Factors affecting LPG demand in Bangladesh-
- Global LPG prices have witnessed a downward trend owing to weak global demand and oversupplied market
- North west and south west parts of the country (Rangpur, Rajshahi, Khulna, Barisal divisions) are relatively less penetrated by natural gas pipelines as compared to eastern and central Bangladesh ( Dhaka, Sylhet and Chittagong division)
- Only 10 percent of the total 30 million households use piped natural gas for domestic cooking. In recent times, natural gas supplies to even these 3 million households have been irregular and in shortage owning to widening demand supply gap of gas in the country.
- Being a developing country living standard and earning capacity of rural people is improving day by day. Increasing of hotel/ restaurant/ road side tea stall etc.
- These factors present a sizable potential market for LPG if the fuel is made available to potential customers at an affordable price
- With the depleting natural gas supplies, larger number of industrial and commercial users is in need of alternate, reliable sources of energy for uninterrupted operations. In the given scenario, some of the potential user segments of LPG are textile industry, glass & ceramic industry, food & processing industry, hotels and restaurants. Also, with five Government owned and three private sector owned The Government of Bangladesh has planned to undertake a number of initiatives to promote usage of LPG across sectors. It has been reported by industry and Government sources that new domestic gas and CNG connections have been suspended. Further, to reduce the disparity between natural gas and LPG prices, the Government is considering to increase the tariffs of piped natural gas and CNG. Also, with its plan to meet seventy percent of the domestic demand with LPG within next three years, the Government plans to put in place polices that incentivize conversion of existing natural gas users to LPG. Such policy interventions are expected to have a positive effect on the demand for LPG in the country.
- economic zones planned for near future, the demand for LPG by industries is set to increase
- While low priced natural gas (USD 2.44/ MMBTU for domestic sector) is available to only limited regions in Bangladesh, cheap firewood remains the most preferred fuel for majority of rural Bangladesh and also large parts of semi-urban & urban Bangladesh. The other affordable alternatives include traditional biomass based fuels such as crop residue, cow dung, etc. In the absence of any subsidy, the affordability of LPG ( current average market price of USD 36/ MMBTU) when compared to such severely, low priced alternatives can prove to be a major obstacle, thus limiting its uptake and acceptability among large number of potential rural and semi-urban customers
- Alternative fuels such as firewood, jute stick, traditional biomass, etc are preferred energy sources among major parts of rural Bangladesh because of their easy availability and adequacy. With its underdeveloped distribution network in rural Bangladesh and refueling challenges, LPG may find lower acceptability among rural customers in the short to medium term