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Liquefied petroleum gas (LPG).

Liquefied Petroleum Gas (LPG)

The potential of liquefied petroleum gas (LPG) is attracting increasing attention from developing countries with abundant oil and gas resources. As demand for LPG continues to grow, Qatar, Indonesia, Iraq and Iran are among nations which have spotted the opportunity to develop export earnings from the trade. LPG can be produced from either crude oil or natural gas, and the market has grown fast over the past 20 years. In 1970, the industrialised countries, which account for the bulk of imports, were self-sufficient. Now their needs have far outstripped their own ability to supply them, and in 1988, the United States, Western Europe and Japan together purchased 20.8 million tonnes on the world market.

Demand is also rising in developing countries. LPG is best known as bottled gas for cooking. It is the obvious fuel for growing urban populations which have access to neither firewood nor piped gas. Factories off the piped gas network also use LPG for industrial purposes. In many countries LPG is blended with petrol, and elsewhere because it causes relatively little pollution, it is used in place of petrol. LPG is found in two forms, butane and propane. Both are used by the petrochemical industry, mainly as feedstock for making ethylene. At a time when developing countries are increasingly dependent on export earnings, the growing LPG trade has attracted oil and gas producers.

The export trade is dominated by the Middle East, which in 1988 exported 14 million tonnes. Saudi Arabia led the way with 8.5 million tonnes, followed by Kuwait, 2.6 million, and Abu Dhabi, 2.4 million. The region also will provide much of the new capacity being built or planned. Qatar, which had modest sales of 570,000 tonnes in 1988 will have a huge export potential by the early 1990s from development of the massive gas resources of its North Field in the Gulf.

It is in the huge Japanese market that the clash of supplies was first felt in 1988. Middle East exporters supplied 10.4 million tonnes of the 12.7 million tonnes by Japan, but now their dominance is being challenged. The first new competitor is Indonesia, whose export capacity recently has risen almost five-fold to 2.45 million tonnes a year as new plants have come on stream. It may be noted that Indonesian new facilities of LPG were raised by Japanese to be rapid from LPG export earnings. The two plants would export a total of 1.95 million tons of LPG a year to Japan, the Arun facility in Acch province accounting for 1.60 million tons and Bontang in East Kaltmantan for the reminder.

LPG in Pakistan

LPG's production started in 1966 in Pakistan. Usually, LPG is prepared by mixing propane and butane in the ratio of 60:40, LPG's heating value is 23,000 btu/lb. It has a calorific value of 2676 btu/ft-3 or 20556 btu/lb or 45,318 x 106 btu/mt or 94462.8 btu/m3. LPG contains impurities upto only 2 per cent. The LPG used in Pakistan is also of the same composition.

In the past, it was flared away considering it as a waste and a useless item at some crude petroleum producing well and at oil refinery sites. It is used as a substitute for kerosene oil and natural gas as well as for firewood in rural areas and "Kachi abadis" of urban areas. Even in "Pucca" houses where natural gas connections are not feasible and not readily available or where the supply of natural gas has become irregular due to some technical reasons, LPG is a good substitute. It is, no doubt, costlier than natural gas but still much cheaper than firewood and kerosene oil. The initial cost of cylinders and domestic equipment like burner in case of LPG is higher than the equipment needed for furnace oil or firewood but the running cost is much lower i.e. roughly 40 per cent of that of kerosene oil, provided there is regular supply of the liquefied petroleum gas.

LPG is a convenient source of energy for domestic use and for smaller hotels and restaurants in areas where the gas supply has not reached so far. In addition to suburbs of big cities and towns, where natural gas is not yet available, the consumption of LPG has ample scope to increase in rural area. However, its demand seems to have grown slowly because of its high prices compared with those of kerosene and firewood. The comparative high price can be explained by the size of capital expenditure which is involved in plants and machinery for the extraction of liquid petroleum gas. Its distribution in bottles or cylinders also requires a fairly heavy amount. However, it is a clean fuel and is preferred by consumers.


LPG is obtained from two main sources i.e. natural gas and refinery gas streams. Most of LPG in USA is produced from natural gas and approximately 20 per cent from refinery gases. In Pakistan, it is produced from the oil field and refineries. A large amount is expected from gas condensate deposit discovered at Dhodak near D.G. Khan in Punjab. Production has shown a marked rise in the last ten years. This was due to substantial expansion in the production capacity. Production in the last eleven years was as follows:

Table : Table-I

Production of LPG
Year (Tonnes) % Increase
1979-80 40,280 -
1980-81 42,085 + 4.48
1981-82 50,228 + 19.34
1982-83 49,666 - 1.11
1983-84 72,072 + 47.04
1984-85 75,203 + 4.34
1985-86 75,094 - 1.44
1986-87 107,886 + 43.66
1987-88 130,642 + 21.09
1988-89 130,642 -
1989-90 130,776 + 1.02

Average Annual Growth 12.82% Source: Energy Year Book 1987 & 7th Five Year Plan

The significant aspect of LPG is that it is produced locally and, therefore, it has a strong potential to replace kerosene oil. There has been more than 78 per cent increase in the value of kerosene oil imports during the past ten years, although the imports in terms of quantity have been more or less stagnant.

