The government is aiming to replace the use of electricity with Liquefied Petroleum Gas (LPG) as a fuel for household cooking. If widely used, LPG can reduce the use of firewood as well as electricity when cooking, which will help to conserve power as well as the environment.
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 the purpose of importing, storing and distributing LPG in Myanmar.
A total of 21 companies sought tender applications but only nine submitted proposals. Of these, privately-owned Parami Energy Services Company ultimately beat oil company Puma Energy to win the tender in August last year.
It is the first time the government has leased out state-owned facilities under a Public-Private Partnership for the import, storage and distribution of LPG in Myanmar. In the past, the import and distribution of LPG was conducted solely by state-owned Myanmar Petrochemical Enterprise.
During an interview with The Myanmar Times over the weekend, U Pyi Wan Tun, CEO of Parami Energy, shared his company’s plans and the prospects for LPG in Myanmar. Here is an excerpt of the interview, which has been edited for clarity:
Can you give us an overview of the current Myanmar LPG market?
Currently, LPG is mainly imported from Thailand through the Myawaddy border. Some quantities are imported from China. Officially, Myanmar imports 4,000 tonnes of LPG per month, but the real number could be as high as 7,000 tonnes per month.
However, this is not enough to meet demand from the industrial, commercial and household sectors. Nationwide, LPG consumption is around 100,000 tonnes annually and this is expected to grow as there are now more hotels, restaurants and other businesses that require LPG.
In comparison, Thailand consumes 4 million tonnes of LPG yearly, which is around 40 times more than Myanmar. So, our LPG market has the potential to expand to become a million-tonne market at least in the years to come.
What is required to address and develop the LPG market?
The LPG industry must build up adequate safety standards as international investors will invest in growing the sector only if there are satisfactory standards in place. We need to promote safety standard procedures across every part of the business, from filling stations to consumption. We will develop these together with Fire Bridge Department and respective ministries.
The other issue is taxes. The import tax for LPG is less than 5percent in Thailand. Businesses also get tax exemptions when the LPG is re-exported. In Myanmar, we need a comprehensive and efficient policy to further develop the business.
What have you done so far since winning this tender last year?
We did some renovation works at the jetty and terminal. As there is no filling station, we have also built one. We started importing LPG since December. It is now ready for sale.
Where do you currently import from and what is your target?
We imported the first batch of LPG from Indonesia. We will continue to import two vessels worth of LPG a month for now. Currently, our jetty in the Thanlyin refinery area is the only one in the country equipped to handle LPG imports. As the water depth is only 5 meters, we can only handle vessels with the capacity to transport 2,000 tonnes of LPG. So it is still quite limited. But our target is to import at least 8,000 tonnes – 10,000 tonnes of LPG a month over the longer term.
How long is this project and who is your partner?
It is a two year project but extendable. If there are investments and we make a profit, we may be able to continue. Currently, we do not have any partner for this project. But we are planning to expand our investments beyond importing to include retail distribution to cover more areas. If we are going to do both wholesale and retail distribution, we will need international partners to help with funding, technology and expertise. At the moment, we cannot expand into retail distribution.
What is your current investment in this LPG project?
We have invested $2 million-$3 million to renovate the jetty and terminal as well as build the filling stations. So far, we have 1,800 tonnes of LPG in storage. It is ready for sale. We expect the market to stabiles and for sales to be good.
What are the advantages of leasing state-owned LPG facilities both for the country and Parami Energy?
This is the first time state-owned LPG facilities at the Thanlyin refinery area are being leased out to a private company for business. During the previous administration, struggling state-owned enterprises were usually privatised or suspended. By leasing out the facilities to us, the state earns K6.5 billion and gains from private sector investments. As the facilities will be run by a private company, additional expenses like maintenance are also passed on.
The government has a target of supplying LPG to 150,000 households in Yangon. This project will support it. At the moment, we are still in the investing stage and are not sure yet of any profits. However, we can expect a profitable outcome if we can import more than three vessels worth of LPG a month.
One of the risks is market competition. When a newcomer enters the market, our profit margins will become smaller. On the other hand, we can expect a win-win situation when market demand hits one million tonnes of LPG or more, as there will be room for more competition then.
Sources: Myanmar Times