Conversion of Commercial Kerosene Users To LPG Users - A Business Case For BM Energy (BD) Limited

Submitted to:
Syeda Mahrufa Bashar

Chairperson
IBA Career Center
Submitted by:
H.M. Rawfun Elahe

Roll: ZR-24
Batch: MBA 51E
Institute of Business Administration

University of Dhaka
14 June, 2017
June 14, 2017
Ms. Syeda Mahrufa Bashar

Chairperson
IBA Career Center
Institute of Business Administration, University of Dhaka
Subject: Submission of Internship Report
Dear Madam,
With due respect, I am submitting my internship report titled “Conversion of Commercial Kerosene
Users to LPG Users- A Business Case for BM Energy (BD) Limited" for your kind evaluation as a part of
my requirement of completing the MBA program.
The report talks about the LPG industry of Bangladesh and analyses how the traditional kerosene fuel
used by HoReCas (hotels, restaurants, cafes and tea stalls) can be upgraded to a safer and eco-friendly
alternative, the LPG.
As you go through the report, you will find an inclusive overview on BM Energy (BD) Limited, the
company responsible for the LPG business in the Preface part of the report. The Methodology chapter
describes the process followed to prepare this report. Market Analysis encompasses an overview of the
LPG market of Bangladesh. There is a comprehensive picture of kerosene usage in the HoReCa universe
of Bangladesh followed by a strategic business plan to convert them into LPG and retaining them. The
financial viability of the business has also been tested.
This internship program has given me an opportunity to learn about LPG business, a thrust sector
declared by the govt. of Bangladesh and its market prospect in Bangladesh. I believe, the knowledge I
gathered during my internship period, will add tremendous value to my career.
For any further query, I shall be available at your convenience.
Yours Sincerely,
_______________
H.M. Rawfun Elahe
Roll: ZR-24
Batch: MBA 51E
Institute of Business Administration
University of Dhaka
ACKNOWLEDGEMENT
First of all I would like to express my deep gratitude to the Almighty for enabling me to prepare the
internship report. I express my deep sense of gratitude and respect to Mr. Sheikh Morshed Jahan,
Associate Professor, Institute of Business Administration, University of Dhaka and my honorable
internship supervisor. I have received valuable guidelines, instructions and feedback from him for
completing the internship report.
I would like to express my heartfelt thanks to the Chairperson and Placement officers of IBA Career
Center. I received full support regarding my internship from them. I would like to thank the faculties
who spoke in the internship orientation seminar to provide us with the basic guideline of the 16 week
long process.
I express my grateful appreciation to Mohammed Nurul Alam, the CEO of BM Energy (BD) Limited for
giving permission to perform my internship work in his organization and to Head of Sales, Mr. Alok
Kumar Pandit, providing all information and cooperation to complete my internship.
In completing this internship report I have been helped at different stages by different people in the
Sales, Marketing, HR departments of BM Energy (BD) Limited. My team of Dhaka region-Sales also
helped me a lot in making this report possible. I would like to thank them all.
Finally, I would like to thank our families, friends and classmates who have encouraged me through
discussion about the theories and application that has helped me to prepare this term paper.
[i]
EXECUTIVE SUMMARY
The environmental, geopolitical and economic realities of the 21st century present an unprecedented
array of challenges and opportunities for Bangladesh. Meeting the ever growing energy need is one of
these prime challenges. The growth trajectory of the economy is aided by increasing movement and
upward shift of fuel and energy need of the mass population. Due to ever diminishing reserve of natural
gas, the Government of Bangladesh has put extra emphasis on LPG or Liquefied Petroleum Gas as the
future fuel by declaring LPG industry as a thrust sector.
LPG is an eco-friendly fuel with high calorific value and is widely considered as the prime fuel for the
next few decades. High growth in demand and easy availability popularized LPG. However, the current
LPG market is almost entirely focused on meeting the household demand of fuel for cooking, providing a
little or no emphasis on commercial usage of LPG by hotels, restaurants, cafes, tea stalls and other such
enterprises (HoReCa). BM Energy (BD) Limited considers this as a unique opportunity to convert these
traditional fuel using enterprises, and convert them into LPG users to capture this untapped market.
BM Energy (BD) Limited has already in place a strong management foundation comprising of visionary
leaders, dedicated sales teams and operations personnel who are capable of thriving in an ever-complex
market environment. Furthermore, the company’s position as the second largest LPG Operator of the
country and the largest storage capacity all but ensures a continuous flow of business opportunities.
The fact that LPG costs lesser than that of kerosene and is way safer in handling makes the conversion of
HoReCas from kerosene to LPG all more essential and interesting. Lastly, with a commitment to create a
round-the-clock technical support team to cater to the clients' needs better, BM feels confident in its
stride to make a tangible difference to the LPG industry in Bangladesh.
The report has been segregated broadly into seven segments, with the first section dealing with the
background of the report followed by a brief introduction to BM Energy (BD) Limited. The second
segment tells about the methodology of the report. The third segment deals with the product in
contention i.e., LPG, usage, benefits and stuff. The fourth segment describes the LPG market scenario in
Bangladesh, value chain analyses, synthesis of LPG industry of Bangladesh using triple triangle
framework, demand and supply side assessment, market size and growth. The fifth part explores the
HoReCa universe using kerosene, cost comparison between kerosene and LPG, kerosene to LPG
conversion cost followed by specific plans towards the conversion. SWOT of BM, PESTEL Analysis,
detailed business model, marketing strategies which will be adopted by BM Energy (BD) Limited to
ensure smooth operations are described in the sixth section. The seventh and last section illustrates the
financial figures as a consequence to the strategies adopted.
The questionnaire used for the market survey, detailed financial models has been inserted into the
appendix.
[ii]
PREFACE
ORIGIN OF THE REPORT
MBA program at IBA requires a 16 weeks long internship program to introduce the students with the
real life business administration. As an internee, I worked for BM Energy (BD) Limited. The topic was set
after discussion with the internship supervisor at IBA and the supervisor at BM Energy (BD) Limited.
This internship report “Conversion of Commercial Kerosene Users to LPG Users - A Business Case for
BM Energy (BD) Limited.” is submitted on June 14, 2017 to The Chairperson, IBA Career Center,
Institute of Business Administration, University of Dhaka.
The idea of this study came into being when I was assigned by BM Energy (BD) Limited to lead the Dhaka
regional team to think out the box to enhance the sales volume of the region. The team consisted of me,
H.M. Rawfun Elahe (Regional Manager, Sales & Marketing-Dhaka), Area Manager (Dhaka South City),
Territory Officers of the region and Assistant Manager (Trade Marketing).
MY PLACEMENT
I did my internship at BM Energy (BD) Limited. I joined the organization on March 1, 2017 as Regional
Manager, Sales & Marketing-Dhaka.
BM ENERGY (BD) LIMITED
BM Energy (BD) Limited is a joint venture initiative between Netherlands and Bangladesh. 51% of the
shares are owned by Smart Jeans Limited, Bangladesh and the other 49%
share is owned by renowned Dutch investor Mr. Bert Pronk. Mr. Bert Pronk is
also acting as the Chairman of the company.
The company is exclusively set up to import, bottle, market and distribute

liquefied petroleum gas in Bangladesh. The company was formed in 2012 and
started its commercial operation in July 2015. Currently, the company has a
market share of 20% (as on 1st quarter 2017) and is the second largest LPG operator of the country.
Source: bmenergybd.com
[iii]
TABLE OF CONTENTS
1. Background ........................................................................................................................................... 4
2. The Study .............................................................................................................................................. 5

2.1. Objectives of the Study ................................................................................................................. 5
2.1.1. Broad Objective..................................................................................................................... 5
2.1.2. Specific Objectives ................................................................................................................ 5
2.2. Scope of the Study ........................................................................................................................ 5
2.3. Methodology ................................................................................................................................. 6
2.3.1. Secondary Study.................................................................................................................... 6
2.3.2. Primary Research .................................................................................................................. 6
2.3.3. Sampling ................................................................................................................................ 6
2.3.4. Definition of the Population ................................................................................................. 7
3. The LPG Industry ................................................................................................................................... 7

3.1. The Product - LPG.......................................................................................................................... 7
3.2. Common Usage of LPG.................................................................................................................. 8
3.3. Benefits of LPG .............................................................................................................................. 9
4. LPG Industry in Bangladesh................................................................................................................. 10

4.1. PESTEL Analysis of Bangladesh LPG Industry .............................................................................. 10
4.2. The LPG Value Chain in Bangladesh ............................................................................................ 12
4.3. Synthesis Using Triple-Triangle Framework................................................................................ 14
4.4. Exploring The Demand Side of LPG in Bangladesh ..................................................................... 16
4.5. The Supply Side of LPG in Bangladesh ........................................................................................ 18
4.6. LPG Market Dynamics In Bangladesh ......................................................................................... 20
4.6.1. Typical LPG Cylinders For Bangladesh Market .................................................................... 20
4.6.2. Major LPG Operators in Bangladesh ................................................................................... 21
4.6.3. Market Size ......................................................................................................................... 23
4.6.4. Market Growth ................................................................................................................... 23
5. Journey from Kerosene to LPG ........................................................................................................... 25

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5.1. Exploring the Demand Side of Kerosene in HoReCas ................................................................. 25
5.2. Profile of the HoReCas ................................................................................................................ 26
5.3. Cost Comparison: Kerosene vs. LPG ........................................................................................... 26
5.4. The Switching Cost: From Kerosene to LPG ................................................................................ 26
5.5. The Kerosene to LPG conversion plan ........................................................................................ 27
5.5.1. Plan A: Subsidizing and Conversion .................................................................................... 27
5.5.2. Plan B: Partially (only LPG Cylinder) Subsidizing the Conversion........................................ 27
5.5.3. Plan C: Not Subsidizing the Conversion .............................................................................. 28
5.5.4. Weighted Average Conversion Portfolio ............................................................................ 28
6. Strategic Action Plan for Converting Kerosene Users into LPG Users and Retaining Them ............... 29
6.1. SWOT Analysis of BM Energy (BD) Limited ................................................................................. 29
6.2. Porter’s Five Forces Analysis ....................................................................................................... 31
6.3. The Marketing Plan ..................................................................................................................... 32
6.3.1. Marketing Objectives .......................................................................................................... 34
6.3.2. Product Differentiation ....................................................................................................... 34
7. Financial Plan ...................................................................................................................................... 35

