LPG Business Review

Myanmar is taking some very interesting steps towards the development and growth of their LPG industry. In the past year, the country has attracted a attention from private and international companies who are looking at just how they can get involved in the LPG game there.

The government is aiming to substitute the use of electricity with LPG for household cooking. The government sees that with LPG substitution, they can drastically reduce the dependence on electricity for cooking in the country.

Reducing Electricity Use Through LPG
Why aim to reduce electricity dependence though?

One major issue in Myanmar is its frequent power outages. Electricity supply in the country is rife with blackouts which the Electric Power Generation Enterprise (EPGE) in Myanmar has blamed on system breakdowns.

System breakdowns happened a total of 12 times in 2011, 14 times in 2012, seven times in 2013, 10 times in 2014, eight times in 2015 and seven times in 2016 until the end of April. The entire grid requires a lot of maintenance and as electricity is hugely subsidized by the government, there is always a lack of monetary resources to maintain the existing grid infrastructure.

Another one of the predominant reasons for these breakdowns has been cited by the EPGE as over consumption.

Myanmar currently relies on hydropower for the bulk of its electricity needs and these hydropower stations are located far from major cities. The country’s largest city Yangon, consumes more than half of the country’s total electricity supply of 2730 MW during the dry season.

The problem here is that combined power generated from hydropower and their few gas fired power plants (which contribute about 500 MW) only provide 2450 MW of power, which leaves a significant shortfall of 280 MW.

It is no wonder that over consumption is causing power outages. There is simply not enough supply to go around.

It’s also important to note that more than 10 million people or about 70% of the country’s population still do not have access to any form of electricity and rely heavily on firewood for lighting. LPG could help lower overall electricity use and and free up electricity supply for where it’s needed more.

Growing LPG Supply
What does the LPG industry in the country look like now?

Majority of the LPG in Myanmar is currently imported from Thailand with some supply coming from China. It is estimated that imports are about 7,000 tons per month. This current supply though is hardly enough to meet the demand. Yearly LPG consumption in the country is about 100,000 tons and is only growing each day as the country becomes more developed and sees a rising number of hotels and restaurants being set up. Even at current demand, this only represents supply for around only 5% of the population.

The government has identified these factors and has been working towards increasing LPG supply and storage in the country.
Last year, the Ministry of Electricity and Energy (MOEE) launched a K6.5 billion tender involving the lease of a jetty, terminal and storage facility at the Thanlyin refinery in Yangon Region, for importing, storing and distributing LPG in Myanmar. This was the first-time Myanmar leased out state-owned facilities under a Public-Private Partnership for LPG.

Parami Energy won the tender against 20 other competing companies in August last year. So far, the company has built an LPG filling station at the refinery and has begun importing LPG from Indonesia.

The company’s plan is to continue to import two vessels worth of LPG per month, which amounts to about 4000 tons of LPG. The jetty is currently limited by a very shallow water depth but has plans to increase their import target to about 8,000 to 10,000 tons over the next 2 years of their contract.

Parami Energy CEO, Ken Pyi Wa Tun has said that they have plans down the road to further develop their business activities and expand their resources and investments to include retail distribution as well as wholesale. To achieve this though, Mr Tun has said that they will need to work with strategic partners to assist them with funding, technology and expertise.

Private Involvement: A New Beginning
Could it be the beginning of a new wave of government-private partnerships for the LPG industry in Myanmar?

It very well may be the opening of the proverbial flood gates that international LPG players have been hoping for.

An international company that has been looking closely into public-private partnerships with Myanmar for LPG distribution is the Indian Oil Corporation (IOC).  The India state-owned oil company is considering the prospects of exporting LPG to Myanmar and has plans to open an office in Yangon.

This interest comes about as IOC recently secured a deal to export aviation fuel to Myanmar and feel that they can assist in providing LPG to the undersupplied country as well. IOC is looking to obtain a comprehensive license for end-to-end distribution of LPG in Myanmar.

Following Parami Energy’s recent success in obtaining their LPG import and distribution license, IOC has approached them for possible partnership in this area. The fact that IOC’s supply is only a 4-day sea journey from Yangon, makes working with IOC a very attractive option for Parami Energy.
As Myanmar continues to develop, the country is only going to need more and more assistance in dealing with their flailing power issues. The fact that the government has finally decided to let private companies step in and provide their services is a long-awaited boon for the industry.

LPG is a perfect solution to assist them in freeing up resources for expanding their electricity grid and seeing that the government has also acknowledged this fact means that the gears for progress have already started turning.

What is needed now, is more development in safety standards and comprehensive guides on how LPG activities should be conducted in Myanmar. Standardization will make it easy for international players to operate safely and have confidence in the industry in Myanmar to continue to develop.

Where there is demand, there is always opportunity.

Are you ready to ride the wave of LPG partnership that has just begun in Myanmar?