Sample donated: Belinda Wilkins
Last updated: September 30, 2019
ChallengesOmera owns and operates the largest and most sophisticated LPG infrastructure in Bangladesh.
However being a thrust sector it faces many challenges. They have to make sure that everyone is brought under the safe energy network along with supplying all the gas based industrial needs. Some of the challenges that they have to face in their day to day business are mentioned below.Demand and Supply GapBalancing the use of gas between domestic and industrial needs have to be ensured. The demand for LPG is rising for the nation whereas the supply is not increasing in the same way.
The lowering energy reserve and gas shortage has to be dealt with proper usage and utilization of gas for both industrial and domestic use.ReliabilitySince LPG is fully dependent on import it’s supply is not sustainable and reliable. Also the mass buyers will be severely affected by the volatility of the global market.
LPG operators face certain challenges to bring large size LPG cargoes to Bangladesh as the port areas do not have navigability for large LPG vessels. Presently Omera has an LPG import and storage terminal with a capacity of 3600MT at Mongla, Bagerhaat. Government should help to ensure navigability so that import of larger size cargoes can be undertaken.Easier to operateFor the day-to-day operations LPG operators require almost 45 clearances/certificates from various government departments. Also some dishonest traders are engaged in the illegal cross-filling of gas cylinders which is very risky as they do not follow any safety standards. Omera needs to go through these clearance procedures properly while making sure their customers are getting safe products.Safety Issues”LPG is not safe” – how to change this perspective that people have.
Gas cylinder explosions have been reported in media which could have been due to reasons such as illegally filled cylinders, sub-standard valves and lack of awareness of the customer. Omera LPG must ensure proper safety measures and raise awareness regarding the issue, as the use of LPG cylinders is on the rise.High costBangladeshi LPG operators have to bear high shipping costs which may constitute 30-35 percent of the total cost of the product due to draft restrictions.
However East Coast Group & Omera are investing in innovation and developing international LPG supply chains to bring down the shipping cost which will make LPG products more affordable. Since the LPG market is largely managed by private sector organizations in a monopolized form, this may cause people to suffer from the price volatility.AffordibilityOmera has to make LPG cylinders affordable along with LPG connections so that it can be used by everyone of all social classes. India is a good example of how LPG can be made affordable as they have provided more than 31 million free LPG connections and kits across the country. The Bangladesh government can take up similar initiatives to help rural populations migrate from the unhealthy traditional fuels to LPG while providing subsidy to residential LPG users for the next few years.
Weak supply chain in remote rural areasBeing one of the largest operator, Omera owns and manages a sophisticated LPG supply infrastructure. They supply their products through a vast network of supply chain management all over Bangladesh and even control the whole system which includes international shipping, storage, local shipping, cylinder manufacturing and so on. But still in some remote areas of rural Bangladesh the transport route is not that strong due to which even a small amount of rain is enough to wash away those roads and make it almost impossible to reach.Threat of alternativesOmera LPG has to keep a lot of things in mind while planning to advertise their product and sell that to their customers. Being a mass production company with a lot of intermediaries in between, they really cannot compete with just lowering its prices.
Making the product cheap while keeping the quality high is something that Omera has to keep in mind constantly . There are a lot of substitute in the products market which are sometimes cheaper. AvailibiltyOne of the key factors that Omera has to ensure is how cylinders can be made more available to the customers.
One of the ways the sector can expand would be if the licensing procedure is made easier. The biggest challenge for new LPG companies is to find to good location to set up bottling plants. Sometimes a company can secure proper funds along with getting a license but still face difficulty in finding a good location for its plant.