7.1. Key Assumptions ......................................................................................................................... 35
7.2. Financial Modeling ...................................................................................................................... 35
7.2.1. Plan A: BM Energy provides Free Cylinder and Burner to the Restaurants ........................ 35
7.2.2. Plan B: BM Energy Provides Cylinder For Free And Burner At Market Price ...................... 36
7.2.3. Plan C: BM Energy Provides Cylinder And Burner To The Restaurants At Market Price .... 37
7.3. Income Statement....................................................................................................................... 38
7.3.1. The Likely Scenario .............................................................................................................. 38
7.3.2. The Favorable Scenario ....................................................................................................... 39
7.3.3. The Unfavorable Scenario ................................................................................................... 40
8. Remarks .............................................................................................................................................. 41
9. Bibliography ........................................................................................................................................ 42
10. Appendix ............................................................................................................................................. 43
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10.1. The Questionnaire................................................................................................................... 43
10.2. Technical Details of BM LPG Cylinders .................................................................................... 44
10.2.1. 12Kg Pack Size ..................................................................................................................... 44
10.2.2. 33KG Pack Size .................................................................................................................... 45
10.2.3. 45KG Pack Size .................................................................................................................... 46
10.3. Visiting Card of the Intern ....................................................................................................... 46
10.4. Detailed Financial Plan ............................................................................................................ 47
10.4.1. Basic Assumptions............................................................................................................... 47
10.4.2. Plan A: BM Energy provides Free Cylinder and Burner to the Restaurants ........................ 47
10.4.3. Plan B: BM Energy Provides Cylinder For Free And Burner At Market Price ...................... 48
10.4.4. Plan C: BM Energy Provides Cylinder And Burner To The Restaurants At Market Price .... 49
10.5. Banner/Shop Sign Hoisted at Subsidized HoReCa .................................................................. 50
LIST OF FIGURES
1. Fig 1: A LPG Storage Facility (Bullet Type)………………………………………………………………………………..4

2. Fig 2: A Flowchart Showing Development of LPG Industry in Bangladesh……………………………….10
3. Fig 3: Global LPG Value Chain………………………………………………………………………………………………….13
4. Fig 4: Demand Factors of LPG in Bangladesh………………………………………………………………………….18
5. Fig 5: International Price (CP) of LPG from ’14 to’16……………………………………………………………….18
6. Fig 6: LPG Storage Facility (Sphere Type)………………………………………………………………………………19
7. Fig 7: Demand vs. Supply Curve of LPG in Bangladesh……………………………………………………………20
8. Fig 8: A Typical Kerosene Run HoReCa…………………………………………………………………………………..25
9. Fig 9: A Typical LPG Run HoReCa…………………………………………………………………………………………...33
10. Fig 10: Visible Shift from Kerosene to LPG……………………………………………………………………………..41
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1. BACKGROUND
Bangladesh has been growing steadily over the last two decades registering an impressive growth trend.
The GDP growth level has remained above 6% over the last decade, despite persistent global economic
downturn. This resilience is due to Bangladesh’s economic vitality, which has been identified by
Goldman Sachs, a global investment bank, which included Bangladesh as part of “Next-11” - a group of
countries with potential to grow.
The report clearly delineates the growing demand for energy. The growth trajectory of the economy is
aided by increasing movement and upward shift of fuel and energy need of the mass population.
Due to ever diminishing reserve of natural gas, the Government of Bangladesh has put extra emphasis
on LPG or Liquefied Petroleum Gas as the future fuel by declaring LPG industry as a thrust sector.
Fig 1: A LPG Storage Facility (Bullet Type)
However, the current LPG market is almost entirely focused on meeting the household demand of fuel
for cooking, providing a little or no emphasis on commercial usage of LPG by hotels, restaurants, cafes,
tea stalls and other such enterprises (HoReCa). BM Energy (BD) Limited considers this as a unique
opportunity to convert these traditional fuel using enterprises, and convert them into LPG users to
capture this untapped market.
The following report presents the prospect of conversion of Kerosene users into LPG and the capacity of
BM Energy (BD) Limited in operating necessary functions to successfully manage the drive.
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2. THE STUDY
2.1. OBJECTIVES OF THE STUDY
The broad objective was defined at first. This broad objective was fragmented into some smaller,
clearer, specific objectives.
2.1.1. BROAD OBJECTIVE
The broad objective of this report was to make a business case for BM Energy (BD) Limited to convert
commercial entities using kerosene into LPG users in Dhaka city and its peripheries.
2.1.2. SPECIFIC OBJECTIVES
The specific objectives of the study were as follows:
 To explore the demand dynamics of kerosene in commercial usage by HoReCas (restaurants,

hotels, cafes, tea stalls)
 To make apple to apple comparison between the costs of kerosene and LPG usage
 To determine the cost of switching from kerosene system to LPG system
 To identify the right product offering to the potential convertible users
 To analyze the financial viability of a subsidized pricing model to the converted users
2.2. SCOPE OF THE STUDY
This study covers secondary research and exclusive primary research done by BM Energy (BD) Limited in
Dhaka region. The area identified by “Dhaka region” includes Dhaka City (DSCC and DNCC), and Savar,
Keraniganj, Dohar, Nawabganj upazillas of Dhaka district. The selection of geographical scope was based
on available resources and jurisdiction of the internee as provided by the company. There was a scope
for the scale up should the project proved to be a success.
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2.3. METHODOLOGY
Information was collected from scratch about the commercial users (HoReCa) such as restaurants,
hotels, cafes and tea stalls that used kerosene as fuel to cook the food/beverage they serve to the
customers. The Dhaka Sales team members performed this hard work.
To write an overview of the company primarily responsible for the business, BM Energy (BD) Limited,
the information regarding different departments were gathered by face to face interview with the
employees and also the company website.
To collect information from the commercial users, a questionnaire was prepared and used. Data was
collected mainly from primary sources by means of this questionnaire survey.
2.3.1. SECONDARY STUDY
Extensive secondary research could not be done because sufficient information for kerosene run
HoReCas in Bangladesh is not available. However, the business models used by them have been studied.
Also, the quality and quantity of sales of LPG to the existing HoReCas were carefully analyzed.
2.3.2. PRIMARY RESEARCH
To collect information from kerosene using HoReCas of the selected region, a questionnaire was
prepared and used. Data was collected mainly from primary sources by means of this questionnaire
survey. The list of HoReCas in a particular area was done by the Territory Officer (TO) of BM Energy (BD)
Limited of that area. The data of the various areas were then combined by the internee to get the total
regional picture. The questionnaire has been inserted into the annexure of the report.
2.3.3. SAMPLING
BM Energy (BD) Limited used judgmental sampling based on the location of HoReCas and insight of the
respective TO. The market size, industry overview, the potential client list and financial projection was
prepared based on these interviews along with the insight of the expert panel of BM Energy (BD)
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Limited. The customers of the HoReCas were also interviewed to get an idea of what they think,
whether they have any perceived differentiation between kerosene and LPG.
2.3.4. DEFINITION OF THE PO PULATION
The major players of this exercise include:
 The principal suppliers of fuel. A) Kerosene is supplied by BPC via local dealers/distributors and
petrol pumps. B) LPG is supplied by LPG Operators (6 major operators, including BM Energy BD
Limited) via local distributors and retailers
 The HoReCas (Hotels, Restaurants, Cafes, Tea Stalls etc.) currently using kerosene who are
potentially convertible to LPG
3. THE LPG INDUSTRY
3.1. THE PRODUCT - LPG
Liquefied petroleum gas (LPG or LP gas) are flammable mixtures of hydrocarbon gases including
propane, butane or mixtures of these gases used as fuel in heating appliances, cooking equipment and
vehicles.
LPG, liquefied through pressurisation, comes from natural gas processing and oil refining. LPG is used as
heating, cooking and auto fuel. In different countries, what is supplied can be propane, butane or
propane-butane blends. In Bangladesh the mixture contains 65%-70% butane and 30% to 35% propane.
LPG is prepared by refining petroleum or "wet" natural gas, and is almost entirely derived from fossil
fuel sources, being manufactured during the refining of petroleum (crude oil), or extracted from
petroleum or natural gas streams as they emerge from the ground.
LPG was first produced in 1910 by Dr. Walter Snelling, and the first commercial products appeared in
1912. It currently provides about 3% of all energy consumed, and burns relatively cleanly with no soot
and very few sulfur emissions. As it is a gas, it does not pose ground or water pollution hazards.
LPG has a typical specific calorific value of 46.1 MJ/kg compared with 42.5 MJ/kg for fuel oil and 43.5
MJ/kg for premium grade petrol (gasoline). However, its energy density per volume unit of 26 MJ/L is
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lower than either that of petrol or fuel oil, as its relative density is lower (about 0.5–0.58 kg/L, compared
to 0.71–0.77 kg/L for gasoline).
3.2. COMMON USAGE OF LPG
LPG has a very wide variety of uses, mainly used for cylinders across many different markets as an
efficient fuel container in the agricultural, recreation, hospitality, calefaction, construction, sailing and
fishing sectors. It can serve as fuel for cooking, central heating and to water heating and is a particularly
cost-effective and efficient way to heat off-grid homes.
 Household Cooking: LPG is used for cooking for economic reasons,

for convenience or because it is the preferred fuel source. In
Bangladesh, about 3 million households use LPG as their primary
source of fuel for cooking, mostly concentrated in the urban and
semi urban areas. There is huge opportunity to expand the LPG
market into the rural areas where average income level and
propensity to spend is one the increase. Generally 12KG, 15KG and
20KG sizes are used in households. But this study is beyond the scope of this report.
 Commercial Cooking at HoReCas: Hotels, restaurants, cafes, tea

stalls in Bangladesh use traditional fuels such as wood, kerosene,
some have connection to Natural Gas. However, due to
unavailability, high price and inconvenience of traditional fuels,
many HoReCas are looking for an alternative source, the LPG.
Generally 20KG, 30KG,33KG, 35KG, 45KG pack sizes are sought
after by HoReCas. Identifying this potential group of customers and
converting them into LPG users is the objective of this report.
 Motor Fuel (Autogas): When LPG is used to fuel internal

