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Prospects of Liquefied Gases in Bangladesh Economy as a move towards Fuel

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DOI: 10.31124/advance.7227653.v1

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 2nd Hellenic Association for Energy Economics (HAEE) Energy Conference
May 18-20, 2017, Athens, Greece

Prospects of Liquefied Gas in Bangladesh Economy

as a move towards Fuel Diversification
Muntasir Murshed1*, Sakib Bin Amin2
1
MS in Economics, School of Business and Economics, North South University, Bangladesh
2
Assistant Professor, School of Business and Economics, North South University, Bangladesh
*Corresponding Author’s Email address: [email protected]

Abstract: Traditional dependence on fossil fuel has led to the Economy of Bangladesh being
confined to energy shortages, marginalizing the development prospects of this energy South Asian
economy. The country has also relied heavily on its indigenous supply of natural gas particularly for
electricity generation purposes. However, following in appropriate subsidized pricing of natural gas
in the country has led to over exploitation of this resource and together with technical inefficiencies
holding back new natural gas field discovery has pushed the nation towards running out of this
energy resource by 2031. Thus, the aim of this paper is to discuss the prospects of liquefied gaseous
use in Bangladesh, especially in the form of LNG and LPG, as a strategy to embrace fuel
diversification within the Bangladesh economy in order to relieve the existing pressure on natural
gas demand.

Keywords: renewable energy, liquefied natural gas, liquefied petroleum gas, Bangladesh

1. Introduction

Energy insufficiency is a predominant feature of all Energy diversification is crucial when it comes to
developing nations across the globe. It is universally small reserves of traditional energy resource reserves.
believed that the incompetence of these nations to Moreover, energy diversification also complements
meet their own energy demand is one of the main the global drives to go green via switching from use
factors limiting their development processes. of non-renewable energy resources to greater use of
Bangladesh over the years had faced the same fate as renewables. In the context of Bangladesh,
all other developing nations being unable to match diversification of energy resources has become
local demand for energy. Thus, the nation's energy mandatory as the nation's natural gas reserve is put to
crisis over a prolonged period of time has generated the sword and is expected to last till 2031 unless
negative externalities on the economy as a whole, drastic steps are taken to reduce the dependence on
depriving the nation of potential development. A key natural gas employment. Bangladesh is heavily
factor attributing to the nation’s deficit between reliant on natural gas especially when it comes to
energy demanded and energy supplied could be due electricity generation. In addition, imported fuels also
to the dependence on a limited number or energy supplement electricity generation in the country.
resources, primarily natural gas. Thus, heavy reliance However, dependence on these energy resources has
on these few energy resources has often led to asserted in adversities within the economy in the form
shortages in their supplies and had led their reserves of shortages in natural gas supply and surge in fiscal
on the verge of being exhausted. It has been burden arising from the oil import bills. Thus, energy
empirically acknowledged that it is impossible for a resource diversification has become the utmost
nation to solely depend on a limited number of important agenda for the nation.
energy resources and generate an adequate amount of
energy that is needed by the population. Hence, One way of guaranteeing energy security could be
underscoring the necessity of ensuring energy for all, being self-sufficient in the production of energy
a nation should ideally diversify its energy resources resources. However, being self-sufficient in it is a
and tap all options available at disposal. humongous challenge which encourages the
prospects of Cross-border Energy Trading (CBET) as

