Business Reporter
DOHA: As economic growth, high demand, and increasing wealth fuel domestic use of liquefied petroleum gas in China and India, kerosene subsidies in the Asian region make LPG uncompetitive, an energy expert has said.
Jason Feer, vice-president and general manager (Argus Media) said though LPG demand was rising in many regions of the world, subsidies continued to distort markets.
“While kerosene subsidies in India and Indonesia make LPG uncompetitive, price controls in China distort markets in that country”, he said at a session at the “Middle Eastern LPG in the Global Marketplace” at the Marriott yesterday.
Feer said the desire for clean fuels spurred the use of LPG as an urban motor fuel. For the petrochemical sector, LPG’s low price related to naphtha makes it attractive.
He said the LPG supply side was improving with large refining additions in Asia and the Middle East and natural gas projects, leading to strong supply growth. By 2013 LPG supply is expected to exceed 28mn tonnes a year.
On China, Feer said industrial and commercial demand for LPG remained strong though there were some signs of sluggish demand growth in rural areas due to price. But huge refinery expansion in China has slashed imports.
In India there is a large untapped market if subsidies are reduced and marketing companies sell at a profit. But this is unlikely to happen in the short term.
LPG demand growth in India is now between 4.5% and 5% a year. But the increase in domestic production will result in a drop in LPG imports in the country.
Feer said the Japanese market was unregulated but LPG demand was dropping because of high domestic retail prices. New Japanese houses are built without LPG appliances.
However, in Japan the demand for butane is rising because of strong demand by petrochemicals due to high naphtha prices, he added.
In another session, Progas (Pakistan) managing director and CEO Abbas Bilgrami said his firm’s LPG terminal at Port Qasim could act as an energy hub to take large shipment from the Middle East and benefit from economies of scale.
Port Qasim has an annual capacity to handle up to 2mn tonnes of LPG.
He said Pakistan’s LPG market grew at about 38% in 2005–’06 and is currently growing at abut 15% annually. Pakistan does not produce significant quantities of LPG and the current market expansion would require up to 500,000t of LPG imports.
“The demand for LPG has been expanding into other sectors also. The government has recently allowed use of LPG in the automobile sector and has provided significant incentives such as abolition of customs duty and decision of income tax at import stage,” Bilgrami pointed out.
Historically, Pakistan’s LPG imports have remained constrained because of lower producer prices, which kept imports unviable. However, the government has finally implemented the import price parity and the local product is now priced at Saudi Aramco contract price, which makes imports viable. This has already bought significant interest in the market and now that prices and supplies will be stabilised, other industries including power plants are also looking to using LPG, he said.
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