Table : Table-II

Imports of Kerosene Oil
Year Quantity Value
 (Mil. Tons) (Rs. million)
1979-80 0.593 1,582
1980-81 0.377 1,313
1981-82 0.352 1,323
1982-83 0.392 1,599
1983-84 0.411 1,510
1984-85 0.582 1,920
1985-86 0.492 1,758
1986-87 0.618 1,526
1987-88 0.576 1,676
1988-89 0.614 1.848
1989-90 0.693 2.820

Source: Federal Bureau of Statistics

It is estimated that one ton of LPG, on an average, replaces 1.96 tons of kerosene oil. Thus, the present production of LPG in Pakistan, which is estimated around 130,776 tons, is contributing to foreign exchange savings of more than Rs. 500 million per annum which, otherwise, would have been spent on the import of kerosene oil. LPG production remained almost constant in 1988-89 and 1989-90. the production is estimated to increase from 358.3 tonnes/day to 410.37 tonnes/day in 1990-91 mainly due to production from Adhi and Dakhni plants. The annual production target is given in Table-III.

Table : Table-III

LPG Production
Agency/ 1988-89 1989-90 1990-91
Source (Actual) (Actual) (Target)
PRL 13,971 15,833 13,300
NRL 14,326 14,283 15,900
ARL 11,849 10,699 9,125
POL 34,929 32,962 31,000
OXY 55,567 56,999 49,435
Dakhni - - 9,125
Adhi - - 21,900
Total: 130,642 130,776 149,785
Per Day 357.92 358.3 410.37

Source: Detailed Annual Plan 1990-91

LPG production is estimated to reach 518 tonnes per day in 1992-93 compared to 323 tonnes per day in 1987-88. The additional LPG will be produced by Dhodak, Dakhni and Adhi LPG plants. The LPG production expected from various plants during 7th plan period is given in Table-IV.

Table : Table-IV

LPG Supply and consumption Forecasts for Seventh Plan
 (Tonnes per day)
Source 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93
Dhurnal 130 130 130 130 130 130
Meyal 90 90 90 85 85 85
Refineries 103 103 103 103 103 103
Adhi - - 60 60 60 60
Dakhni - - 25 30 30 30
Dhodak - - - - 55 110


Production 323 323 408 408 463 518


Consumption 0.12 0.12 0.15 0.15 0.17 0.19 (Mil Tonnes per year)

Source: Seventh Five Year Plan.

The allocation made to all LPG marketing companies except the Southern Gas Co. Limited (SGCL) is subject to the condition that 25 percent of their allocation will be marketed in the areas of NWFP, FATA, AJK and the Northern Areas. SGCL have been obligated to supply 25 per cent of their allocation in the interior of Sindh and Balochistan. The increase in LPG production will be utilized to replace kerosene oil in areas where natural gas is not available. At present there are 728,526 LPG consumers in the country. It is expected that 200,000 new consumers will be served by LPG by 1992-93.


The demand for LPG has been rising fast during the last few years whereas the supply has been far below the demand. In a number of towns and areas where the supply of natural gas is not economically viable/technically feasible, or the natural gas is in short supply, the LPG is being supplied through pipeline in addition to cylinders. The demand of LPG can be seen in the perspective energy requirements in the country. The total amount of LPG produced is being marketed throughout the country to reach the consumers who use it and who need it.

LPG's demand for automobiles is also rising rapidly. Therefore, the Government, has been forced to ban the use of LPG in the vehicles due to its current short supply at the moment and excess production of motor spirit in the three refineries. LPG mixed with air is being marketed in Quetta and Larkana through pipeline. Air is mixed in LPG to bring down the calorific value of LPG to the calorific value of Sui-gas.

LPG's production and marketing has started in the country since 1966. It has been established as a premium heating value and an efficient burning portable. It has been the policy of the Government to encourage the use of LPG in those sectors were maximum benefit of substitution could be derived. The use of LPG in domestic and commercial sectors results into the replacement of furnace oil and conservation of forests. There has been a great demand for LPG both in domestic and commercial sectors. There has been a great demand for LPG both in domestic and commercial sectors. There is a great potential for the promotion of LPG for domestic and other consumption purposes as a fuel and feed stock. Presently, about 90,000 tons of firewood is used for curing tobacco leaves in NWFP every year. In fact, LPG is used for curing tobacco leaves in NWFP every year. In fact, LPG used for curing purposes produces at least 30 per cent better results than the fire-wood. LPG could also be used for banana curing and for other food-drying purposes.