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 Murshed and Amin

a potential option to resolve the energy crisis in possible barriers that can hold back the LNG and
Bangladesh. Engagement in CBET is pretty much in LPG market development processes. Overall, this
line with the energy diversification mechanisms. A paper aims to critically analyze the prospects and
possible mode of undertaking energy diversification constraints of LPG and LNG in Bangladesh economy.
policies via CBET could be through the introduction This sort of study is not only important for
of liquefied gaseous energy resources in Bangladesh but it also provides some useful thoughts
Bangladesh’s energy sector, mainly in the form of for other developing countries having similar
imported Liquefied Natural Gas (LNG) and Liquefied economic structure. This study is planned on a
Petroleum Gas (LPG). Both these energy resources twofold methodological approach. Firstly, a general
can be exemplary in mitigating Bangladesh's energy overview with regard to the prospects and constraints
poverty and simultaneously attribute towards the of LPG and LNG uses is provided incorporating
development of the economy. Adoption of LNG and collection and processing of relevant secondary data
LPG in the national energy framework of Bangladesh available from the literature on the economies of
is expected to be beneficial to the economy in three using these two energy sources. Both quantitative and
particular ways. Firstly, it would help the nation to qualitative analyses have been carried out. Secondly,
get over its mono-fuel dependency whereby it would few case studies have been analyzed to understand
no longer have to be reliant on the use of indigenous the importance of LPG and LNG market development
natural gas. As a result, natural gas usage in the in the context of developing economies. To the best
economy can be lessened which would ensure its of our knowledge, no other study previously has
reserve to last beyond 2031. Therefore, it can be said specifically addressed the prospects of liquefied gases
that LNG and LPG usage can contribute to secure in Bangladesh, suggesting their inclusion into the
natural gas security in Bangladesh, keeping its supply national energy policy and taking appropriate steps in
for future generation uses. Secondly, LNG and LPG the development of the associated markets.
can relieve the nation from the fiscal burdens arising
from crude oil imports. These two liquefied gaseous The remainder of the paper is as follows. Section 2
energy resources are relatively cheaper sources of provides a general outline of Bangladesh’s energy
energy compared to imported fossil fuels and as a sector followed by the section 3 that highlights the
result, importing LNG and LPG instead of crude oils LNG and LPG scenario in the country. Moving on,
can effectively cut down the nation’s import bills. section 4 sheds light on the upcoming and future
Finally, LNG and LPG, being relatively environment- prospects of LNG and LPG market development in
friendly energy resources, can befittingly reduce the Bangladesh while the associated barriers upholding
emission of harmful greenhouse gases keeping the LNG and LPG market development are provided in
environment clean. Lowering carbon emissions is section 5. In section 6, the worldwide usage of LNG
extremely important for Bangladesh following the and LPG are put forward for Bangladesh to draw a
nation’s vulnerability to natural calamities arising new leaf from the international best practices in LNG
from environmental degradation. However, the and LPG usage. Finally, the latter part of the paper
ultimate goal of incorporating LNG and LPG in the contains the conclusions followed by the possible
national energy framework of Bangladesh is to policy recommendations that can be considered by
partially diversify its energy resource usage which the government of Bangladesh.
would ensure energy sufficiency and foster economic
development of the nation. 2. General overview of Energy Sector in
Bangladesh
The purpose of this study is to examine how
alternative fuels in the form of LNG and LPG can Access to energy has become essential to the
supplement the existing energy resources in functioning of modern economies and the
Bangladesh, ensuring sufficient and sustainable government of Bangladesh has been putting its best
energy supply. It furthermore aims to contribute to efforts to develop the indigenous energy resources,
the development of LNG and LPG markets in which ultimately plays a vital role in the socio-
Bangladesh by highlighting the economies of using economic development of the country. Energy is
these energy resources and also shedding light on the considered to be one of the major factor fostering

