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HOW to GROW the LPG MARKET in

PAKISTAN

4TH INTERNATIONAL LPG CONFERENCE

25th March 2010, Islamabad

SOHAIL A. QURAISHI

CHIEF EXECUTIVE

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LPG GLOBAL MARKET

Total Size of World Market:

Year 2008 242 Million Tons

Year 2012 270 Million Tons

Total Size of Pakistan Market

Year 2008-09 Sales was 570,000 Tons

This is 0.25% of World Market It is at a low level of 2.6 Kg/Capita

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LPG Per Capita Consumption (Kg)

75.47

28.8

18 15.512.03

7.32.6

0

10

20

30

40

5060

70

80

Ma ays a ha and an h na h pp nes nd a ak s an

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GLOBAL LPG PRODUCTION

TRENDSMillion Tonnes

Million Tonnes

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GLOBAL LPG CONSUMPTION

TRENDSMillion Tonnes

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MAJOR LPG EXPORTERS

Major LPG Exports are from Mid-East

In Year 2010 33 Million Tons

In Year 2012 40 Million Tons

Global Consumption in Year 2012 is 267

Million Tons

A surplus of 3 Million Tons is expected inMid-East

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MAJOR LPG EXPORTERS

Million Tonnes

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GLOBAL CONSUMPTION BY

SECTOR

Domestic and Commercial 46%

Feedstock 32% Transport 9%

Industry 11%

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Global Consumption by Sector

2008

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PAKISTAN LPG MARKET

Total Market is Contracting (23%) over last four years

No. of Marketing Companies has grown From 16 in 2004 to 83 Now (Increase of +500%)

Major Conversion of Auto Market to CNG

Smuggling of Substandard LPG fromIran/Turkmenistan etc.

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LPG Sales Volume

- - - - - - 9 9-

ons

Lo al m orts

(*) Annual projections based on Jul-Dec09 volume 250 K

9

(*)

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Low Level of LPG Imports (2003 10)

Local 2%

Imports

8%

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REASONS FOR LPG MARKET

CONTRACTION CNG Market Expansion

NG Expansion in Domestic Market

4 Million Consumers in Year 2004

5.6 Million Consumers in Year 2009

Lack of Investment in Cylinders in LPG

Downstream Market

Imports Uneconomic and Uncompetitive

Decline in local LPG Production

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Auto Fuel Comparison

an Apr u

l tan A

pr ul t

an Apr u

l t

s/m

LP M AS C

Data based on commonly used kits for use in 1000 CC Car

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GOP POLICY CHANGES TO

GROW THE BUSINESS Import Parity Pricing thru reduced GST both at

Import & Supply Stage (No Revenue Loss to

GOP due to higher imports) To allow all players to have adequate volume

To control prices through competition

Clear Policy on Comparative Fuel Taxation and

Pricing Legislate against cross-filling of Cylinders

Controls on Smuggling of LPG

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LPG Competitiveness with Other

Fuels

C G FO CO L L O E O HS LPG P G ELEC

Fuel Prices as at 3rd March2010

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OGRA REQUIRED INITIATIVES

A LPG Consumer requires a safe, economic andcorrectly filled cylinder. For this:

Cylinder Cross-filling needs to be stopped by linking Company sales to stock of

cylinders available*

Correct LPG weight is filled

Ban on Manufacture and Sale of small non-company owned cylinders

Re-qualification of cylinders

Control Sub-standard LPG Smuggled from Iran/Turkmenistan etc

Control Decanting

*For current market conversion to domestic from Auto about 3 Million more

cylinders are required costing 5.5 Billion Rupees

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LPG SAFETY

Compliance to Codes & Standards throughout the Distribution Chain

Pressure Vessels to be manufactured with prescribed steel only

Use of genuine UL Listed valves only for LPG Plants / Vessels

LPG Tankers to comply with International standards like ADR,

COP2 and BS 7122 etc.

Re-qualification of all LPG Vessels (Both Static / Mobile) to be

carried out only by API 510 certified inspector.

3rd Party Inspection Bodies with foreign accreditation

Only certified inspectors to be authorized by OGRA for inspection of

pressure vessels.

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Recommendations

To Grow the LPG market, support from Government and

Regulator is required for:

Increased LPG supplies thru imports by rationalizingGST structure

Safety Implementation throughout the LPG

distribution chain

Clear Policy on Tax/Price on different fuels to allow

investment by companies

Control Smuggling