Harun Ortaç is the chief executive officer (CEO) of United Aygaz LPG Ltd, a joint venture between Bangladesh’s United Group and Türkiye’s Aygaz. In a recent interview with Bonik Barta, he discussed the growth prospects of Bangladesh’s LPG sector, infrastructure and safety challenges, competition in the market, and the role LPG could play in strengthening the country’s energy security.
How do you see the future potential of the LPG sector in Bangladesh? Given that this sector has already contributed significantly to employment, what does its future look like to you?
Let me start with our own journey at United Aygaz. It is a 65-year-old LPG company in Türkiye and the market leader in that sector. Aygaz is part of the Koç Group, which is celebrating its 100th anniversary this year. The Koç Group operates across multiple industrial sectors and is the only Fortune 500 conglomerate in Türkiye. We have a joint venture with Ford through which we manufacture cars, trucks and commercial vehicles. We also have a joint venture with Fiat Stellantis, producing vehicles that we export to Europe and the United States. Through a joint venture with the world-renowned brands Case IH and New Holland, we manufacture tractors in Türkiye. Together with South Korea’s LG, we produce air conditioners. Our subsidiary Arçelik, through its acquisition of Singer Bangladesh, now brings both the Singer and Beko brands to consumers in Bangladesh. So the Koç Group is an internationally well-known group with vast investments both within Türkiye and beyond.
For our LPG business, we looked at various regions around the world — Africa, India and specific countries such as Indonesia, Thailand and Vietnam. Bangladesh was certainly part of that feasibility assessment. Bangladesh is one of the fastest-growing LPG markets in the world. The market here is also quite open, meaning the authorities trust the private sector and play the role of a regulator, which is exactly as it should be. At the same time, the market size had already grown considerably.
That is why we chose Bangladesh as the destination for our first overseas investment. However, before coming here, we wanted a local partner. In our search, we first approached international financial institutions and consultancy firms such as Standard Chartered and HSBC. Naser Ezaz Bijoy, CEO of Standard Chartered Bank, introduced us to United Group. After learning about both groups’ values, principles, ideals and business ethics, the two groups found that they were an excellent match. It was a great combination.
Following this, we launched the joint venture in 2021. We believe strongly in the potential of the LPG sector in Bangladesh. The annual demand and growth rate make this one of the most promising markets. Currently, annual LPG demand in this market stands at 1.7 million tonnes. We expect this figure to reach 2.5 to 3 million tonnes in the coming years. LPG offers a genuinely clean fuel solution for Bangladesh. As the living standards of Bangladeshi people improve, they are moving away from traditional cooking methods and transitioning to LPG. In rural households, LPG use is now commonplace, and it brings with it a safer and more comfortable way of life.
Bangladesh has its own natural gas reserves. But given the size of the country’s economy and industrial sector, natural gas is not sufficient. As a result, LPG is carving out a place in other sectors as an alternative to gas. I believe LPG will play one of the leading roles in ensuring the country’s energy security in the future. That is why we came here. We want to share our 65 years of experience with the industry, consumers and the regulator, BERC. That is why we are very optimistic about the future of the LPG sector in Bangladesh. The trends we are seeing in this sector are quite promising.
How do you view the existing tax structure on LPG imports?
In many countries, LPG is used by lower-income people as an affordable fuel. The LPG sector stands on a solid foundation. Private entrepreneurs have expanded the LPG sector, private investors run the businesses, and the regulatory bodies control them. The same thing is happening in Bangladesh, and I believe this is the most successful model. The situation in Türkiye is similar. Of course, the regulatory authorities need tax revenue to serve the people, so naturally there will be taxes and duties here, but the regulatory authorities will balance these prices keeping in mind the purchasing power of the public. Recently, the authorities made some changes regarding VAT at the import stage. LPG imports have already been kept customs-duty free, which is a significant advantage. So I believe the authorities are doing what is needed for Bangladesh in terms of the tax structure.
Since this is an industry of nearly 1.7 to 2 million tonnes, the authorities need to structure the tax framework in a way that facilitates service to the people. Of course, if taxes were lower, LPG prices could come down further. But the macroeconomic dynamics of this country must also be understood and the need for tax revenue is real.
The issue of LPG storage infrastructure keeps coming up in discussions as it helps reduce costs. The private sector has already built a strong market in the country. Can operators step up further on infrastructure development?
Bangladesh has already built sufficient capacity to operate the LPG sector effectively. Chattogram, Dhaka and Mongla — these three regions function like a triangle. In addition, private investors have already made good investments for the economy, including some satellite plants in the northern region. So what do we need now? We need to improve efficiency in imports. By efficiency, I mean that the depth of Bangladesh’s seaports is comparatively low. This creates obstacles for LPG operators when importing and unloading cargo. Even when large vessels are brought in, the shallow depth of the waterways forces operators to use smaller vessels, or to offload cargo through ship-to-ship transfers at sea, which increases the landed cost of the product. We need to reduce import costs through more efficient management.
