Paing Soe Hlaing examines how the LPG business survives and grows in Myanmar.
While the majority of households in Myanmar depend on wood, charcoal and electricity, people tend to overlook the fact that there is a clean and affordable energy source in Liquefied Petroleum Gas (LPG), also known as cooking gas. Often, they have barely heard anything about what LPG is, or how LPG is used. And, for this, they are not to be blamed. Hardly any have seen how LPG is utilized. My interest here is in examining how the LPG business sector is operating. This is important to understand because the sector’s operations and the availability and accessibility of LPG, impact its ordinary usage across Myanmar.
The State of the LPG Market Today
In recent years, international investors have shown a sudden interest in building jetties— which allow ships to dock at port— and terminals— for oil and gas storage— in Myanmar. This shift has demonstrated that the distribution of oil and gas products is increasingly seen by business people as a site for investment. Investment in LPG is complicated, as an investment in LPG is an investment in an import product rather than in the production process, itself. However, Myanmar’s LPG market has nonetheless been booming since the Thein Sein Government issued free licenses to public companies to import LPG. Since then, the market consumption of LPG in Myanmar is around 3000 tons per month, the equivalent of about 12.5 US million dollars. The market share in Myanmar is split among three to four major companies.
Yet, the LPG industry remains an under-regulated industry. The issuance of free licenses has allowed larger companies to distribute more freely, which enables lower pricing for consumers as LPG traditionally has been an expensive product.
Beginning in 2012, the Ministry of Electricity and Energy (MOEE) granted Myanmar Liquified Petroleum Gas (MLPG) Group of Companies licenses to import and distribute LPG. Since then, MLPG has been distributing LPG across the entire country. MLPG has been awarded the title of ‘most tax paying company’ at 421st in top 500 companies in Myanmar. The reason for ‘most tax paying’ is to describe how MLPG has made such efforts to make LPG prevalent in Myanmar. Business is located in most of the major cities throughout Myanmar such as Yangon, Mandalay, Taunggyi, Mawlamyaing, Bago, Lashio, Pyay and Hinthada. My family founded this business in 1994 and encouraged business partners and networks to consider and invest in this sector. We started off as the very first official LPG store in Yangon in Myanmar, which is still in operation today. This post draws on my experiences in the industry, and cites statistics throughout that are based on two decades of the MLPG’s directors’ research into this field of work.
The government has been encouraging the public to use LPG in an attempt to curtail deforestation and promote a cleaner environment. However, building an LPG distribution network in cities outside Yangon has been a major challenge to this goal. LPG distribution relies on cross-border trade as well as supply from the Ministry of Energy, which from time to time, must purchase LPG through the tender system to meet market demands in the country. Currently, the border supply is mainly coming from Myawaddy, a city on Myanmar’s border with Thailand, and Chin Shwe Haw on the Myanmar-China border. LPG tank trunks purchased from Thailand and China are driven to filling stations at these borders, where they are filled with 48 kg cylinders. From the Thai border stations at Myawaddy, they are then distributed to major cities like Mawlamyine, in Mon State and Dawei, in Tannintharyi State, as well as Yangon, Bago, Pyay, Naypyitaw and Mandalay. From the China border, they are distributed to Lashio, May Myo, Mandalay and Taunggyi. This is how MLPG operates nationwide in Myanmar.
The Beginnings of LPG in Myanmar
In order to understand how to build distribution networks outside the city of Yangon, we need to go back in time and learn about how the LPG market has become what it is today. It began in 1986-87, when the government started offering LPG at a relatively low price to particular high-ranking public servants only. They used a permit system with 25 kg cylinders, which were allowed to be refilled once a month. However, this system did not become a regularized system applicable to everyone in Myanmar. While, at the start, there was just one government filling station, by 1990-91, there were five government filling stations in Insein, Mawbi, Alone, Dagon and Hle Kuu. In 1994, the very first LPG store with stoves and cylinder was opened to public. However, only one or two sets of stoves and cylinders were sold each month. In 1998, due to an electricity shortage and the difficulties of using wood and charcoal for people living in higher storeys in flats, there was a growing demand for LPG, at that time sold in 7 LPG retail stores. In 2000, over 7% of Yangon area residents were using LPG with 20 to 25 retail stores across the city, as well as two in Mandalay.
In 2005, with over 50 stores in Yangon and 4 in Mandalay, 12% of the cities’ population heard about LPG. However, the government did not allow the sale of LPG gas to the public. Instead, LPG gas was sold to stores from officials who had been granted LPG permits, but who didn’t want to use it. As a result, the LPG market was not developing as it would have if it were a public LPG sector, and if it were legal to do business. The sales of stoves were only permitted by the government. Yet, beginning in 2007, the demand started to increase significantly due to continued shortages of electricity, with illegal imports from Thailand beginning to fulfil the increase in interest.