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economic development drives in Bangladesh. was lower than the neighboring South Asian nations
However, the overall energy use in the economy I like India, Nepal, Pakistan and Sri Lanka.
very low which is evident from a report by the US Furthermore, it is even lower than the per capita
Energy Information Administration (USEIA, 2015), energy consumption in the Sub-Saharan African
in which the total energy use in Bangladesh in 2012 countries, let alone that in the entire world. Such low
was merely 0.20% of world energy consumption. energy consumption per capita figure is even more
Moreover, the per capita energy use in the country is alarming for Bangladesh because the country is
also quite low when compared to other peer aiming to achieve the tag of a middle-income country
developing countries. According to the figures shown by 2021 whereby it is far behind the average per
in Table 1, the per capita energy use in Bangladesh capita energy consumption figure of 2008.5 kg of oil
was around 212.52 kg of oil equivalent in 2013 which equivalent on average in middle-income countries.
Table 1: Per capita energy use in different countries
Country/Countries Energy Use Per Capita (kg of oil equivalent) as in 2013
Bangladesh 215.52
India 606.05
Nepal 369.68
Pakistan 474.86
Sri Lanka 487.52
South Asia 672.64
Sub-Saharan Africa 488.06
Lower Middle Income 744.6
Middle Income 2008.5
World 3104.38
Source: World Development Indicators (WDI), 2016.
rate of energy in the country was about 5% between
However, the annual growth rate of energy use in 2000 and 2010, which was greater by 1 percentage
Bangladesh is relatively higher than that of the other point than the energy growth rate in India. Table 2
South Asian countries. According to a statistical presents the growth rates of energy use in selected
report by the World Bank (WDI, 2016) the growth South Asian countries between 1980 and 2010.
Table 2: Energy Growth Rate of Bangladesh and Neighbouring Countries
Country Energy Growth Rate Energy Growth Rate
(1980-2010) (2000-2010)
Bangladesh 4.3% 4.8%
Sri Lanka 2.5% 1.6%
Pakistan 4.0% 2.6%
Myanmar 1.3% 0.8%
Nepal 2.6% 2.1%
India 4.0% 3.8%
Source: World Development Indicator (WDI), 2016 and Tamim et al., 2013
petroleum, and natural gas products represent around
Domestic natural gas and solid biomass account for
85% of total energy consumption in Bangladesh.
the majority of Bangladesh's total primary energy
consumption with the remainder being covered by
Although the country has shown some progress to
imported oil, coal, and hydropower and solar energy.
achieve macroeconomic stability and had maintained
In 2015, Bangladesh’s primary energy consumption an annual growth rate of 6.34% on average from 2011
was estimated to be generated 62% from natural gas, onwards, it still continues to face significant
12% from traditional biomass, 21% from imported
challenges in the forms of underdeveloped
oil, 2.5% from coal, and 2.5% from renewables.
infrastructure and energy deficits. In Bangladesh,
(BPDB, 2015). Fossil fuel comprising of coal, oil,
electricity is the widely used form of energy input
which is tapped to facilitate most of its economic

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 Murshed and Amin

activities. The government has envisioned ensuring 3. LNG and LPG scenario in Bangladesh
100% electrification rate by 2021, but currently, only
74% of the population has been blessed with access The use of LNG in Bangladesh is yet to make its way
to affordable and reliable electricity supply. It is a forward in spite of measures taken to introduce LNG
matter of serious concern since rural electrification in the national energy policy of the country.
rate is still around 40% and has to be increased Following the acute shortage in supply of indigenous
dramatically in order to attain the government's stated natural gas, the government in 2010 made up its mind
goal. The demand for electricity in Bangladesh is to develop the infrastructure necessary to cater LNG
mainly stimulated by economic, technological and import. As a part of the development plan, the
social advancements. The electricity generation government decided to build a Floating Storage
capacity in the country has been doubled recently Regasification Unit (FSRU) with the anticipation of
which can be endorsed to operations of the privately importing LNG by 2013. However, this project
owned Quick Rental (QR) power plants over the last finally could not proceed following numerous
few years. Although the Bangladesh government has constraints faced by the government. As a result,
adopted a comprehensive electricity development despite having immense potential in executing fuel
strategy for exploring supply-side options along with diversification in the country, LNG usage did not take
demand management, still the country is unable to off as per plans. A second attempt to introduce LNG
ensure the necessary electricity supply to meet its in the national energy market came about in 2011
local demand. when the government signed a memorandum of
understanding with Qatar Petroleum and expressed
One of the many reasons behind the gap between the desire to import 4 million tonnes of LNG per
electricity demand and its supply in the economy is year. However, the deal is yet to be finalized and as a
the fact that an addition in the installed capacity was result LNG market development in Bangladesh once
not reflected in terms of proportional increase in again was halted. Nevertheless, recently on March
electricity generation as some of the existing plants 2016, the government signed an agreement with the
remained out of operation for maintenance, Excelerate Energy Company to build the FSRU
rehabilitation, and overhauling, while the capacities terminal at the Moheshkhali Island. As per the
of some plants may also be derated due to aging. agreement, the FSRU will have a storage capacity of
Moreover, almost 62.5 % of total electricity around 1, 38,000 cubic meters with an overall
production in Bangladesh is fueled by natural gas. capacity of handling 5 million metric tonnes per
Such heavy reliance on natural gas is also an ominous annum. Moreover, the FSRU will have a
sign for the nation since its natural gas reserve, at the regasification capacity of 500 million standard cubic
current rate of exploration and consumption, is feet of gas per day. Upon successful construction of
expected to be exhausted by 2031. Thus, shortage of the FSRU, it is expected that Bangladesh can start
natural gas is the major constraining factor for low importing LNG by early 2018. Apart from this
installed capacity utilization in Bangladesh’s floating gasification venture, the government has also
electricity sector. Currently, the electricity sector of sanctioned funds to set up two onshore LNG
the country is dependent on natural gas supply and terminals at Payra in Patuakhali and Matarbari in
imported petroleum products like High Speed (HS) Moheshkhali. Therefore, it can be anticipated that
furnace oils. However, the use of these imported fuels LNG will make its way forward in the Bangladesh
in case of disruptions in natural gas supply exerts energy sectors within a couple of years from now.
pressure on the nation’s fiscal burden in the form of
high import bills. Hence, these call for immediate fuel On the other hand, LPG has already made its way in
diversification with the underlying notion that Bangladesh on a nominal scale and is expected to
effective energy policies should ideally ensure take off in an enormous manner soon. Unlike LNG,
tapping all possible sources of energy, sufficient LPG is produced locally as locally produced LPG
supply of energy for various uses and equitable accounts for 13% of the total supply while the rest
access of energy to all segments of the society. 87% is generated from LPG imports. However,
currently, there is a huge mismatch between the
demand for LPG and its supply within the country. At