combustion engines; it is often referred to as autogas or auto
propane. In some countries, it has been used since the 1940s as a
petrol alternative for spark ignition engines. Its advantage is that it
is non-toxic, non-corrosive and free of tetraethyl lead or any
additives, and has a high octane rating (102–108 RON depending on local specifications). It
burns more cleanly than petrol or fuel-oil. It is also cheaper than petrol, diesel, kerosene or
octane. But this study is also beyond the scope of this report.
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3.3. BENEFITS OF LPG
As a clean gaseous fuel, LPG offers many advantages, both to end-users and to society as a whole. It is
easily liquefied, facilitating simple transport and storage and making it a highly versatile energy option.
LPG is an immediately available low carbon alternative to conventional fossil
alternative. Its combustion emits 33% less CO2 than coal and 15% less than
heating oil1. According to the LPG usage Strategic Paper 2014 formulated by
the Government of Bangladesh, LPG has the following benefits:
Faster cooking due to higher heating/calorific value
Stable supply & price in the international market
Environment friendly nature of the fuel, lesser CO2 emission
Competitive market due to open and developed private sector investment
LPG is more engine friendly to vehicles than CNG/Octane
Car conversion to LPG is much cheaper than conversion to CNG
1
ADEME (Agence de l’Environnement et de la Maîtrise de l’Energie).
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4. LPG INDUSTRY IN BANGLADESH
LPG is being used in Bangladesh since 1965. The market took the shape of an industry when the state
owned petroleum company BPC started producing LPG in 1978. Later, the market took a huge step
forward when the National Energy Policy was introduced in 1996, allowing private investment to take
place. Bashundhara Group was the first private owned company to enter the market. Jamuna
Spacetech, TotalGaz, Petredec Elpiji (now known as Laugfs) followed. In 2014 the government of
Bangladesh published its LPG usage Strategic Paper and provided license to many private investors.
Omera LPG launched in March 2015 while BM LPG launched in July 2015. At present, there are a few
other small LPG operators too but majority market share is controlled by the big 6 LPG operators.
National Energy
Initially BPC in 100%
LPG use started in Policy 1996
control, starting
1965 introduced, allowing
operation in 1978
private investment
Govt. proposed to
Jamuna, Total Gaz, Bashundhara came
increase price of NG
Petregaz entered into the market
& subsidize LPG in
market (2000-2003) (1999)
2014
Omera LPG & BM LPG

entered market in 2015 Oligopoly Market Current Annual
and both emerged as with 6 big players Demand 400,000 MT
big players
Fig 2: A Flowchart Showing Development of LPG Industry in Bangladesh
4.1. PESTEL ANALYSIS OF BANGLADESH LPG INDUSTRY
An analysis of the external factors impacting the LPG industry of Bangladesh is done below:
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•Government adopted friendly policies for the LPG sector
•Political stability is beneficial for sales processand obtaining growth
Political
•Expected growth in the industry in the next decade or so

•High emphasis on switch from traditional fuel to LPG will further increase the demand
Economic •Exchange rates may affect the costs of imported raw material and equipment
•Security is an essential facet of every business and workplace. Emphasis on safety is an edge to
BM Energy (BD) Limited
•Upgradation from traditional fuel to LPG is seen as a positive socio-cultural improvement and a
Socio-cultural
status symbol in Bangladesh
•Willingness to adopt new technologies has led many to adopt LPG to replace costly traditional
fuel
Technological •More modern alternatives may come and slow down LPG industry
•Industrial Legislation: Important legislation such as the Labor Law, Factories Act, Explosive Act
and other acts pertaining to industrial law should be considered in the business
•Compliances to all health and safety regulations is essential in order to have a safe and
Legal
functional working conditions
•Since environmental implications are constantly being considered by all types of businesses,
being environmentally conscious when selecting products should be a priority. LPG is
Environmental environmentally non-hazardous and much safer than kerosene.
 Political: The government of Bangladesh adopted friendly policies for the LPG sector. It has been
declared a thrust sector; govt. has provided tax free import facility to LPG machineries and
accessories. Not providing any more natural gas connection is the decision of the government
and it has direct positive impact on the LPG sector.
Since 2015, Bangladesh has seen a relatively stable political scenario. Political stability is
conducive to economic betterment of people and thus beneficial for sales process and obtaining
growth.
 Economic: Expected growth in the economy in the next decade or so as predicted by the World
Bank and big private think tanks means more demand for fuel. High emphasis on switch from
traditional fuel to LPG by the government will further increase the demand. However, since BDT
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is a floating currency, exchange rates may affect the costs of imported raw material and
equipment. Because, the prime raw material is the LPG liquid, entirely dependent on import,
exchange rate is going to be a prime factor determining the price of the product.
 Socio-cultural: Security is an essential facet of every business and workplace. Emphasis on

product safety is an edge to BM Energy (BD) Limited. BM cylinders maintain most modern
security features and the highest safety standards (DOT 4BA as prescribed by European Union).
Upgradation from traditional fuel to LPG by the customers is seen as a positive socio-cultural
improvement and a status symbol in Bangladesh.
 Technological: Willingness to adopt new technologies has led many to adopt LPG to replace
costly traditional fuel is a challenge. However, LPG has become very popular and a status symbol
to many in Bangladesh. There is also the issue of advent of newer technologies that can
potentially replace LPG such as induction cooker or LNG etc.
 Legal: Important Industrial legislation such as the Labor Law, Factories Act, Explosive Act and
other acts pertaining to industrial law should be considered in the business. The company as
well as the trade channel partners needs legal licensing from local govt. and the explosive
department of the govt. of Bangladesh. Compliances to all health and safety regulations is
essential in order to have a safe and functional working conditions.
 Environmental: Since environmental implications are constantly being considered by all types of
businesses, being environmentally conscious when selecting products should be a priority. . LPG
is environmentally non-hazardous, non-toxic and much safer than kerosene. LPG is often termed
as eco-friendly fuel due to these characteristics.
4.2. THE LPG VALUE CHAIN IN BANGLADESH
To set up an LPG bottling plant, operators need to create a facility of LPG liquid importing terminal,
storage reservoir facility, cylinder bottling facility and a proper distribution network.
About the machineries requirement, Bangladeshi LPG operators are entirely dependent on the foreign
suppliers (such as Parlym-France, Kosan-Denmark, Renzo-Italy, SMPC-Thailand, Maurya Udyog- India) for
related accessories and spare parts.
For cylinder manufacturing, the main raw material is Hot-Rolled coil, imported from Thailand, China and
Indonesia.
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Fig 3: Global LPG Value Chain
LPG operators in Bangladesh including BM Energy (BD) Limited import liquid from the international
market. There are a few global suppliers of LPG. The main raw material, LPG liquid, is supplied by
Petronus, Shell, BP and a few other major oil companies in the world. The LPG operators order for liquid
which is carried via ocean going LPG carrier ships. The ships are anchored at the import & storage
terminal of the LPG operators where the LPG liquid is unloaded and stored at the reservoir. This LPG
liquid is then filled into the cylinders via automated machines working on conveyer belts.
LPG operators in Bangladesh including BM Energy (BD) Limited has distribution network to ensure full
coverage of the customers including the households and the HoReCas that are already running on LPG
or are potential converts to LPG.
The distributors lift product from the operators’ bottling factory. They carry their product to their
warehouse via truck/lorry from which they supply either directly to the customers (household or
HoReCa or industrial) to their listed retailers. The retailers deliver to the customers.
Once an LPG cylinder delivered to the client, it is sent to the location of setup and a team of technicians
assemble and set it up for the client. Testing is done during this period so that there are no problems.
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BM Energy (BD) Limited also has an emergency servicing team who remain on standby in case any
problems do arrive after setup is complete. The after sales service is one of the major factors taken into
account by potential clients.
The whole business value chain can be summarized in the diagram below:
BM Energy (BD) Limited imports liquid LPG, bottles into cylinders in factories
Distributors lift product from BM factories & store in their warehouses
Distributors supply product to the retailer points (sometimes directly to

customers too)
Retailers supply product to the HoReCas (& other customers)
After sales team perform regular servicing, maintenance and solve problems
at the the HoReCas, if any.
4.3. SYNTHESIS USING TRIPLE-TRIANGLE FRAMEWORK
With the synthesis of the findings of

the survey with the Triple-Triangle
Framework (TTF), a better
understanding of how LPG Industry is
operating currently can be found.
In the innermost triangle, the

capacity, capital and culture of
individual entities within the industry
is discussed. It actually analyzes the
inward business specific issues that a
firm can change and influence to
capitalize on the existing industry environment.
In order to start up an LPG operatorship, there is a huge amount of investment required. This is one
of the unfavorable factors. With this huge investment, it takes several years to break even. On top
of that profit margin is also not high due to fierce competition. However, for LPG industry,
according to the industry experts, bank loan is easily available. The ability to reenter the business is
an unfavorable one. Index LPG, once a powerful player of the industry, after several years of non-
Page | 14
activity, could not reenter the business despite taking various initiatives to do so. Lower product
differentiations, low economies of scale are the barriers in this regard. Poor roads and other
infrastructure make it difficult to set up LPG bottling factories at many strategically important
locations. The positive side about the culture is the interdependence of the firms and suppliers.
However, sometimes the unfair competition becomes a matter of concern.
In the second triangle, the business

has to take consideration of three
external entities: collaborators,
customers and competitors.
Collaborators are basically the
facilitators of the firms.
Government and different
educational organizations play
positive role for a LPG operator.
Competitors pose a potential threat
for the business entity. Industry
experts believe that there is a very
tough competition in this industry. Customers are neither a threat nor an absolute opportunity.
When firms are successful at attracting customers, they become an advantage for the firms and vice
versa. In case of LPG firms, the customers are generally conscious and educated. This gives the firms
an edge over other industry.
According to the industry
insiders, the customers are
price sensitive. They tend to
switch brands for the
minimum amount of price
fluctuation.
In the third and outermost

