Autogas Gains Momentum in Pakistan

By Belal Jabbar, CEO, Noor LPG

After a hiatus of almost a year, the Autogas market seems to be gaining momentum in Pakistan. The first Autogas station was set up last year in the city of Sialkot by Noor LPG and since then, three more stations have become operational this year.

These stations are situated in the following places: One, in the northern city of Muzaffarabad set up by Progas, the second in the cultural heart of Pakistan, Lahore by Pakistan State Oil (PSO) and the third in the country’s largest city, Karachi by Hascol. Both PSO and Hascol are Oil Marketing Companies.

Although the Autogas market accounts for nearly 40% of the LPG consumed in Pakistan, its use has been primarily based on decanting of LPG from one cylinder to another.

Unlike most countries where LPG has emerged as a popular alternative either as a result of favorable taxation policies or outright subsidies, the demand in Pakistan has been growing due to shrinkage of the CNG sector.

Pakistan currently boasts the highest number of CNG vehicles worldwide, but all that is changing with the depletion of gas reserves and the narrowing of the price gap with petrol. The CNG sector has also been struggling due to its ill planned development which saw the creation of as many as ten stations next to one another. Competition between the stations led to severe malpractices such as under filling and escalated pressure on supply of gas from the utility companies.

Constraints in the CNG sector have turned the spotlight on Autogas. Pakistan State Oil is the country’s largest oil marketing company operating more than 3800 retail outlets. Its entry into the Autogas business is of significant importance to the industry and has attracted the interest of other oil marketing companies such as Hascol. PSO has identified several sites on which it can establish Autogas facilities.

The success of the Autogas market will largely depend on the policies of the Government. A recent proposal to impose a petroleum levy on LPG has severely dampened the interest of many investors as it would make the difference between Autogas and Petrol negligible.

Meanwhile a new LPG Policy in the works has allowed CNG stations to establish Autogas facilities. Pakistan has more than 3000 CNG stations and approximately ten percent of those meet the minimum area requirements for setting up Autogas facilities. Such a measure would prove to be a bonanza for the LPG industry; however the Government would have to protect the additional investment by ensuring a minimum distance is maintained between the stations.

At present 24 licenses for construction of Autogas stations in various locations across the country have been issued by the Oil & Gas Regulatory. If only the Government refrains from imposing additional taxes on LPG; Autogas may well become Pakistan’s preferred fuel of choice.

Belal can be contacted at belal.jabbar@noorlpg.com