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present, the LPG demand-supply deficit lurks around products makes LNG a plausible option to initiate
3, 50,000 tonnes. A possible reason behind this could partial fuel mix within the energy sector of the
be due to the exponential growth in LPG demand country. However, the option of LNG overall is
over the years which were not correspondingly ranked medium in terms of affordability since the
matched by the relatively lower growth rate of LPG price of LNG is a touch on the higher side as
consumption. The domestic household sector holds compared to the prevailing local gas price.
the lion’s share of total LPG employment within
Bangladesh. It is noteworthy of mentioning that the Another promising feature of LNG is that it expands
LPG industry is dominated by private sector almost 600 times to reach its gaseous state which
involvement. LPG is imported only by private implies that LNG is a highly portable energy source.
companies that are also in charge of storing, bottling, Upon regasification, one unit of LNG can produce
distributing and marketing of LPG in Bangladesh. 600 units of natural gas which means that a large
Some of the leading private companies include amount of natural gas can be easily stored and
Bashundhara LP Gas Limited, Jamuna Spacetech transported at low pressure. Thus, it can be a
Joint Venture Limited, Omera Petroleum Limited, breakthrough if employed in the transport sector in
etc. Conversely, the public companies are entitled to Bangladesh. At present, the transport sector is heavily
produce and supply LPG locally. The state-owned dependent on locally produced Compressed Natural
LPG supplying entities include Bangladesh Gas (CNG) and imported petroleum products.
Petroleum Corporation (BPC) and Rupanatarita However, the acute gas shortages and fiscal burdens
Prakritik Gas Company Limited (RPGCL). arising from crude oil imports have had a negative
Moreover, more private companies are in the pipeline impact on the macroeconomic indicators of the
to enter the market and import LPG in Bangladesh nation. Thus, the introduction of LNG into the
due to LPG being an energy resource of choice. transport sector can not only cut down on the natural
gas demand but would also relieve some of the
4. Prospects of LNG And LPG usage in associated burdens arising from huge import bills.
Bangladesh
LNG is considered to be an environmentally friendly
4.1. LNG proposition in Bangladesh Energy Sector source of energy compared to the other fossil fuels
that are associated with harmful emissions leading to
Following the enormous reserve of natural gas, environmental adversities all around the globe. It has
Bangladesh once had the possibility of exporting its been empirically acknowledged that LNG usage can
indigenous natural gas. However, due to effectively mitigate nitrogen dioxide emissions into
inappropriate pricing strategies such prospects soon the atmosphere. Thus, the employment of LNG in the
disappeared and currently, the nation faces an acute transportation sector can reduce the prevailing
shortage of natural gas supply, hampering its volume of air pollution in Bangladesh. Air pollution
economic development processes. In order to counter in the country has become a serious concern for the
the natural gas crisis, the Bangladesh government can government which is determined to leave no stones
look up to importing LNG as an alternative source of unturned in controlling harmful emissions resulting
energy. The prospects of LNG in Bangladesh are from the exhausts of vehicles. Although the per capita
promising which make it an energy resource of carbon emission in Bangladesh is very low compared
choice. The potential use of LNG in the country could to the global average carbon emission, the
be in the transport sector which would generate introduction of LNG into the transportation sector can
multidimensional positive externalities in the significantly reduce the emissions further and also
economy. In addition, switching to LNG based ensure improved health standard of the people.
electricity generation in the future can also curb
Bangladesh’s electricity deficits to a great extent. Out LNG ranks high in terms of reliability since
of the several benefits associated with LNG usage, interruptions in the sustainable supply of LNG are
the relatively low cost of per unit LNG compared to unlikely to be encountered. This is because the
that of conventional imported liquid petroleum current global market for LNG is oversupplied

