In a tough market environment, where certain LPG operators face difficulties in selling their units due to increasing loan burdens and diminishing sales, City Group, a leading conglomerate in the country, is taking an audacious step. They are committing over Tk2,000 crore to establish the largest liquefied petroleum gas (LPG) facility in the nation.
This ambitious endeavour will be launched within the Hoshendi Economic Zone located in Gajaria, Munshiganj.
In addition to this monumental venture, the conglomerate is currently engaged in negotiations to acquire two plants, each equipped with import terminals, situated in Mongla and Chattogram.
These strategic moves are aimed at securing a firm foothold in the burgeoning LPG market, which is expanding beyond its traditional use in cooking gas to encompass industrial, automotive and power generation applications.
As the supply of natural gas continues to dwindle, the demand for LPG is poised to surge. City Group’s plan comes at a critical juncture, with its new plant boasting an impressive storage capacity exceeding 16,000 tonnes – a record high in the country. This capacity is expected to grow even further to over 20,000 tonnes upon the successful acquisition of the two additional plants, as per the conglomerate’s outlined strategy.
Fazlur Rahman, head of City Group’s LPG unit, said, “Approximately 70% of our preparations have already been completed and we are aiming to enter the market during the first quarter of the upcoming year.”
City Group plans to market its LPG products under its flagship brand “Teer”.
City Group’s venture into the LPG sector positions it as the newest player among the 29 existing operators in Bangladesh. This list includes industry giants like Bashundhara, Omera, Meghna Group of Industries (Fresh), Beximco, S Alam Group, and JMI Group.
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Meanwhile, foreign operators such as France’s TotalGaz, Dutch Petromax, and Hong Kong’s Kai Heng Long Global Energy have established a presence in this rapidly expanding market.
Over the past decade, Bangladesh’s LPG market has experienced remarkable growth, with annual rates ranging between 15% and 20% attributed to the government’s ongoing efforts not to provide natural gas connections to households.
According to market reports, the demand for LPG in Bangladesh has witnessed a remarkable surge. It was at 80,000 tonnes in 2013 but is on track to surpass 14 lakh tonnes by the end of 2023, marking a staggering 15-fold increase over the span of a decade. Projections suggest that LPG demand in Bangladesh could reach 30 lakh tonnes by 2030.
Currently, among the existing LPG operators, JMI Group boasts the largest storage capacity at 14,000 tonnes, followed by BMI Energy at 10,700 tonnes, Omera at 9,600 tonnes, and Bashundhara at 9,300 tonnes.
City Group’s capacity at the Hoshendi plant will be 16,500 tonnes, and this figure is anticipated to increase to around 20,000 tonnes following the acquisition of two additional plants in Mongla and Chattogram.
In terms of market share, Bashundhara leads the way, followed by Omera, Unigas Jamuna, and Fresh. These top 10 companies collectively dominate over 70% of the market, even though some are currently seeking buyers due to substantial bank loan liabilities.
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The LPG industry in Bangladesh has witnessed substantial investments totalling around Tk30,000 crore over the past decade, with significant foreign direct investment inflows.
In 2022, the Netherlands’ SHV Energy entered the burgeoning Bangladesh LPG market through the acquisition of Petromax LPG and Petromax Cylinders at a cost of around $100 million.
Reason for investment
LPG offers a versatile range of over 1,000 applications, catering to the requirements of hundreds of millions of individuals across various sectors, including commercial enterprises, industrial operations, transportation, agriculture, power generation, cooking, heating, and recreational activities.
This adaptability makes LPG indispensable, catering to a wide spectrum of needs, from powering family kitchens in Dhaka to factory kitchens in Gazipur, providing refrigeration for shop owners in Bandarban, supplying Autogas for urban vehicles, and supporting welders in old Dhaka, among countless other uses.
The dwindling reserves of natural gas have prompted the Bangladesh government to cease new natural gas connections since 2008. Although attempts to resume connections have been made sporadically, supply shortages have prevented their continuation.
Source: The Business Standard
