belief, however, is that the demand for LPG will continue to grow and pull in imports.

The next ten years will be a period of great change for the LPG industry in Pakistan during which competition will increase, quality, health and safety standards, along with availability of LPG, will become the measures for success. In view of a huge market of approximately one million Metric Ton, Pakistan would ultimately be required streamlining its supplies through imports. Hence, the local production of LPG will need to be supplemented through imports of at least 500,000 Metric Tonnes. This is why the Progas LPG Terminal will be a major landmark for the industry.

Replying to a question, Abbas said that countries like Iran, Oman, Qatar, and Abu Dhabi were the major producers of LPG and were capable to cater to the future needs of LPG in Pakistan.

Obviously, the LPG is going to assume a more significant role in view of the growing demand especially in the absence of distribution network for supply of natural gas to the rural based consumers in Pakistan.

The growth pattern indicates that growth rate for LPG consumption was 7-8 percent in 1997-98 which increased to 12 percent during 1998-2004. The demand for LPG is likely to take a quantum jump of 40 percent in next two years, said Abbas.

OUTLOOK

The oil prices in the international market touched the highest level of $56 a barrel during the recently concluded year 2004. There seems to be no hope for defusing of the hot oil market in the prevailing politically hostile circumstances especially in Iraq. The oil exorbitant oil prices have forced the developing economies like Pakistan to switch the major oil consuming areas from oil to gas and other cheaper fuels to get rid of the unbearable cost of oil imports. According to an estimate, the oil imports of Pakistan are feared to exceed $4 billion during the current financial year. Hence the situation calls for a preferential treatment towards gas industry to cut down the cost of production in the face of free global trade environment where competitive prices would play a significant role to survive in the global market. This situation indicates that the next ten years will be a period of great change for the LPG industry in Pakistan during which competition will increase, quality, health and safety standards, along with availability of LPG, will become the measures for success.