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providing extra leverage for the buyers. Furthermore, Following the natural gas shortage in Bangladesh, the
the global LNG exporting capacity is expected to be government in 2009 stopped supplying new gas
doubled in the next few years as well. As a result, this connections in residential areas with the vision of
global glut of LNG exporting capacity is gradually enhancing LPG uses. In addition, the government
creating a buyers’ market worldwide whereby LNG is also decided to all duty and taxes on LPG imports in
becoming the most reliable source of energy supply order to promote greater use of LPG as an alternative
for importers. Reliability in energy supply is key to to natural gas usage. It is to be mentioned that the
achieving economic development, especially for government was particularly interested in
developing countries like Bangladesh that are encouraging widespread use of LPG within the
extremely vulnerable to energy price shocks and economy because LPG market development, unlike
disrupted supplies. The adequate global LNG reserve that of LNG, can be fostered using the existing
provides insurance to LNG importers against short- energy infrastructure of the nation.
term and medium-term supply disruptions and
provides incentives for long-term trade agreements. Another possible use of LPG would be in the
In addition, the geographic location of Bangladesh transport sector in Bangladesh whereby it would
also makes it favorable in diversifying its LNG supplement LNG in replacing the traditional CNG
importing partners. For instance, Bangladesh's and liquid petroleum fuels. By the end of 2025, the
proximity with India, Australia and Singapore government has envisioned to convert 2.3 million
enables it to be not solely dependent on Qatar for natural gas domestic end users and 0.18 million
importing LNG. existing CNG driven vehicles to using LPG. This
could be a great initiative in transforming the
4.2. LPG proposition in Bangladesh Energy Sector transport sector of Bangladesh as LPG is considered
to be good for the engines which reduce the
LPG demand in Bangladesh is expected to rise in a maintenance costs of the vehicles. In addition, using
drastic manner in a couple of years from now. LPG to run vehicles does not require frequent
Employment of LPG in Bangladesh is usually made refilling like CNG, relieving the people from the
for cooking purposes both in the rural and urban menacing traffic jams as well. In order to provide a
areas. Thus, the effects of using LPG vary across cushion and promote greater use of LPG in the
geographic locations across the country. For instance, transport sector, the government has plans to raise
in the rural areas traditional biomass-based cooking CNG prices by two-thirds of the current price.
fuels are used predominantly. However, combustion
of these fuels emit harmful gases that not only affect A concerning fact adhering to the LPG market in
the health of women who are engaged in cooking and Bangladesh is the fact that almost 80% of the total
heating activities but also releases greenhouse gases LPG market is import dependent while merely 20% is
into the atmosphere. Hence, use of biomass to fire held by state-owned companies producing LPG
stoves in the rural areas exerts negative externalities locally. Thus, the private sector has a role to play in
at both household and social scales, which in turn generating LPG locally which would not only keep
may hamper the socioeconomic development in LPG prices relatively low but would also reduce the
Bangladesh. This is where LPG emerges as a solution dependence on LPG imports. LPG market
to these rural problems particularly due to the fact development using indigenous energy inputs can also
that LPG accounts for low combustion emissions and generate employment opportunities within the
does not produce black smoke either. Moreover, country which eventually could be translated into the
switching to LPG from traditional biomass-based social welfare of its people. More importantly, LPG
fuels also raises the efficiency level which to some market development locally can be highly effective in
extent is important for energy conservation. The managing the rural demand for energy and can also
economies associated with LPG usage are just not attribute to poverty alleviation in those areas. The
confined to the rural areas but it also affects the urban development of this market strongly hinges upon the
areas where natural gas is the source of cooking fuel. improvement in the rural LPG distribution channels
Thus, the introduction of LPG in large scale would which would enhance the availability of LPG in the
relieve the pressures of the natural gas demand. rural and semi-urban areas of the country. The