LPG has also a characteristic of replacing motor spirit in the vehicles. Experiment of converting high-speed diesel engines to LPG engines has also been carried out in the country and standard kits are available in the market to convert petrol engines to LPG. In Japan, almost all taxies are run on LPG rather than motor spirits, LPG can also to a large extent, substitute kerosene in lighting and used as good feed stock for the preparation of petro-chemicals such as Polyethylene, PVC, Polypropylene and Butadiene.

Burshane (Pakistan) Limited

Considering the prospects of a steady increase in the demand for LPG, the marketing and distributing companies have also firmed up their plans to increase their offtake from the LPG producing centres. Burshane (Pakistan) Limited, which is perhaps the oldest company engaged in filling and marketing of LPG in cylinders since 1965, launched its expansion project for increasing their offtake of LPG from Pakistan Oilfields Limited's additional plant at Dhulian, near Rawalpindi in 1982. At present, Burshane has three filling plants, one of which is near Pakistan Refinery, Karachi the other at National Refinery, Karachi, and the third at Dhulian.

The company maintains, a marketing network for the sale of LPG in cylinders for domestic and commercial uses throughout Pakistan. It is a private limited company with up to 81.58 per cent share holdings by foreign companies namely, Shell Petroleum Company Limited, London and Burmah Oil Company Limited, UK. The Paid-up capital stood at Rs. 20.418 million.

The company has a total of 117 distributors and serve approximately 99,000 consumers in the North and 52,000 in the South. The installed filling capacity of LPG bottling plants is 90 metric tons per day on single shift basis against which the actual average daily supply received being 70 metric tons. Under-utilization of capacity was a result of non-availability of adequate supply of gas.

Initially the selling capacity of the company was about 12,000 tonnes per annum. the share has now increased to 25,773 tonnes in 1989. Supplies from Pakistan Oilfields LPG Extraction Plant at Meyal increased to 38,000 tonnes during 1988-89. Aggregate supply from other three suppliers (Pakistan Refinery, National Refinery and Attock Refinery) was approximately 40,815 tonnes. As the LPG Industry in Pakistan is controlled by the Federal Government under the Liquefied Petroleum Gas (Production and Distribution) Rules 1971, available LPG production is allocated by the Federal Government. In April the Federal Government imposed control for the first time on maximum LPG selling prices, although the product transfer price charged by the suppliers has always been controlled by the Government.

During the year ending June 30, 1984 the company surpassed mark of 100,000 customers. The company now serves 151,000 LPG customers throughout the country including several remote areas. The retail marketing which had been previously limited to only 22 cities was expanded and company's product was made available to an additional 25 towns and cities in the provinces of Punjab and NWFP. In line with the Government's policies, LPG availability was also extended to several remote areas. In order to cope with additional volume a new sales office was set up at Rawalpindi to coordinate and supervise the expanded marketing activities in the Northern Area.

Pakistan Oilfields Limited

Production of LPG has increased from 10,650 tonnes in 1981 to 38,848 tonnes in 1989. Sales of LPG also increased from Rs. 5.0 million in 1981 to Rs. 47.0 million in 1989. LPG Plant at Meyal operated smoothly. The standby turbine of the LPG plant underwent extraordinary repairs during the year at a cost of Rs. 13.3 million. The LPG price allowed by the Government remained completely out of line. Currently the company was receiving Rs. 1200 per ton or $54 whereas some other producers were allowed $70 per ton and world prices were over $125 per ton. Pak Gas

PSO entered Karachi LPG market in 1981. With the completion and commission of LPG plants in 1983 at Karachi, Meyal, Sihala, Akora, Khattak and Skeikhupura PSO is now fully equipped and capable of handling LPG marketing operations on large scale in Karachi, Pubjab, NWFP, Azad Kashmir and Northern Areas. Sales of LPG increased from 900 tonnes in 1982, to 3500 tonnes in 1983 and to 18,800 tonnes in 1988. However, Pak Gas sales during the year under review were restricted due to meagre allocations by the Government and frequent shutdowns of the Pakistan Oilfield's Gas Extraction Plant at Meyal. PSO has been allocated 1/5 of the LPG production from this plant. In order to fully utilise its capability for marketing Pak Gas, PSO secured allocation of about 25 tonnes per day from Occidental's LPG plant at Dhurnol Oil Field.
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Title Annotation:LPG production in Pakistan; Oil and Gas
Publication:Economic Review
Date:Jun 1, 1991
Previous Article:Lube oil industry.
Next Article:Methyl tertiary - butyl ether (MTBE).

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