Looming LPG crisis

Things are certainly not going well for energy planners in the country. The dip in natural gas supply from existing gas fields coupled with a US dollar crisis that is increasingly having an adverse impact on liquefied energy gas (LNG) import has adversely impacted production capacity in Bangladesh. Now it seems that liquefied petroleum gas (LPG) supply is heading for a crisis. Like coal and LNG, LPG is also on the import basket of fossil fuels. The difference here is that LPG is widely used as a cooking fuel and any disruption in its supply will have serious consequences for the general populace.
According to LPG Operations' Association of Bangladesh (LOAB) some 30 companies are importing and bottling LPG in the private sector that meets 99 per cent of demand. Although not all Bangladeshis use LPG for cooking, the market cannot be discounted as a fad item. Data show that some 44.5 million LPG cylinders are in circulation with some 60,000 retailers in the business of supply to end users. Use of LPG is not limited to home-users but increasingly being adopted by automobiles as an alternative to compressed natural gas (CNG) - supply woes of which are tied to supply of natural gas in the country. Hence, any disruption in LPG supply will have economic ramifications.
Reportedly, "The government decided to give licences to the private sector for importing, bottling and distributing LPG with a vision for increasing the use of environment-friendly fuel for cooking. Under this licence, private sector, private sector conglomerate Bashundhara Group launched the LPG business in 2000. They own the highest share in Bangladesh." Other major players include Omera Group followed by BM, Jamuna Spectech, Beximco, etc. Since its launch in 2000, LPG market has grown steadily and hasn't witnessed any major disruptions, until now. Over time, market competition has driven out many of the original players and now some seven companies rule the LPG market.
With the economic downturn several factors have emerged to put a lot of pressure on LOAB. The most significant being the steady devaluation of Bangladesh Taka (BDT) against dollar. It made LPG imports much dearer. This is clear from the example that when letters of credit (LCs) were opened in March 2022 (exchange rate being BDT86 to $1.0), and then having to settle import payments at BDT 102-103 per dollar, opened wide the losses importers had to face because the price of LPG cylinders were not increased to cover this fluctuation in rate of exchange. Then of course came the tightening of monetary policy from the central bank, which meant that fewer LCs could be opened by LOAB to import necessary LPG. Market data points that in May 2023, import of LPG was 20,000 tonnes less than what the market needed.
According to media reports, the monthly demand for LPG import stands between 100,000 - 120,000 tonnes. But operators have sunk in millions of dollars in investment in the sector looking to do business for the foreseeable future. The nature of import in this segment requires bulk imports over long term contracts with suppliers. Hence, when there is delay in settling bills, suppliers' interest in shipping LPG to Bangladesh wanes and this is exactly what has happened. The economy continues to bleed on account of precious foreign exchange which is scarce, adversely impacting import of LNG. LPG will also soon become short in supply in the market unless required dollars can be found from somewhere to pay for import.

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