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demand for LPG is expected to experience a surge available at USD 4-5 per million British thermal units
following the government’s policies aimed at for the end users. Nevertheless, even at this
reducing natural gas shortage and its conservation for subsidized rate, the cost of LNG is way more than the
future uses. Thus, the LPG sector is viewed as a cost of natural gas it is expected to replace. As a
profitable avenue for private investors to invest funds result, the use of relatively expensive LNG for
for development of the overall energy sector of electricity generation, in particular, would definitely
Bangladesh. have a cascading effect on the cost of electricity
generation and would require revision of the bulk
5. Key Barriers of LNG and LPG Markets in power tariffs. However, such increase in energy
Bangladesh tariffs is always against public sentiment as it
automatically reduces the non-energy expenditure of
Although LNG and LPG have immense prospects in households and industries. In order to balance the
dictating the energy diversification processes in difference in prices of imported LNG and
Bangladesh, the development of the associated conventional locally produce natural gas, the
markets have traditionally been held back due to a government very recently has expressed its decision
number of constraints. For instance, poor energy to increase per unit natural gas and CNG prices
infrastructure of Bangladesh has always acted as the within the country, which sparked public oppositions
major impediment to LNG imports in the country. A and protests pressurizing the government to
major drawback of LNG usage is the fact that it reconsider the price hike decision. Hence, the cost
requires a health infrastructure for it to be accessible factor does act as a crucial barrier against adoption of
to the end users. Building land-based LNG terminals LNG in the national energy framework of the
require huge quantity of open land at concessional country.
rates for the terminal developers. Bangladesh, being a
densely populated developing nation, has always On the other hand, barriers upholding LPG market
been subject to a shortage of empty lands that can be development are relatively less severe compared to
used for LNG importing, storing and regasification those restricting development of the LNG market in
purposes. An alternate solution to the demand for Bangladesh. One of the main issues surrounding LPG
open land could be building floating LNG terminals. usage is that it is a comparatively costlier energy
However, such offshore projects are subject to hefty option. At present, the price of non-subsidized LPG
investments and require technical expertise which hovers around 1400 taka per 12.5kg with an
unfortunately has been constraining LNG market additional 1500 taka for the LPG cylinder. When
development in Bangladesh. Moreover, inadequate compared to the price of its alternatives, local natural
deep sea ports for handling huge amount of LNG gas at USD 2-3 per million British thermal units and
carriers is another major constraint that has high speed diesel at USD 24 per million British
contributed to the underdeveloped energy thermal units, the prospect of using LPG often gives
infrastructure hampering LNG market development second thoughts to the consumers which has a
in Bangladesh. negative impact on its adoption in a wide scale all
throughout the economy. However, keeping the
Besides poor energy infrastructure, the relative costs associated benefits of LPG usage into consideration it
associated with LNG production and usage also been is a matter of debate whether to go for this high price-
a major issue when it comes to large-scale LNG trade off or not, for the greater interest of energy
employment, especially for electricity generation resource diversification in Bangladesh.
purposes. The import cost of LNG for Bangladesh
will be around USD 8 per million British thermal Moreover, the poor energy infrastructure of
units and taking the regasification charges into Bangladesh is not a huge issue for the development of
consideration the total cost would sum up to around the LPG market since a strong infrastructure is not a
USD 11 per million British thermal units. However, pre-requisite for LPG adoption in the energy sector.
the government is planning to use a pooling However, it does act as a bottleneck to meet the ever-
mechanism and subsidize LNG price making it