triangle, the external factors
are elaborated in details.
This is where the globalization parameters, technology, actions by state & society are taken into
consideration. These factors are such that the business cannot influence them but take as given.
Nowadays, dollar price rise is a major concern for this industry. The firms have no control over this
issue. Since the industry is solely dependent on imported LPG liquid, rise of currency exchange rate
is a major factor in determining the price in the local market and thus the profitability of the firms.
State and government are actually facilitating this industry by imposing minimum import duty.
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However, the budget 2017-18 may impose 15% VAT on the sales which might prove a big blow for
the industry. The present government motto of shifting the energy sector from natural gas (by
withdrawing subsidy from it) to LPG in Bangladesh is turning out to be very beneficial for this
industry.
4.4. EXPLORING THE DEMAND SIDE OF LPG IN BANGLADESH
The rising demand for LPG and other energy sources is a consequence of depleting gas reserves of the
country. As of 2015, the natural gas reserves of Bangladesh is 14.16 trillion cubic feet and is enough to
last till 2031, if current rate of extraction is maintained, according to Government statistics. The rapid
use of natural gas in power production has been the main source of gas consumption, since it
contributed to 56% of domestic energy demand, depleting gas fields and putting pressure on energy
sector. Titas gas is already rationing gas
connection to higher priority areas as of
2016. The current gas production from
the 20 operating gas fields within the
country yield about 2,500 mmcdf (million
cubic feet per day), and is speculated to
reach peak production of 2,700 mmscfd
within 2017, and then decline. In FY
2015-16, overall gas demand in the
country has been estimated to be 3,200
mmscfd (Petrobangla data 2 ), which
means a 30% deficit on total demand. An
annual shortage of 500 mmscfd natural gas shows the need for diversifying the energy requirements.
The deficiency of Natural Gas (NG) will only increase and it will have an overall impact on electricity
generation, fertilizer, transportation and domestic sector.
LPG is mainly used by households for cooking and by some light engineering workshops, as fuel for
wielding. Increase in LPG demand has been contributed by unavailability of fresh NG connections
households, increasing price of kerosene and decreasing accessibility of firewood. Bangladesh’s LPG
demand is only 2% of total oil demand, and less than 0.01% out of the total energy demand. However,
LPG demand is expected to grow significantly as an alternative to households’ cooking fuel and
transportation fuel (in the form of Autogas).
2
Data Collection Survey on Bangladesh Natural Gas Sector, 2012, JICA
Page | 16
Gas demand forecasts for Bangladesh are expected to grow with increasing number of industries and
households in future. While LNG import is expected to compensate for the industrial gas demands, LPG
is expected to be the alternative for household/commercial gas use.
Currently, the residential sector occupies about 13% of total natural gas consumption. In terms of
number of consumers, about 2.8 million household consumers are now using 330 mmcfd gas (13.06%)
of total gas production according to the national Energy Division. Even with a power conservation policy,
the projected demand for gas in 2030 will be at least three times of demand.
Various local and international research firms have tried to determine the exact demand of LPG
consumption in Bangladesh from time to time. The following chart3 summarizes the three main surveys
done through govt. initiative.
Estimated count of Projected Demand

Year Survey by
household (million) (million MT)
0.5
1995 RTM Engineering Ltd., Canada 27.8
M/S Marktech International Corporation,
2010 30 1
USA
Estimate by Dr. Rafiq, author of LPG Usage
2015 34 3.70*
strategic paper, GoB
*1 pcs 12KG per month average consumption for each household
Inter-company data and experts also agree with the 2015 estimation by the Bangladesh govt. There is an
estimated consumer market demand of four million metric ton LPG in 2017. Besides the end users’
demand, there is an also inter-company sale of LPG. This generally happens when a company runs short
of supply and another company has more than its required stock. The one with the extra reserve sells to
the one with the lower reserve. This is also known as bulk LPG sale. This is not added to the annual
demand because it will cause double counting.
The following factors are said to affect the demand of LPG in Bangladesh:
3
LPG Usage Strategic Paper, 2014 by Govt. of Peoples’ Republic of Bangladesh
Page | 17
Fig 4: Demand Factors of LPG in Bangladesh
4.5. THE SUPPLY SIDE OF LPG IN BANGLADESH
Availability and improving the supply system are two major constraints for the supply side. The demand
for LPG in 2015 was 300,000 MT and currently more than 95% of the LPG demand was met by import
and the state-owned BPC supplied the rest 5%. The sources for government supply are from
government oil refineries, since LPG can be produced as a by-product of oil extraction.
CP
$1,200
$1,000
$800
$600 CP
$400
$200 Linear (CP)
$0
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
'14 '14 '14 '14 '14 '14 '15 '15 '15 '15 '15 '15 '16 '16 '16 '16 '16 '16
Fig 5: International Price (CP) of LPG from ’14 to’16
Private sector imports are from Singapore, Malaysia, Saudi Arabia, Abu Dubai and Kuwait. The standard
import price is the Saudi Aramco (the state-owned oil company of Saudi Arabia) monthly Contract Price
or CP. When buyers order LPG from international market, they have to pay that month’s Aramco
Page | 18
Contract Price and add the freight per ton charge for shipment to Bangladesh. While the government
subsidizes their portion of LPG, the importers sell their products in line with import price. The above
chart of CP shows an ever continuous downward slope which means the price of LPG is on the decrease
in the international market. The trend line shows while the price was more than USD 800 per MT in
January 2014, the price has steadily reduced to about USD 400 in December 2016. As a result, the price
at retail level has gone down from BDT 1500 to BDT 900-950. This resulted in the tremendous increment
in local consumption of LPG.
The supply is also dependent on the total storage capacity of the LPG Operators. The current storage
capacities are as follows:
LPG Operator Storage Capacity (MT)

BM LPG 6,500
Bashundhara 3,000
Omera 3,600
Jamuna 2,800
Laugfs 1,800
Totalgaz 2,500
Total 20,200
Ocean going LPG carriers can generally make 3/4 trips to the import terminals of the operators per
month. Hence, at the current storage capacity operators will be able to supply about 850,000.00 MT
annually. So, the current storage capacity is sufficient for the next few years.
Fig 6: LPG Storage Facility (Sphere Type)
Page | 19
4.6. LPG MARKET DYNAMICS IN BANGLADESH
4.6.1. TYPICAL LPG CYLINDERS FOR BANGLADESH MARKET
LPG is generally distributed in cylinders made of steel or composite carbon fiber. LPG cylinders have
been developed over time and their heritage can be seen in the various generations.
The first generation of cylinders was introduced between 1870-1880 to store liquid carbon dioxide for
industrial gas business. They were long steel tubes without handles and very hard to handle.
Later on, the second generation was introduced to bridge some gaps in the first one. They were also
made from steel, but with a handle, shorter but wider and the shape has been refined. This generation
of cylinder is the most popular and is known as the “traditional” cylinder.
Third generation cylinders improved upon type II, using plastic for coating the metal exterior allowing
the exterior to be customized. However, these cylinders continue to have the same drawbacks as
Generation I and II.
Generation IV cylinders are the latest on the market. They were developed with aerospace technology
and represent a real advance in technology, that otherwise has effectively remained unchanged over 75
years.
 5.5 KG Pack Size: This pack size is used by

single/bachelors for individual cooking or as
emergency fuel back-up by households. It is a low
sale product.
 12 KG Pack Size: This is the most popular and

available pack size. It is widely used in the unitary
family based households in Bangladesh. It is a
perfect fit for the monthly consumption of a 4-5
member family. About 2.5 million 12 KG cylinders
are consumed per month in Bangladesh at an
average.
 15-20 KG Pack Size: These packs have been tried

by various LPG operator from time to time to attract the extended families (5-7 members). 20
KG is also used by mobile tea stalls of Dhaka city. These are yet to receive mass popularity.
 30-35 KG Pack Size: The size varies as 30, 33, 35 KG from one LPG Operator to another. Small to
medium restaurants are the main customers of this product line. The existing kerosene fuel
Page | 20
using segment will be targeted primarily by this product line of 33 KG of BM Energy (BD)
Limited. Various SME factories such as bakeries, foam, gaslight factories also use 33KG pack.
 45 KG Pack Size: Medium to big restaurants and SME factories use this product. The existing
kerosene fuel using segment will also be targeted by this product line of 45 KG of BM Energy
(BD) Limited.
4.6.2. MAJOR LPG OPERATORS IN BANGLADESH
LPG industry in Bangladesh is an oligopoly market. There are 6 big operators in the market controlling
almost 97% of the market.
 Bashundhara LP Gas Limited: Bashundhara LP Gas Limited is one of the subsidiaries of

Bashundhara Group and the first private LP Gas bottling and
marketing company in Bangladesh. The company is marketing
and distributing their product in the brand name of
‘Bashundhara LP Gas’ in glossy red color and set to introduce a
new brand cylinder under the name of “Bashundhara Premium
LP Gas” in yellow body color. Bashundhara has 12 KG, 30 KG and
45 KG pack sizes. The company started its operation in the year 1999 and availed the vast
opportunities of the LPG market. The import terminal, storage facility and mother bottling plant
is situated in Mongla Port Industrial Area, Bagerhat. It has own cylinder manufacturing plant
too, located in Mongla. Bashundhara is the market leader in the LPG sector with 25% market
share.
 Jamuna Spacetech Joint Venture Limited: Jamuna Spacetech was

incorporated on August 11, 1998 and started its operations in
2000. Jamuna gas is distributed and marketed throughout the
country in 5.5 kg, 12 kg, and 30 kg pack sizes. The company has the
import terminal and mother bottling plant is situated in Mongla Port Industrial Area, Bagerhat.
Jamuna is now the fourth largest LPG operator of the country with 16% market share.
 Totalgaz Bangladesh: Totalgaz Bangladesh is a subsidiary of

TOTAL S.A., France. It is in the business of import, storage, and
distribution of LPG in domestic and commercial cylinders under
the brand name Totalgaz as well as in bulk to industrial
customers in Bangladesh. Incorporated in 1998, Totalgaz Bangladesh started commercial
operations in August 2002. Totalgaz is one of the leading private LPG Marketer in Bangladesh
with presence in domestic households, commercial establishments, medium and large-scale
industries for various applications. For Domestic and Commercial used, the LPG requirement is
Page | 21
served via cylinders 12 KG, 15 KG and 33 KG pack sizes. Currently Totalgaz has about 8% market
share.
 LAUGFS Gas (Bangladesh) Ltd: Lankan Autogas Filling Station or LAUGFS is a Sri Lankan owned
LPG operator. LAUGFS Gas PLC, own 69% of LAUGFS Bangladesh LP
has acquired the remaining 31% share of Elpigi Sd. Bhd. Malaysia.
The company entered the LPG downstream industry of Bangladesh
in 2001 with the brand name of Kleenheat Gas. It rebranded itself
as Petredec Elpiji in 2013 and as LAUGFS Gas in 2016. LAUGFS has a
storage capacity of 1,800 MT at Mongla port. At present LAUGFS controls 10% of the LPG
market in Bangladesh.
 Omera Petroleum Limited: Omera Petroleum Ltd. (OPL), a subsidiary of MJL

