Liquefied Petroleum Gas (Production & Distribution) Policy, 2011

Economic Review, February-March 2012 | Go to article overview

Liquefied Petroleum Gas (Production & Distribution) Policy, 2011


Introduction

Liquefied Petroleum Gas (LPG) is a colourless, odourless and environment friendly mixture of hydrocarbons (mainly propane and butane) which is gaseous at normal temperature and pressure, and liquefiable under reduced temperature or moderate pressure. A chemical ethyl mercaptan is added to impart a pungent dour for leak detection. Currently about 1200 tons/day LPG is being produced domestically contributing less than 1% to the total energy supply mix. Because of its characteristics LPG is fast becoming a fuel of choice in the areas, where natural gas distribution network is not available. Currently out of 27 million households in Pakistan, 6.1 million are connected to natural gas network and the rest are relying on LPG and conventional fuels like coal, firewood, kerosene, dung cake etc.

[ILLUSTRATION OMITTED]

In June 2000, the Federal Government decided to deregulate the LPG industry with a view to making it investor friendly, foster healthy competition, improve safety standards and ensure better consumer services. Accordingly, in supersession of LPG (Production & Distribution) Rules 1971, LPG (Production & Distribution) Rules 2001 were formulated under which LPG allocations made by the Ministry of Petroleum & Natural Resources (MPNR) prior to deregulation were given protection to the extent of terms of existing agreements between the marketing companies and producers. These Rules also empower the producers and marketing companies to fix a reasonable producer price for their product and a retail price respectively. After promulgation of Oil & Gas Regulatory Authority (OGRA) Ordinance, 2002 all LPG regulatory functions as envisaged in LPG (P&D) Rules, 2001 were transferred to OGRA in March 2003.

Objectives

This policy aims at increasing LPG supplies, through indigenously produced and imported product streamlining its distribution at competitive prices, especially to LPG starved areas of the country and promoting healthy competition for growth of LPG market while ensuring minimum safety standards across the LPG supply chain. To achieve this goal, issues regarding LPG production, LPG licensing, safety standards, pricing, distribution in under developed areas and import of LPG have been addressed in this document.

Policy

Guidelines Disposal of LPG by Public Sector (E&P) Companies

E&P companies shall directly or through Sui companies exercise their right to set up LPG extraction facilities at gas fields where LPG can be commercially extracted in accordance with the development plan approved by the Government. In case the E&P Company does not set up LPG extraction plant in accordance with timelines then Public Sector Gas Utility Companies will set up their plants and E&P Companies will forego their right. Public Sector Gas Utility Companies will have first preference for the LPG extracted by public sector E&P Companies.

LPG Licensing

OGRA will issue provisional licenses for an initial period of one year to technically and financially sound applicants/parties for construction of works commensurate with their work programme subject to providing commitment of LPG supplies from local or international source. OGRA will revoke licences of the licence holders including existing licence holders who fail to demonstrate firm supply commitment of minimum 5 MT per day, for a period of 3 consecutive years.

The work program will ensure that adequate storage, cylinders and logistics infrastructures are constructed within this timeframe in line with the marketing plan of the company. On completion of works to the satisfaction of OGRA, the provisional license will be converted to Marketing license for a period of fifteen years subject to availability of LPG supply and meeting applicable safety rules. OGRA will also issue licences for production/extraction/LPG Air Mix plants, LPG storage and filling plants, LPG refuelling stations. …

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