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growing demand for LPG in the country. Due to all more than a quarter of total energy usage worldwide
the existing LPG import terminals situating near the and is also responsible for a little less than a quarter
port areas, equitable distribution of LPG across the of total greenhouse gas emissions globally. Thus, use
entire country seems to be hampered. Thus, LPG of environmentally friendly liquefied gases in the
coverage is insufficient and uneven in Bangladesh form of LNG and LPG in the global transport sector
which tends to hamper its rural development in has been a revolution in reducing greenhouse gas
particular. For example, the Rangpur division in the emissions all over the world. In between 2010 and
country has relatively lower access to LPG compared 2015, there were 2% rises in the number of LNG and
to the other divisions mainly because of the absence LPG powered vehicles around the world which
of waterways leaving the expensive road clearly implies the growing trends in LNG and LPG
transportation as an alternative. Furthermore, the adoption in both the developing and developed
drying up of water bodies in Bangladesh has also nations.
aggravated the constraints faced in distributing LPG
to the rural areas of the country. As a consequence, LPG, in particular, has emerged as a promising
LPG has been regarded as a less reliable source of transport fuel in energy markets across China, India
energy due to the possibility of disruptions in its and Russia. LPG is a widely used source of cooking
supply following transportation constraints. fuel in rural areas in India and recent development in
the LPG market in the country has effectively
Lack of operational efficiency is another concerning reduced India’s rural energy deficit. The magnitude
factor associated with LPG market in Bangladesh. of market penetration through LPG in the developed
This has been the scenario particularly due to lack of nations recently depicted a diminishing trend when
competition within the sector. At present only six compared to that in the developing countries which
private companies operate within the country which clearly implies that LPG is a preferable source of
implies the insufficient amount of competition. In energy in developing countries in particular.
addition, the private companies are confined to only Moreover, a clear shift in Asian LPG dynamics can
importing LPG with no involvement in producing be seen from the trends in LPG imports in some of
LPG locally. The local supply of indigenous LPG is the major Asian countries. Traditionally, Japan
undertaken by a couple of state-owned companies in accounted for the lion’s share in the total volume of
Bangladesh. Therefore, this lack of private LPG imports in the Asian region. From 2012
intervention through investment in the domestic LPG onwards, demand for LPG in Japan exhibited rising
market has had a negative impact on the sector's trends which tend to have slowed down in recent
development and has also attributed to dependence on times. Moreover, statistical insights assert that China
the high priced imported LPG. In the absence of any is most likely to overtake Japan in terms of LPG
public assistance and funding, the high costs of LPG imports (Poten and Partners, 2016). Chinese LPG
generation and distribution have deterred private imports reached a staggering 11.5 million tonnes by
institutions from entering the local LPG market as the end of 2015 and are expected to increase further
well. Thus, the absence of public-private by the end of the current fiscal year. Such a surge in
collaborations in the country has unfortunately LPG demand in China reflects effective
deferred the development of the LPG market to a implementation of the nation’s policies that were
major extent. aimed at reducing per capita carbon emissions in the
country. LPG market development has also taken
6. International LNG and LPG Markets place in most of the West African nations (World
Bank, 2001). These countries have made the best
LNG and LPG have penetrated the energy sectors in possible use of their indigenous LPG resource base
the developed world as well as some of the and have increased LPG usage all throughout the
developing nations across the globe. Alternative fuels region. The governments' financial assistance in
including LNG, LPG, CNG, etc. have made their subsidizing the price of LPG enhanced the
ways into the global transport sector. According to a accessibility of this clean energy resource in those
report published by the European Commission (EC, countries which not only met their energy demand but
2016), the aggregate transport sector accounts for also helped the nations to maintain a harmony with

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the environment. It is to be mentioned that Nigeria is 7. Conclusions and Policy Recommendations