Bangladesh Ltd. (the largest lube oil blending and
marketing company of Bangladesh), is one of the
largest operators in the LPG sector of Bangladesh. In
partnership with European energy giant BB Energy, the
company has installed LPG import and storage terminal with capacity of 3600MT at
Mongla, Bagerhat. Apart from the main installation in Mongla, OPL has established
three other satellite filling and bottling stations located at various strategic locations to
ensure convenience and availability of LPG to its distributors and customers. Omera,
along with BM LPG, has contributed towards revolutionizing the LPG industry in
Bangladesh, making it a mass product. At present, Omera has 19% market share.
 BM Energy (BD) Limited: BM Energy (BD) Limited was formed as a joint venture
between Netherlands & Bangladesh for LPG import, storage,
bottling and marketing in Bangladesh under the brand name-
“BM LPG” in 2012. 51% of the shares are owned by Smart Jeans
Limited, Bangladesh and the other 49% share is owned by renowned
Dutch investor Mr. Bert Pronk. Mr. Bert Pronk is also acting as the
Chairman of the company. The company started its commercial
operation in July 2015. The company has a storage capacity of 6500 MT, the biggest among the
operators in Bangladesh, located in Chittagong. There is another satellite bottling plant at
Purbachal, Dhaka. BM LPG is available in 12KG, 20KG, 33KG and 45KG pack sizes. Currently, the
company has a market share of 20% and is the second largest LPG operator of the country.The
T
current report is based on this company where the intern works.
Page | 22
 Other Operators: Bin Habib, Universal are two private LPG operators who do not have any
storage facility, they procure LPG liquid in bulk from big operators and bottle their cylinders. BPC
also has few cylinders in the market, mostly concentrated in the Chittagong region, is another
and the oldest LPG operator of the country. Recently Beximco LPG (owned by Beximco Group),
Sena LPG (owned by Sena Kallyan Sangstha), Orion LPG (owned by Orion Group) have acquired
LPG operators’ license too. These operators have done soft launching but are yet to create an
impact on the market.
4.6.3. MARKET SIZE
The market size and share of LPG industry in 2016 was as follows:
LPG Operator Annual Sales Volume (MT) Market Share (%)

Bashundhara 100 25%
BM LPG 80 20%
Omera 75 19%
Jamuna 65 16%
Laugfs 40 10%
Totalgaz 30 8%
Others 10 3%
Total 400 100%
The market size is determined by factors like storage capacity, cylinder availability in the market,
number of years in operation etc. The cylinder availability (12 KG pack size) of the LPG Operators is as
follows:
LPG Operator 12 KG Cylinder Availability (Million)

BM LPG 1.7
Bashundhara 3.3
Omera 1.9
Jamuna 2.0
Laugfs 1.1
Totalgaz 1.0
Others 1.0
Total 12
4.6.4. MARKET GROWTH
The demand for LPG has been on the steep rise ever for the last few years. The market growth scenario
is likely to continue in the near future.
Page | 23
Year 2013 2014 2015 2016 2017 2018 2019 2020 2021
Demand (MT) 180,000 240,000 300,000 400,000 420,000 450,000 500,000 550,000 600,000
Supply (MT) 150,000 195,000 250,000 360,000 400,000 440,000 500,000 550,000 625,000
Gap 30,000 45,000 50,000 40,000 20,000 10,000 0 0 -25,000
The following chart shows that the demand has grown tremendously over the last few years. Initially
there has been a supply shortage but it is projected that soon the shortage will be replaced by surplus.
700
Thousands
600
500
400
Demand (MT)
300 Supply (MT)
Gap (MT)
200
100
0
2013 2014 2015 2016 2017 2018 2019 2020 2021
-100
Fig 7: Demand vs. Supply Curve of LPG in Bangladesh
There has been a gap between supply and demand of LPG from the onset of the industry. However, due
to timely planning and policies of the government and subsequent rapid initiative from the private
sector, it is projected that after 2020, there will be surplus.
Page | 24
5. JOURNEY FROM KEROSENE TO LPG
5.1. EXPLORING THE DEMAND SIDE OF KEROSENE IN HORECAS
Kerosene has been a long used fuel in Bangladesh. It is being used for
ages in the country for lighting hurricane lamps, rural torches and
cooking etc.
Kerosene is also used for cooking in rural, semi urban areas. Kerosene
stove is a common picture in many parts of the country. However, it is a
risky medium as the burner may explode anytime. The burner needs to
be pumped manually by hand and is always untidy.
HoReCas use kerosene mainly for the following reasons:
 Lack of awareness about LPG

 Wide availability of kerosene which comes via distributors’
vehicle thereby HoReCas do not need to worry about fuel
transportation
 Kerosene can be purchased in small quantities thereby
economically easier for the HoReCas
Fig 8: A typical kerosene run HoReCa
The detailed usage of kerosene as cooking fuel in HoReCas is shown below:
Kerosene Using Restaurant Count Total

Area (Sq. Population BM Distributor Kerosene
Division
km) (Census 2011) Count Small Medium Large Total Consumption
(Liter)
Dhaka 31,178 51,424,418 65 15,950 5,390 10,560 31,900 84,920
Chittagong 33,909 28,423,019 81 7,200 3,040 5,760 16,000 45,120
Khulna 22,284 15,687,759 30 7,150 3,930 6,820 17,900 53,040
Rajshahi 18,153 18,484,858 20 2,300 760 1,940 5,000 14,280
Barisal 13,225 8,910,219 22 4,100 1,900 3,900 9,900 29,300
Sylhet 12,635 9,910,219 15 3,200 1,640 2,450 7,290 20,370
Rangpur 16,185 15,787,758 17 5,120 2,470 4,420 12,010 34,630
Total 147,569 148,628,250 250 45,020 19,130 35,850 100,000 281,660
 Total Number of Kerosene HoReCas throughout the country: 100,000

 Total Kerosene Consumption per day: 281,660 liter
 Equivalent LPG consumption per day in MT: 225
 So, annual demand of LPG by HoReCas (replacing kerosene) = 81,000 MT
Page | 25
5.2. PROFILE OF THE HORECAS
Criteria Small Medium Large
Fuel Consumption (Liter/month) 30-89 90-149 >150
Initial Investment (BDT) 0-30,000 30,001-2,00,000 >200,000
No. of customers (monthly) 0-7,500 7,501-12,000 >12,000
Sales (BDT/month) 0-90,000 90,001-4,00,000 >4,00,000
Net Profit (BDT/month) 0-30,000 30,001-60,000 >60,000
5.3. COST COMPARISON: KEROSENE VS. LPG
An apple to apple comparative analysis of costing between kerosene vs. LPG is shown below using
heating/calorific value:
Kerosene LPG
1 liter = 0.82KG
1 liter costs = BDT 65 1 KG costs = BDT 80
So, 1 KG costs = BDT 79.30 So, 1 KG costs = BDT 80
1 KG kerosene = 35 MJ calories 1 KG kerosene = 46.1 calories
Cost of producing 1 MJ heat = BDT 2.27 Cost of producing 1 MJ heat = BDT 1.74
Cost of producing 1000 MJ heat = BDT 2,270 Cost of producing 1000 MJ heat = BDT 1,740
Hence, LPG is 31% cheaper than equivalent quantity of kerosene producing equal amount of
heat/calories.
5.4. THE SWITCHING COST: FROM KEROSENE TO LPG
Though LPG is 31% cheaper than equivalent quantity of kerosene, there is the issue of switching cost.
Initially, a commercial kerosene user would require the following minimum amenities for the
conversion:
1) 1 LPG Cylinder (33/45KG): BDT 5000-BDT 6000

2) 1 set double burner: BDT 4000-BDT 5000
Page | 26
So, there is total cost of around BDT 10,000 for the conversion. BM Energy (BD) Limited plans three
alternatives (from cost sharing point of view) as discussed in the later parts of this report.
5.5. THE KEROSENE TO LPG CONVERSION PLAN
BM Energy (BD) Limited has the following plans about the HoReCas. It wants to convert up to 10% of the
currently kerosene using restaurants to LPG.
5.5.1. PLAN A: SUBSIDIZING AND CONVERSION
To convert 10,000 Restaurants from kerosene to LPG within 5 years
Providing free cylinder and burner to the kersone user with agreement to use only
BM LPG for 5 years
To make commercial segment to be 15% of company's total sales volume by 2021
5.5.2. PLAN B: PARTIALLY (ONLY LPG CYLINDER) SUBSIDIZING THE CONVERSION
Providing cylinder and burner at market price to the kersone user and making an
exclusive LPG supply agreement for 3 years
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5.5.3. PLAN C: NOT SUBSIDIZING THE CONVERSION
Providing cylinder and burner at the market price to the kersone user
5.5.4. WEIGHTED AVERAGE CONVERSION PORTFOLIO
The industry experts opine that all three options should be kept open by BM Energy (BD) Limited to
convert the HoReCas from kerosene to LPG. The probable ratio of the three options in likely, favorable
and unfavorable scenarios is projected to be as the following:
Projected Scenario Ratio