What we are trying to do at Chattogram is this — we have a storage capacity of 16,000 tonnes there, which is the highest storage capacity of any single terminal in the country. We also have 3,000 tonnes of storage capacity in Dhaka — so a total of 19,000 tonnes. Our goal is to bring in larger vessels so that we can improve import efficiency and bring costs down. By reducing costs, we are trying to offer the best and most affordable prices to our customers, just as we are doing now.
In terms of storage and infrastructure capacity, can it be said that United Aygaz is the market leader in this sector?
Yes, United Aygaz currently has the largest capacity in this sector. We currently have 19,000 tonnes of storage capacity. We will invest further in Chattogram and Rupganj plants, adding an additional 8,000 tonnes of capacity. We will also invest in the Mongla plant, where an additional capacity of 5,000 to 7,000 tonnes will be created. This will bring our total capacity to 34,000 tonnes.
As the use and growth of LPG increases, the issue of safety and security is coming to the fore in a big way. What kind of work is United Aygaz doing on quality and safety?
We follow the international safety standards that Aygaz has maintained over 65 years. This is a continuous process — building this culture is not easy. From the very beginning of our operations, we have placed a strong emphasis on safety. We have been investing heavily in awareness creation. When no one was willing to invest in safety and awareness, we were running informational and awareness advertisements on television. We showed how to carry LPG cylinders, how to ensure adequate ventilation in areas where LPG is used, how to use safe regulators and hose pipes, and how frequently they need to be replaced. These are extremely important matters, because more than 95 percent of the accidents we see in the market are caused by substandard equipment — substandard regulators or hose pipes that do not meet the required standards. We encourage our customers to use European-standard regulators and hose pipes and to replace them regularly — hose pipes every 3 years and regulators every 10 years — so that LPG use at home is safer. We are investing in this. We are running campaigns, educating people and working in coordination with the Fire Service and Civil Defence Department. Safety has always been our first priority and we will continue working this way.
What is United Aygaz doing to ensure safety standards across the autogas stations it works with?
In Türkiye, we have an autogas market of 3 to 3.5 million tonnes, and it is one of the world’s largest autogas markets, alongside countries such as South Korea, Ukraine, Russia and Japan. Out of 17 million vehicles in Türkiye, 5.2 million run on LPG. It is clean, affordable and effective.
So as the number of LPG-powered vehicles in Bangladesh is growing, we believe this transition will happen here too. Autogas stations should supply safe and affordable fuel while maintaining internationally recognised standards and safety norms, because LPG must be maintained in good and safe condition. Every LPG or autogas station should follow this. We have our own After-Sales Service department. Before we start supplying gas, our representatives visit the station and inspect the infrastructure; if any improvements are needed, they advise accordingly. Only when the equipment is safe and meets our standards do we begin supplying. And regardless of how much gas that station is buying from us, our technical team visits the stations regularly, completely free of charge, checks their systems and takes preventive measures if necessary. Why is this important? Because these stations are located on roadsides or in densely populated areas and they must maintain safety standards. As long as they remain safe, follow the standards and the regulatory bodies monitor them regularly, this will be a game-changing industry for Bangladesh — providing a clean and efficient product.
Both local and foreign companies are operating in the LPG sector in Bangladesh. How do you view this competition? What is the state of competition in the market and are there any challenges?
We love competition. Competition is healthy for every industry. It raises the quality of products, improves service and creates accountability in the market. However, alongside being competitive, it must also be a rational and trustworthy space for investors. If we do something irrational in the name of competition, it will damage the continuity of investment and the overall environment of this industry. So this industry must be healthy and competitive — but the condition is that we must become smarter and more efficient on the supply side and in imports. The real challenge in the days ahead will be maintaining uninterrupted supply. Because if supply is not uninterrupted, the LPG sector will remain stuck at the discussion table. Once supply is stable, we can focus on the market — how we provide better service, how we offer better quality products, and how we take care of our business partners so that they can continue doing business in a healthy way. So it is a long chain. The strength of United Aygaz lies here — Aygaz’s 65 years of global experience and international sourcing network. We believe that with the entry of United Aygaz, the market has become even more competitive. Competition keeps our competitors sharp, and their strength keeps us sharp as well. It is healthy — good for consumers, distributors and the companies themselves.
What kind of advantages, if added, or what obstacles, if removed, would most help in increasing tax revenue and developing this sector?
Recently, we have seen some users shifting towards electric induction cookers and cooking with electricity. If we can continue to develop the LPG industry and more consumers understand the benefits of cooking with LPG, the country’s tax revenues will increase, while pressure on electricity use for cooking declines. These two will go hand in hand. On one hand, it will reduce the burden of subsidies for the economy; on the other, it will increase tax revenue and give people an efficient solution for cooking, driving vehicles or running industrial boilers. So, from the import stage all the way to the consumer level, operators need to work with greater efficiency. As imports increase, revenue will naturally grow. Policy support and incentives to encourage widespread LPG use among the public could be considered. There are examples of this in quite a few countries.