a net exporter of LPG in Africa. Statistical figures
showed that Nigeria produces over 2 metric ton of Transition to use of LNG and LPG is one of the
LPG per annum of which 85% of the LPG is exported potential ways through which energy security in
to different African countries (Ahmed, 2013). Bangladesh can be achieved. Augmenting the energy
However, the figures are quite alarming in the sense market of Bangladesh through the incorporation of
that in spite of producing a huge quantity of LPG, the LNG in the national energy framework can be
per capita LPG consumption in the country is very exemplary in mitigation of the nation’s prolonged
low compared to that in West African countries like electricity crisis. It can also replace CNG and
Ghana and Senegal. imported petroleum products in the transportation
sector relieving the natural gas pressure in the country
Similarly, LNG market development has also and at the same time keep carbon emissions at a
exhibited a promising trend worldwide. For instance, manageable rate. Simultaneously, through the
China has gone on to become the third largest provision of widespread access to clean cooking and
importer of LNG in the world by the end of 2012 heating solutions mainly via LPG, Bangladesh can
(Chen, 2013), surpassing the UK and Spain. It started resolve its domestic natural gas crisis and at the same
its journey of importing LNG way back in 2006 with time, it can safeguard the health of the consumers via
Australia being the first country to export LNG to the reduction in harmful gaseous emissions. In
China. Australia, Qatar and Indonesia are the three addition, LPG usage in the transport sector can curb
main countries from whom China imports LNG on a the import bills arising from petroleum imports and at
long-term basis. In addition, China also purchases the same time release pressure from the ever-growing
LNG in spot markets from countries belonging to the demand for CNG. Therefore, the strategy of
Atlantic Basin. An encouraging aspect of the Chines enhancing the use of LPG and LNG within the
LNG sector is the fact that ever since the first LNG economy is very much in line with the United
shipment arrived from Australia in China in 2006, the Nation's Sustainable Development Goals (SDGs) by
Chinese government started providing incentives to ensuring clean, affordable and sustainable access to
local investors leading to large-scale investments in energy resources worldwide.
upstream LNG projects. Simultaneously, the
domestic LNG industry was also brought under the Energy is considered to be a strategic input that
Chinese government’s assistance radar whereby mini- attributes to socioeconomic security, food security,
LNG generation plants were set up. LNG as an health security and environmental sustainability.
alternative transportation fuel was the main driver of Research reveals that the socioeconomic costs of
the mini-LNG industry in China. Likewise, China, the burning fossil fuels across the developing world are
prospects of LNG in India are promising enough to enormous and devastating. For instance, it has been
generate positive economies within the nation. estimated that exposure to indoor air pollution from
Following the growing natural gas demand in the combustion of fossil fuels causes around 4 million
country, LNG imports are expected to reach around premature human deaths per year in the developing
140million standard cubic feet per day by the end of countries across the globe. Moreover, the use of
the fiscal year 2020 (Petrotech, 2010). An increase in biomass for energy generation leads to environmental
the number of LNG terminals and regasification units degradation through deforestation causing natural
have immensely contributed to the rise the volume of calamities like floods, especially in tropical countries
LNG imports in India whereby the share of imported like Bangladesh. Hence, keeping the huge prospects
LNG in India’s total domestic gas supply rose from a and economies of usage into consideration, a switch
mere 1% in 2004 to almost 20% by the end of 2010. from the employment of traditional fuels to LNG and
The strong energy infrastructure in this country LPG would ideally improve the standard of living of
ideally complemented LNG import activities and the people of Bangladesh and would also help to
have contributed in terms of minimizing the gap attain the far-reaching social, economic and
between demand and supply of natural gas in India. environmental benefits. However, in order to reap the

7
 Murshed and Amin

complete benefits of using these two relatively eco- In addition to controlling the average price of LPG,
friendly energy sources, as alternative fuels, the the government can also invest in strengthening the
concerned markets need to be developed properly. LPG distributional channels so that all the divisions
Moreover, favorable government regulations, of the country have a more or less even access to
improvement of infrastructure in port areas, LPG resources. This is ideally important for the rural
awareness building and, most importantly, proper areas of developing countries in particular that have
pricing of LPG and LNG are necessary to ensure traditionally been neglected in the form of inadequate
effective energy diversification for resolving energy energy supply which has restricted rural development
crisis in Bangladesh. to a major extent. A balance between rural and urban
usage of LPG can, therefore, contribute towards
However, the barriers upholding potential penetration minimization of the overall energy deficit in
of LNG and LPG in the domestic energy market in Bangladesh. Finally, public awareness regarding the
Bangladesh need to be addressed carefully, leaving safe use of LPG is another area that requires
no stones unturned in resolving the challenges that government intervention. LPG cylinder explosion is a
lay ahead in overcoming the barriers. With respect to common phenomenon in developing countries
LNG market development in Bangladesh, it is whereby inappropriate use of the LPG cylinder may
recommended that the government engages in trigger casualties. Thus, in order to resolve the safety
investment projects aimed at developing the energy problems, the government can engage in holding
infrastructure of the country. Although such projects workshops to disseminate proper knowledge with
are subject to huge financial injections, the potential regard to the use of LPG, especially at the rural
benefits, in the long run, would outweigh the present household level. Provided the government succeeds
costs via contributing to the nation's energy security in overcoming the existing barriers associated with
through partial fuel diversification. The government LNG and LPG employment within the economy,
can also provide incentives to private investors to do energy resource diversification in Bangladesh should
the same in order to build more LNG terminals and not be a far-fetched phenomenon which would be
storage and regasification units both on and offshore. effective in ensuring sustainability in its domestic
Furthermore, the government can gradually reallocate energy supply.
its subsidies from natural gas to imported LNG just to
create a balance between their relative prices. Bibliography
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