Scenarios Plan
Likely Scenario Favorable Scenario Unfavorable Scenario
Fully Subsidized A 40% 30% 50%
Partially Subsidized B 30% 30% 35%
Not Subsidized C 30% 40% 15%
Implementation Ratio 100% 120% 80%
 Projected Scenario Ratio: This signifies the ratio of three options (Plan A, B and C) as predicted to
be implemented under various scenarios. For example: The Likely Scenario is that 40% of HoReCas
will go for fully subsidized conversion from kerosene to LPG, 30% HoReCas will go for Partial
subsidization and another 30% HoReCas will chose not to go for subsidization. Similar explanation
goes for Favorable and Unfavorable scenarios too.
 Implementation Ratio: This ratio indicates the projected percentage of conversion achievement
under various scenarios. For example: Likely scenario is projected to be implemented by 100%,
while Favorable and Unfavorable scenarios will be implemented by 120% and 80% respectively.
A more detailed breakdown of calculation is shown in the Financial Plan part of the report (Chapter 7.3).
Page | 28
6. STRATEGIC ACTION PLAN FOR CONVERTING KEROSENE USERS
INTO LPG USERS AND RETAINING THEM
Before devising a strategic plan to convert kerosene users to LPG users and retain the customer base, it
is imperative that BM Energy (BD) Limited looks at its position and see whether it has the strength to do
what it is planning to do; whether the market dynamics allow BM Energy doing so in an economically
profitable way. The SWOT Analysis and Porters Five Forces Analysis are done to get these insights.
6.1. SWOT ANALYSIS OF BM ENERGY (BD) LIMITED
The SWOT Analysis for BM Energy (BD) Limited has been done below:
Strengths:
 Highest Storage Capacity: BM Energy (BD) Limited has the highest storage capacity of LPG
liquid, 6500 MT in its import terminal in Chittagong and 200 MT in its satellite plant in Dhaka.
This is almost double than that of the second highest competitor. This allows BM the ability of
confirmed supply of products to the customers even when all other operators have shortage.
 Wide-spread distribution network: BM Energy (BD) Limited has the most spread and wide
ranging distribution network in the LPG industry of Bangladesh.
 Strong after sale service team: BM Energy (BD) Limited believes in service. Since the company is
ready to manage after sale operations and problems, it is one of the biggest strengths of the
company.
 Friendly policies adopted by the government towards LPG sector: Since the government wants
to self-dependent in agri-business, the policy formulated by the government is favorable for the
business.
 Diverse B2B connections and a bunch of dedicated & reputed working team: The current
business goodwill and relation with a diverse pool of businesses is core strength for BM Energy
(BD) Limited. The company has a dedicated and reputed working team who are always striving
towards achieving the company’s goals.
Page | 29
Weaknesses:
 New in the market: BM Energy (BD) Limited is comparatively a new-comer to this industry
comparing to other LPG operators like Bashundhara, Jamuna or TotalGaz who have been
operating for more than 15 years . Being new in the market, BM has lesser market experience.
 Less Control on price: Since the market is very much price driven, being a new company it is
difficult for BM Energy (BD) Limited to fight with price considering the fact that the other
companies are already in profit while BM is only in operating profit, its investment has not been
recovered yet.
Opportunities:
 Expected growth of market: The rapid growth in the LPG industry and the emphasis on usage of
LPG in the place of traditional fuels and natural gas along with favorable tax rates will help to
increase the demand.
 Expansion of HoReCa business: Dhaka is such a city which offers no window for activities for its
huge population other than eating out. HoReCa business is on an all-time high boom. New
HoReCas are being set up at every corner of the city. Since no new natural gas connection is
provided, LPG has a huge opportunity in this segment.
Threats:
 Political instability: If the National Parliament Election 2019 is suspended due to political chaos,
the economy is going to take a downturn.
 Induction Burner: Electric induction burner is becoming popular day by day. With the increased
production of electricity, this might be a strong substitute product of LPG in the near future.
 Currency exchange rate: Bangladesh taka (BDT) is a floating currency. If its value is reduced
against US $ or Euro or GBP, the import of LPG liquid may suffer due to price hike. The effect will
be instantly visible in the local market too.
 Introduction of VAT: The government of Bangladesh proposed 15% VAT on LPG in the proposed
budget 2017-18 FY. If this is indeed imposed, there will be an instant price hike on the retail
price of LPG because end users will have to pay the VAT.
Page | 30
6.2. PORTER’S FIVE FORCES ANALYSIS
The Porter’s Five Forces Analysis (developed by Michael Porter) is conducted to attain a better
understanding of the competitive forces acting on BM Energy (BD) Limited’s performance in the
industry.
By analyzing the competitive threats as well as the bargaining power of all parties impacting the firm’s
performance, the extent of industry rivalry may be determined.
 Threat of New Entrants: High barriers to entry make this industry relatively difficult to enter. There
are high capital requirements for new entrants this industry since it’s mostly import-based. Also,
licensing fee is very high. It is very important to have a foreign collaboration with a renowned LPG
supplier. Moreover, those interested in pioneering locally-produced LPG are likely to face very high
initial costs for setting up a factory and premises along with acquiring technology through foreign
collaboration or Joint Venture.
 Threat of New Substitutes: The major substitute in the industry is the traditional fuel such as
kerosene, wood, dry bushes, electric induction burners where the switching cost is cheaper in short
term but in the long run, it will be more expensive in terms of cost as well as productivity.
Page | 31
Conversion to LPG is a one-time investment along with minimum annual maintenance cost, but
there is savings in fuel cost every month.
 Bargaining Power of Suppliers: Few numbers of suppliers and high technical know-how in this
industry have increased their bargaining power significantly. LPG is supplied by Petronus, Shell, BP
and a few other major oil companies in the world. There is also huge reliance on the suppliers
(Parlym-France, Kosan-Denmark, SMPC-Thailand, Maurya Udyog- India) for related accessories and
spare parts. This creates more value for the product, and makes the suppliers more suited to
negotiate prices.
 Bargaining Power of Customers: In the LPG industry, customers tend to have less bargaining power
due to the fact that it is a near non-differentiable product. Therefore, not only do clients pay for the
LPG, but also pay for the expert knowledge on how to run and utilize the burner system in an
efficient manner, ultimately reducing their bargaining power.
 Industry Rivalry: The level of competitiveness and rivalry is high in this industry due to a number of
factors:
Few firms - Oligopoly Market: 6 big LPG operators are currently operating in this industry, making the
market oligopolistic. The same distributors, agents or retailers cater to almost all the companies in the
industry. This increases the tendency for rivalry as they sell almost all the brands at the same price to
the customers. Hence, they tend to sell the product more in which they earn bigger commission/profit.
Low levels of product differentiation - All the operators import the same LPG liquid in bulk, but they are
mostly not differentiated in terms of product utility. In this industry, the price of the products is given
importance and differentiation occurs mostly through wide availability and distribution network as well
as after sale services.
6.3. THE MARKETING PLAN
No other LPG operator has taken special initiative to convert other fuel users into LPG; they just catered
the voluntary LPG users. BM Energy (BD) Limited with its unique idea to cater a completely untapped
market is ideally suited to make a difference.
The business makes a unique value proposition to bring kerosene users under the umbrella of LPG and
engage in a B2B business model via its wide spread distribution system. In addition to providing the LPG
cylinder and burners, the business also commits to provide a dedicated customer service support to
ensure that all kinds of after-sales service and equipment repairing are made in a timely manner.
Page | 32
BM Energy (BD) Limited’s vision is to change the way HoReCas use fuel in Bangladesh, and the
organization believes, that with the prevalent market opportunity that exists, its unique value
proposition will help materialize the ambitious vision. The company’s past experience of establishing
sound relationships with clients is exemplary. This characteristic will help ensure smooth business
transactions with potential client base.
To ensure that the customers do not suffer lack of product the sales personnel of the BM
distributor/retailer regularly visit the HoReCas. Also, the HoReCas have been provided with the contact
number of the local distributor/retailer.
They can call and order for the product
anytime. BM distributor/retailer will deliver
the product to the HoReCa premise within
half an hour time. On top of that, the sales
and marketing team of BM Energy (BD)
Limited periodically visits the HoReCas to
know about their demand as well as get
their feedback.
Closely related to customer attraction and

acquisition is customer retention. BM
Energy (BD) Limited hopes to build enduring
loyalties with these target clients through
the provision of excellent after-sales service
and an annual maintenance contract. This distinct feature
will help ensure that the business model is seamless,
generating a steady flow of customer benefits.
BM Energy (BD) Limited’s promise to making the LPG

industry big in Bangladesh will be demonstrated by its
focus on hiring and training the marketing team to serve
the customers better in the long-run. This key feature will
add necessary boost to the corporation's brand identity in
addition to dealing with quality branded products. To
commensurate the salient resources and activities of the
organization, BM Energy (BD) Limited’s sound track
record sends positive signals across various spheres in the
above model to herald a new era of change in
Bangladesh’s HoReCa industry.
Fig 9: A Typical LPG Run HoReCa
Page | 33
6.3.1. MARKETING OBJECTIVES
Below are the objectives of the plan:
To educate the customers (HoReCas) about the core benefits of LPG and show the
comparason of costing between kerosene and LPG
To educate the HoReCas about the after sales service of BM Energy (BD) Limited
To ensure a seamless distribution of products to the HoReCas
To create a top-of-mind positioning of the brand in consumer’s mind
6.3.2. PRODUCT DIFFERENTIATION
Strong Customer Service Team: The main objective of BM Energy (BD) Limited is to cater the untapped
market and become the market leader in the commercial segment. In order to achieve this, BM Energy
(BD) Limited has created an excellent customer service unit. This will be one of the most developed
service providing units in the LPG industry of Bangladesh. This service will distinguish BM Energy (BD)
Limited from other competitors.
Some of the features of the after sales customer service team are:
 24/7 on call trouble shooting on demand
 Maintenance crew who will service gas burners and connection after every period of time
 All cases of trouble will be recorded and looked into so that these problems are notified to the
manufacturer and more care can be taken while installing. These records will also serve as a
guide to solving future maintenance issues
These features would most definitely increase the client’s confidence on the equipment supplied and
would convince them that this is the best buy.
Page | 34
7. FINANCIAL PLAN
7.1. KEY ASSUMPTIONS
Parameter Value
Average effective time per restaurant in year 1 (months) 6.5
Average monthly rotation (cylinder count) 3
Cylinder size (KG) 33
Annual average consumption (rounded) of LPG (KG) per restaurant in year 1: 215
Annual growth rate in consumption: 2%
Product cost per KG in year 1: 60
Cost inflation p.a.: 2%
Selling price per KG in year-1: 80
Annual growth rate in selling price: 2.3%
7.2. FINANCIAL MODELING
7.2.1. PLAN A: BM ENERGY PROVIDES FREE CYLINDER AND BURNER TO THE

