June 09 - 15, 2008

With LPG remains much cheaper than diesel, kerosene and furnace oil, there is big room for promotion of this product and efforts are being made to enhance it use in automobiles.

Apart from economic benefits to customers, use of LPG in automobiles would significantly contribute to lowering vehicular emission, thereby reducing environmental pollution, experts say.

The Oil and Gas Regulatory Authority (Ogra) has also issued the first-ever licence for setting up the liquefied petroleum gas (LPG) autogas station in Lahore. The licence, awarded to Noor LPG of Lahore, now clears the way for construction and operation of LPG autogas stations across the country.

"This Licence marks a milestone in the history of the LPG industry, as it will pave the way for a cleaner and cheaper fuel for vehicular use. "The LPG Association of Pakistan has been at the forefront to legalise the use of LPG as autogas in an effort to eradicate its decanting and black marketing and rationalise prices for the end user," said Chief Executive Officer (CEO) of Noor LPG Belal Jabbar.

With the first licence now approved, other LPG marketing companies, including oil marketing companies (OMCs) such as Pakistan State Oil (PSO), Shell and Caltex, are also expected to establish LPG autogas stations.

Belal said, although the Federal cabinet had approved the LPG's use as autogas in September 2005, its regulatory framework was finalised in March 2007. According to the sources, the Ogra approved the framework, which called for a minimum area requirement of 10,000 square feet and allowed only licensed LPG marketing companies to set up stations. The sources said that there were over 12 million vehicles operating on LPG world-wide. He further said the LPG kits will cost one-third of the cost of compressed natural gas (CNG) kits and will be much safer due to LPG's lower operating pressure of 250 psi versus 3,600 psi of CNG", he added. "At a time of rising fuel prices and with the ban on installation of new CNG stations, the LPG is the fuel of the future. The LPG autogas stations can be virtually established anywhere in Pakistan since the supply of LPG is not restricted to piped gas as is the case with the CNG," said Belal.

According to the LPG Association of Pakistan (LPGAP), a group comprising licensed LPG marketing companies, at current consumer prices, LPG remains cheaper than diesel, kerosene and furnace oil.

"In MMBTU terms and based on current consumer fuel prices, LPG is Rs 1,213.30 per unit while diesel is Rs 1,360.03 per unit, kerosene is Rs 1,216.26 per unit and furnace oil ranges between Rs 1,244.24 and Rs 1,356.73 per unit," said LPGAP spokesman Fasih Ahmed. "Even with recent rationalizations in consumer price, LPG remains a highly affordable product," said Ahmed.

"Demand for LPG had been depressed from March through early May compelling LPG producers to offer discounts during this period," he said. "But despite the discounts, market conditions forced LPG marketing companies to sell product below cost," he said. "LPGAP has consistently argued that all links in the value chain must have viable returns in order for the industry to survive and grow," he said.

Mr. Fasih Ahmed said the current LPG producer price (including taxes) of Rs 45,878.10 per tonne or Rs 540 per 11.8kg cylinder is the same as it was last January. "At this producer price, the maximum consumer price, in the assessment of the Oil & Gas Regulatory Authority through its letter of January 3, 2008, should not be higher than Rs 63/kg anywhere in Pakistan except in Kashmir, Northern Areas and FATA where it should not exceed Rs 66/kg," he said, adding that LPG consumer prices are currently at Rs 55/kg.