Although it was illegal to conduct business in LPG gas, the government did not take strict action knowing well the fact that LPG had become a commodity for general public: an unspoken understanding prevailed, allowing the system to continue to operate. This changed however in 2010-2011, when, due to the widespread use of LPG, the government granted Category A licenses to 4 companies, which meant they were allowed to import, store, distribute and sell LPG. Category A license holders must own jetties and terminals. Starting from 2011-2012, the government again started granting Category B LPG licenses to the public. Category B license holders must own a filling station. This is how our company was founded, drawing on over 20 years of experience in LPG. There were 3 companies with Category B licenses as well, for a total of 7 companies altogether. In 2014-2015, the market consumed about 1200-1600 metric tons nationwide.
Starting from 2016, the Ministry of Energy legalised the LPG business, granting 4 more categories of licenses. Thus, LPG stores were allowed to sell not only LPG products but LPG itself, and the market grew significantly with over 350 stores in the market. The importation of LPG by then amounted to over 3000 metric tons. LPG growth was significantly impacted when the government allowed the conduct of business. In order to build networks outside Yangon city, we need to have filling stations across the country. Even in the current context, there are very few of them in a major city. Currently, business is being conducted in LPG stores with gas being transferred from 48 kg cylinders to other smaller cylinders using a manual transfer method, which means using a particular type of pipe to transfer from 48 kg to 7kg containers. Trucks and lorries are used as logistic mediums to distribute LPG mainly in 48 kg cylinders. These trucks, loaded with these 48 kg bottles, are distributed to towns in rural areas. There are now over an estimated 500 LPG stores in Myanmar. Among the current LPG import of 3000 tons, households consume about 60%, commercial entities about 25% and industry 10-12%. The following are the main types of products found in the market: portable cartridges, and bottles of 4kg, 7kg, 15kg, 20kg and 48kg. Households mainly use portable cartridges and bottles of 4kg, 7kg and 15kg. For commercial use, street vendors use mainly portable and 4 kg bottles whereas, mid-size restaurants use 15kg bottles. Hotels and high-class restaurants use mostly 20 kg and 48 kg bottle, respectively.
Future Prospects for Myanmar’s LPG Market
The benefits of LPG usage for ordinary people begins with a challenge, which is the limited availability and accessibility of LPG. The return from an initial start-up investment in LPG takes time to emerge, as the capital required for those in rural areas to start a LPG business is significant. Even in the city of Yangon, it took at least four years to get business going when it started in 1994. In order to sell LPG well with a fair price to every party involved, we need proper and stable import facilities such as jetties, terminals and filling stations operating in the private sector. Then, LPG will become much more economical. There is no LPG law at the moment, but if the government can impose a fair LPG law, then LPG business will be much more efficient. This law, which would impact the LPG sector in general, would also offer greater benefits to LPG users.
The traditional use of wood and charcoal is still prevalent in rural areas of Myanmar. There remains a lack of knowledge amongst people on its safe usage and efficiency. There are also several challenges that can be tackled if this issue is addressed properly and is dealt with. Only then will the livelihood of the people be more advanced and safer due to cheaper access to LPG.
If there can be privately-owned jetties, the market will become much more stable, and the LPG sector will then not need to rely on the border trade, where LPG associations on the Myawaddy borders are limiting the supply and controlling the price. This is the main reason why LPG cannot grow freely, and why it is not used as much as it should be in the country.
In conclusion, in order to encourage the widespread use of LPG outside Yangon city, limitations on supply and price controls have to be resolved as soon as possible. Benefits for the rural population should be prioritised through awareness campaigns regarding the positives of the use of LPG amongst the public. Only then will there be better potential for the LPG business in every corner of the country.
There won’t be short-term massive growth in Myanmar as soon as privately-owned terminals are finished. The sudden drop in LPG price that will occur as a result of terminal construction may not attract people to use LPG immediately. The main reason is that people, even in urban areas, lack knowledge regarding the benefits of using LPG as an alternative to wood and charcoal. It is not a commodity that everyone is aware of at the moment. It will take some time before people get used to the idea of using LPG. Right now, there are three ways of cooking: electricity, wood and charcoal, and LPG. If electricity costs the same over time, LPG growth will be linear. However, if electricity becomes more expensive, LPG growth will be significant. Since this is an everyday product that people consume, growth can be sustained.
(Image courtesy of Paing Soe Hlaing)
Paing Soe Hlaing is Chief Business Officer of Myanmar Liquified Petroleum Gas Group. He graduated from Oxford Brookes University in Automotive Engineering. He is fluent in English and Burmese, has great local business connections and, most importantly, brings his cross-cultural understanding into action. He is working in his family business where they import LPG and distribute it throughout Myanmar. With MLPG, he is challenging himself working in different focus where his connections mainly in South-east Asia can add value to investors. Myanmar is now open for foreign investment and business is booming.