RESTAURANTS
Parameter Value
Projected Conversions in 5 years (count) 10,000
One time investment of BM LPG per restaurant (1pc 33 cylinder, 1 pc burner) 10,000
Total Investment (BDT) 100,000,000
Annual average consumption of LPG (KG) per restaurant in year 1 215
Total Consumption (KG) 2,150,000
Average Selling Price of LPG (BDT/KG) 80
Total Revenue (BDT) 172,000,000
Average Cost Price of LPG (BDT/KG) 60
Total COGS (BDT) 129,000,000
Gross Profit (BDT) 43,000,000
PBP (Months) 28
IRR 66%
NPV 22,612,894
Page | 35
This is a positive NPV investment and Pay Back Period is also 28 months. Hence, this one time
investment model can be utilized. This model will ensure that maximum number of restaurants get
converted because BM Energy will pay the entire amount required for the conversion. Also, due to
entering into a written agreement that the converted HoReCas will have to use BM LPG for at least 5
years from the date of conversion, a guaranteed pool of sales for the period is ensured. A banner will be
hoisted mentioning that “the setup belongs to BM LPG”. A detailed image is inserted into the appendix.
7.2.2. PLAN B: BM ENERGY PROVIDES CYLINDER FOR FREE AND BURNER AT MARKET
PRICE
Parameter Value
One time investment of BM LPG per restaurant (1pc 33 cylinder) 5,000
PBP (months) 14
IRR 56%
NPV 1,933,242
This is a positive NPV investment and Pay Back Period is also just 14 months. Hence, this one time
investment model can be utilized. However, this model cannot ensure that maximum number of
restaurants get converted although BM Energy will pay the half the amount required for the conversion.
5000 HoReCas will be converted through this scheme in 3 year. Also, due to entering into an agreement
that the converted HoReCas will have to use BM LPG for at least 3 years from the date of conversion, a
guaranteed pool of sales for the period is ensured.
Page | 36
7.2.3. PLAN C: BM ENERGY PROVIDES CYLINDER AND BURNER TO THE RESTAURANTS
AT MARKET PRICE
BM Energy does not provide anything for free; rather the HoReCas collect the cylinder and the burner at
the market price, from BM distributor or retailer. The initial investment requirement is zero, but the rate
of conversion from kerosene to LPG will be lower. Also, BM cannot enter into an agreement about the
usage of BM LPG. The HoReCas will have the option to switching to any LPG brand he prefers depending
on price and other factors.
Parameter Value
Total Consumption (KG) 645,000
Since there is no question of investment, this option is an outright profit earner. However, only 30% of
the coveted number of conversions can be achieved and guaranteed sale to the converted HoReCas
cannot be ensured.
Page | 37
7.3. INCOME STATEMENT
7.3.1. THE LIKELY SCENARIO
The likely scenario considers that 40% of the converts will be selecting Full subsidized model, 30% will
chose partial subsidized model and 30% will go for no subsidizing. 100% of the converts will take place.
Total conversion: [(40% of 10,000) + (30% of 5,000) + (30% of 3,000)] X 100% = 6,400 HoReCas will be
converted in 5 years.
Particulars Annual Details (BDT)

Year: 1 2 3 4 5
Revenue: 2017 2018 2019 2020 2021
Sales Turnover- Fully Subsidized 68,800,000 140,352,000 210,528,000 280,704,000 350,880,000
Sales Turnover- Partially Subsidized 25,800,000 52,632,000 78,948,000 105,264,000 131,580,000
Sales Turnover- Not Subsidized 15,480,000 31,579,200 47,368,800 63,158,400 78,948,000
Net Revenue 110,080,000 224,563,200 336,844,800 449,126,400 561,408,000
Cost of Goods Sold:

COGS- Fully Subsidized 51,600,000 105,264,000 157,896,000 210,528,000 263,160,000
COGS- Partially Subsidized 19,350,000 39,474,000 59,211,000 78,948,000 98,685,000
COGS- Not Subsidized 11,610,000 23,684,400 35,526,600 47,368,800 59,211,000
Total COGS 82,560,000 168,422,400 252,633,600 336,844,800 421,056,000
Gross Profit 27,520,000 56,140,800 84,211,200 112,281,600 140,352,000
Salaries & Wages 2,400,000 2,448,000 2,496,960 2,546,899 2,597,837

Selling & Admin Expenses 1,000,000 1,020,000 1,040,400 1,061,208 1,082,432
Other Overhead Expenses 100,000 102,000 104,040 106,121 108,243
Pay Back of Initial Investment 9,500,000 9,690,000 9,883,800 10,081,476 10,283,106
Operating Cost 13,000,000 13,260,000 13,525,200 13,795,704 14,071,618
Operating Profit 14,520,000 42,880,800 70,686,000 98,485,896 126,280,382
Interest Expense (10%) 950,000 969,000 988,380 1,008,148 1,028,311
Net Profit before Tax 13,570,000 41,911,800 69,697,620 97,477,748 125,252,071
Tax Rate (39%) 5,292,300 16,345,602 27,182,072 38,016,322 48,848,308
Net Income After Tax 8,277,700 25,566,198 42,515,548 59,461,427 76,403,764
Appropriation:
Cumulative Retained Earnings 8,277,700 33,843,898 76,359,446 135,820,873 212,224,636
Closing Balance 8,277,700 33,843,898 76,359,446 135,820,873 212,224,636
Page | 38
7.3.2. THE FAVORABLE SCENARIO
The favorable scenario considers that 30% of the converts will be selecting Full subsidized model, 30%
will chose partial subsidized model and 40% will go for no subsidizing. 120% of the converts will take
place.

Year: 1 2 3 4 5
Revenue: 2017 2018 2019 2020 2021
Net Revenue 117,648,000 240,001,920 360,002,880 480,003,840 600,004,800
Cost of Goods Sold:

Total COGS 88,236,000 180,001,440 270,002,160 360,002,880 450,003,600
Gross Profit 29,412,000 60,000,480 90,000,720 120,000,960 150,001,200
Salaries & Wages 2,400,000 2,448,000 2,496,960 2,546,899 2,597,837

Operating Cost 12,500,000 12,750,000 13,005,000 13,265,100 13,530,402
Interest Expense (10%) 900,000 918,000 936,360 955,087 974,189
Tax Rate (39%) 6,244,680 18,069,667 29,663,150 41,254,501 52,843,678
Appropriation:
Closing Balance 9,767,320 38,030,133 84,426,342 148,952,614 231,605,545
Page | 39
7.3.3. THE UNFAVORABLE SCENARIO
The unfavorable scenario considers that 30% of the converts will be selecting Full subsidized model, 30%
will chose partial subsidized model and 40% will go for no subsidizing. 80% of the converts will take
place.

Year: 1 2 3 4 5
Revenue: 2017 2018 2019 2020 2021
Net Revenue 99,072,000 202,106,880 303,160,320 404,213,760 505,267,200
Cost of Goods Sold:

Total COGS 74,304,000 151,580,160 227,370,240 303,160,320 378,950,400
Gross Profit 24,768,000 50,526,720 75,790,080 101,053,440 126,316,800
Salaries & Wages 2,400,000 2,448,000 2,496,960 2,546,899 2,597,837

Operating Cost 12,900,000 13,158,000 13,421,160 13,689,583 13,963,375
Interest Expense (10%) 940,000 958,800 977,976 997,536 1,017,486
Tax Rate (39%) 4,261,920 14,199,869 23,942,468 33,682,865 43,421,016
Appropriation:
Closing Balance 6,666,080 28,876,131 66,324,607 119,008,063 186,922,986
Page | 40
8. REMARKS
“Taking the market factors into account, the LPG to kerosene conversion program by BM Energy (BD)
Limited is a safe business venture”, says the LPG industry experts. There is an untapped market with
huge market demand and growth potential.
As LPG is way cheaper (31%) than kerosene and also easier to handle and operate, HoReCas are
increasingly converting into LPG. However, there is a switching cost, around BDT 10,000 per conversion.
Hence, BM Energy (BD) Limited came up with three different product offerings to cater the converting
and potentially convertible HoReCas. Also, comprehensive distribution network, wide availability of
product will ensure customers have easy access to BM LPG.
Subsidized conversion facility will help to convert a greater number of HoReCas and keep them engaged
to BM Energy (BD) Limited for longer period of time. A strong after sales service team will play a vital
role in retention of the customers. The financial stress testing shows that this is a going to be a
profitable venture.
However, if the business continues to earn losses, as a contingency, BM Energy (BD) Limited can stop
the subsidized model and continue with the non-subsidized business model which does not require any
investment from the company.
The human resource pool can be transferred to the existing

household focused business which is well established at the
moment and has the second largest market share.
The image at the right shows the visible shift from LPG to
kerosene as published by the Daily Star newspaper (21-Mar-
2017, page 1). Previously the van puller delivered kerosene
using his customized vehicle. Now that LPG is the more
popular fuel, he has made provisions to carry LPG cylinders
too. Fig 10: Visible shift from Kerosene to LPG
Finally, the visionary leadership of the company will ensure that the organization moves in the right
direction. They will be ably assisted by the Sales team and Marketing team who are adroitly looking after
the project. The foraying into the conversion of kerosene users into LPG is in line with the organization's
goals, expertise and falls within company’s core competency.
With respect to the on-going broader HoReCa business environment in the country, there is little
wonder that this will make a huge impact in the near future. And in light of that, BM Energy (BD) Limited
has just the right connections, resources and reasons to justify the niche capture drive of this much
talked about and govt. emphasized future fuel of Bangladesh.
Page | 41
9. BIBLIOGRAPHY
1. Hossain & Hasan (2014), Information Systems (IS) In The Supply Chain Management (SCM): A
Case Of Liquefied Petroleum Gas (LPG) Of Bangladesh. Retrieved 2017-05-15.
2. Elahi, M. (2013), “LPG- An Alternative Fuel In Bangladesh”, ICMERE 2013. Retrieved 2017-05-15
3. Md. Saidul Islam (June 15, 2013), “Autogas Business Prospect In Bangladesh”, Seminar,
organized by Petredec Elpiji Limited, BCICC. Retrieved 2017-05-15
4. Tamim, M., (2013), “LPG-An Alternative Fuel in Bangladesh”, seminar, 7th July, organized by
Mechanical Engineering Division, IEB, Bangladesh. Retrieved 2017-05-15
5. Farhana, N., & Islam, S. (2011). Exploring Consumer Behavior in the Context of Fast World
Journal of Social Sciences, Vol. 1, No. 1 , 107-124. Retrieved 2017-05-15
6. ADEME (Agence de l’Environnement et de la Maîtrise de l’Energie). Retrieved 2017-05-15
7. JICA (2012), Survey on Bangladesh Natural Gas Sector. Retrieved 2017-04-14.
8. LPG Usage Strategic Paper, 2014 by Govt. of Peoples’ Republic of Bangladesh. Retrieved 2017-
04-14.
9. http://www.theindependentbd.com/printversion/details/73810. Retrieved 2017-04-14.
10. http://dailyasianage.com/news/9197/nasrul-advises-domestic-users-to-shift-to-lpg. Retrieved
2017-04-14.
11. http://www.thedailystar.net/business/lpg-market-heat-1215178. Retrieved 2017-04-14.
12. http://www.newstoday.com.bd/index.php?option=details&news_id=2446869&date=2016-07-
12. Retrieved 2017-04-14.
13. http://www.bpc.gov.bd/contactus.php?id=39. Retrieved 2017-04-14.
14. Alvi, Moin ud-Din. "Aerosol Propellant | Aerosol Propellant Gas | Aerosol Supplies Dubai –
Brothers Gas". www.brothersgas.com. Retrieved 2017-04-14.
15. "Liquefied Petroleum Gas Specifications and Test Methods". Gas Processors Association.
Retrieved 2017-05-18.
16. "LPG Profile" Horst Bauer, ed. (1996). Retrieved 2017-03-30.
17. http://epaper.thedailystar.net/index.php?opt=view&page=1&date=2017-03-21. Retrieved
2017-03-30
18. http://www.thedailystar.net/supplements/4th-asia-lpg-summit17. Retrieved 2017-03-30
Page | 42
10. APPENDIX
10.1. THE QUESTIONNAIRE
[A questionnaire survey was used to profile the HoReCas]
Please answer the following questions:
1. Name of HoReCa:____________________________________________________________
2. Location of HoReCa:__________________________________________________________
3. Fuel (s) Used: i) LPG ii) Kerosene iii) Natural Gas iv) Others
4. Burner Count: i) 1 ii) 2 iii) 3-5 iv) >5
If kerosene fuel is used, please proceed to the next questions:
5. Monthly kerosene consumption (liter):

i) <30 ii) 30-89 iii) 90-149 iv) >150
6. Customers catered per month (count):
i) 0-7,500 ii) 7,501-12,000 iii) >12,000
7. Number of staffs at the HoReCa (count):
i) <5 ii) 5-10 iii) 10-20 iv) >20
8. Monthly Sales Volume (BDT): (If possible get the approximate figure)
i) 0-90K ii) 90K to 400K iii) >400K
9. Monthly Expenditure (BDT): (If possible get the approximate figure)
i) 0-60K ii) 60K-300K iii)>300K
10. Are you willing to switch to LPG?
i) Yes iii) No
If yes, please proceed to the next question:
11. What kind of support do you want to switch to LPG?
i) Easy Availability ii) Delivery to Point iii) Subsidized Cylinder iv) Subsidized Burner
--------Thank you for your cooperation--------
Page | 43
10.2. TECHNICAL DETAILS OF BM LPG CYLINDERS
10.2.1. 12KG PACK SIZE
Page | 44
Page | 45
10.3. VISITING CARD OF THE INTERN
Page | 46
10.4. DETAILED FINANCIAL PLAN
10.4.1. BASIC ASSUMPTIONS
Parameter Value
Average effective time per restaurant in year 1 (months) 6.5
Average monthly rotation (cylinder count) 3
Cylinder size (KG) 33
Annual average consumption (rounded) of LPG (KG) per restaurant in year 1: 215
Annual growth rate in consumption: 2%
Product cost per KG in year 1: 60
Cost inflation p.a.: 2%
Selling price per KG in year-1: 80
Annual growth rate in selling price: 2.3%
10.4.2. PLAN A: BM ENERGY PROVIDES FREE CYLINDER AND BURNER TO THE

RESTAURANTS
Parameter Value
One time investment of BM LPG per restaurant (1pc 33 cylinder, 1 pc burner) 10,000
PBP (Months) 28
IRR 66%
NPV 22,612,894
Year Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Cash Flows (BDT) -100,000,000 34,400,000 68,800,000 103,200,000 137,600,000 172,000,000
Page | 47
This is a positive NPV investment and Pay Back Period is also 28 months. Hence, this one time
investment model can be utilized. This model will ensure that maximum number of restaurants get
converted because BM Energy will pay the entire amount required for the conversion. Also, due to
entering into an agreement that the converted HoReCas will have to use BM LPG for at least 5 years
from the date of conversion, a guaranteed pool of sales for the period is ensured.
10.4.3. PLAN B: BM ENERGY PROVIDES CYLINDER FOR FREE AND BURNER AT MARKET
PRICE
Parameter Value
One time investment of BM LPG per restaurant (1pc 33 cylinder) 5,000
PBP (months) 14
IRR 56%
NPV 1,933,242
Year Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Cash Flows (BDT) -25,000,000 7,166,667 14,333,333 21,500,000 28,666,667 35,833,333
This is a positive NPV investment and Pay Back Period is also just 14 months. Hence, this one time
investment model can be utilized. However, this model cannot ensure that maximum number of
restaurants get converted although BM Energy will pay the half the amount required for the conversion.
5000 HoReCas will be converted through this scheme in 3 year. Also, due to entering into an agreement
that the converted HoReCas will have to use BM LPG for at least 3 years from the date of conversion, a
guaranteed pool of sales for the period is ensured.
Page | 48
10.4.4. PLAN C: BM ENERGY PROVIDES CYLINDER AND BURNER TO THE RESTAURANTS
AT MARKET PRICE
BM Energy does not provide anything for free; rather the HoReCas collect the cylinder and the burner at
the market price, from BM distributor or retailer. The initial investment requirement is zero, but the rate
of conversion from kerosene to LPG will be lower. Also, BM cannot enter into an agreement about the
usage of BM LPG. The HoReCas will have the option to switching to any LPG brand he prefers depending
on price and other factors.
Parameter Value
Total Consumption (KG) 645,000
Since there is no question of investment, this option is an outright profit earner. However, only 30% of
the coveted number of conversions can be achieved and guaranteed sale to the converted HoReCas
cannot be ensured.
Page | 49
10.5. BANNER/SHOP SIGN HOISTED AT SUBSIDIZED HORECA
The below shop sign or banner will be placed in the HoReCas who will go for fully or partially subsidized
models (Financial Plans A & B). There will be a written agreement between BM Energy (BD) Limited and
the particular HoReCa about the tenure of agreement and other terms and conditions. This banner/shop
sign will also help the branding of the company.
This LPG Setup is owned by
BM Energy (BD) Limited
HoReCa Code: XYZ-ABC
Page | 50

Conversion of Commercial Kerosene Users To LPG Users - A Business Case For BM Energy (BD) Limited

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Submitted to:

Syeda Mahrufa Bashar

H.M. Rawfun Elahe

Institute of Business Administration

Ms. Syeda Mahrufa Bashar

Subject: Submission of Internship Report

For any further query, I shall be available at your convenience.

ORIGIN OF THE REPORT

BM ENERGY (BD) LIMITED

The company is exclusively set up to import, bottle, market and distribute

2. The Study .............................................................................................................................................. 5

3. The LPG Industry ................................................................................................................................... 7

4. LPG Industry in Bangladesh................................................................................................................. 10

5. Journey from Kerosene to LPG ........................................................................................................... 25

7. Financial Plan ...................................................................................................................................... 35

10. Appendix ............................................................................................................................................. 43

1. Fig 1: A LPG Storage Facility (Bullet Type)………………………………………………………………………………..4

Fig 1: A LPG Storage Facility (Bullet Type)

2.1. OBJECTIVES OF THE STUDY

2.1.1. BROAD OBJECTIVE

2.1.2. SPECIFIC OBJECTIVES

The specific objectives of the study were as follows:

 To explore the demand dynamics of kerosene in commercial usage by HoReCas (restaurants,

2.2. SCOPE OF THE STUDY

2.3.1. SECONDARY STUDY

2.3.2. PRIMARY RESEARCH

2.3.4. DEFINITION OF THE PO PULATION

The major players of this exercise include:

3. THE LPG INDUSTRY

3.1. THE PRODUCT - LPG

3.2. COMMON USAGE OF LPG

 Household Cooking: LPG is used for cooking for economic reasons,

 Commercial Cooking at HoReCas: Hotels, restaurants, cafes, tea

 Motor Fuel (Autogas): When LPG is used to fuel internal

Faster cooking due to higher heating/calorific value

Stable supply & price in the international market

Environment friendly nature of the fuel, lesser CO2 emission

Competitive market due to open and developed private sector investment

LPG is more engine friendly to vehicles than CNG/Octane

Car conversion to LPG is much cheaper than conversion to CNG

Omera LPG & BM LPG

Fig 2: A Flowchart Showing Development of LPG Industry in Bangladesh

4.1. PESTEL ANALYSIS OF BANGLADESH LPG INDUSTRY

•Expected growth in the industry in the next decade or so

 Socio-cultural: Security is an essential facet of every business and workplace. Emphasis on

4.2. THE LPG VALUE CHAIN IN BANGLADESH

Distributors lift product from BM factories & store in their warehouses

Distributors supply product to the retailer points (sometimes directly to

Retailers supply product to the HoReCas (& other customers)

4.3. SYNTHESIS USING TRIPLE-TRIANGLE FRAMEWORK

With the synthesis of the findings of

In the innermost triangle, the

In the second triangle, the business

In the third and outermost

4.4. EXPLORING THE DEMAND SIDE OF LPG IN BANGLADESH

Estimated count of Projected Demand

4.5. THE SUPPLY SIDE OF LPG IN BANGLADESH

Fig 5: International Price (CP) of LPG from ’14 to’16

LPG Operator Storage Capacity (MT)

Fig 6: LPG Storage Facility (Sphere Type)

4.6.1. TYPICAL LPG CYLINDERS FOR BANGLADESH MARKET

 5.5 KG Pack Size: This pack size is used by

 12 KG Pack Size: This is the most popular and