The regional gas business was worth US$ 520 million in 2004 and is forecast to grow at between 10-11 per cent per year over the next five years. So what is behind this growth and who are the players that are benefiting?
The South Asian market accounts for only one percent of the total global gases business and therefore is very small compared to established markets in North America, Japan and Western Europe. However, over the past decade there has been some significant changes in the supply of gases, particularly in India, which dominates the region, both in the value of the business and the tonnage of gases produced.
BOC has been and remains the major supplier of gases in the region as a whole and the company\\$quot;s success has been based on the entry into these markets in the first half of the 20th Century. While the company has lost its No.1 status in India, it remains the main supplier in Pakistan and Bangladesh. The company continues to operate and develop its business in these countries and has installed new gas production equipment in all countries within the region in the past five years.
Other major companies that are developing business opportunities in the region, particularly in India, include Praxair, Air Products and Air Liquide. Both Linde and Air Liquide have established engineering divisions in the country as well \\$quot;“ to build ASUs for the local market. While the major companies dominate the news and the business, there are a large number of small to medium sized companies that operate in the South Asian region, apart from Sri Lanka. In India alone there are more than 250 gas companies registered in the country, many operating their own small plants for cylinder filling. We have provided below an overview of the structure of supply and what has been happening in the past 18 months.
Bangladesh industrial gas business reached US$ 34 million in 2004///
The industrial gas business in Bangladesh is again relatively small and reached US$ 34 million in 2004. It is not surprising that one company has a major share of the market \\$quot;“ BOC Bangladesh \\$quot;“ which has important production and distribution facilities in the main industrial centres in Bangladesh. There are a number of minor players (8), mainly linked to the relatively active ship-breaking business.
BOC was already in the industrial gas business when the country was East Pakistan but Bangladesh Oxygen was created in 1973 (following independence) and was part owned by BOC and part by the Government. The company had three main sites all having small oxygen generators and acetylene plants for filling cylinders \\$quot;“ at Dhaka, Chittagong and Khulna. In 1985, Bangladesh Oxygen was \\$quot;privatised\\$quot; by going public on the stock exchange \\$quot;“ BOC owning 60 per cent of the equity in the company. The company changed its name to the present BOC Bangladesh in 1995. In 1998, BOC acquired the second largest player in Bangladesh, Hatim Oxygen, to increase its market share in Bangladesh. BOC also has a management contract to operate the ASUs at Cittagong Steel.
There are about eight minor companies operating in the Bangladesh market, mainly to be found in the Chittagong or Dhaka areas. The most notable are Chittagong Oxygen and National Oxygen. Most of the companies operate small gas plants (from China or India) to fill cylinders. These companies are also very focused on the ship-breaking business.
There are also a number of gas cylinder distributors located in the main centres of Bangladesh.
Demand for gas is also geared towards the basic end of the industrial gas applications, such as cutting and welding (especially ship-breaking), steel and engineering and some chemical/pharmaceuticals demand. The demand for more sophisticated gases is relatively limited due to the lack of industrial development in the country. However, we understand that the large gas fields in the Bengal Gulf will attracted increased construction and oil and gas support services, which will boost demand for gases in the coming years.
Indian market totalled US$ 435 million in 2004///
The Indian market totalled US$ 435 million in 2004 and accounts for 84 per cent of the total region. Back in 1995, the market was valued at US$ 280 million, so the Indian market has essentially grown by an average annual rate of five per cent per year (in US Dollar terms). The market has in fact been growing at a faster rate than this but there has been currency erosion against the dollar over that time.
gasworld Magazine has covered India in Edition 1 (page 17) in which we covered the background development of the Indian industrial gases business in which BOC (former Indian Oxygen Ltd) dominated the market for most of the 20th century until the company was restricted from investing by the Indian Government in the 1970s and 1980s to encourage the development of private Indian companies. This all changed in the 1990s, when a new government wanted to encourage foreign investment, which lead to major international companies entering the market in the mid 1990s.
This article covers where the Indian industrial gas market is now and where it is going and who are the \\$quot;˜movers and shakers\\$quot; of this market. The recent AIIGMA meeting (see Edition 10, page 22) gave us a flavour of the optimism in the country, with anticipated double-digit growth for the business over the next five years.
Recent announcements and developments include success for BOC in 2005 with a contract to supply Jindal Steeel with a large ASU at another steel mill located at Bellary. A smaller plant is also being built in Medak to supply the merchant market.
Praxair also announced a large on-site contract with Titan Iron and Steel Company (TISCO) in Jamshedpur. Praxair is also constructing another on-site in Balari. Air Liquide announced last year that it will build a 250 tpd plant at the Asahi Glassworks near Roorkee, 170 kms north-east of Delhi. Most of these plants will have liquid availability to serve the merchant market.
According to Mr Asit Gangopadhyay, marketing director for Praxair India, the demand for gases in India is being driven by the copper, glass, steel and petrochemicals industries. Higher quantities of oxygen are being consumed to produce a ton of steel and increased petrochemical/refining projects is driving the demand for nitrogen.
He stated at the recent AIIGMA conference that the total liquid capacity in India stands at 2 200 tpd but that an additional 1,300-1,500 tpd will be on-stream by 2010. However, there are concerns in the Indian gases business related to availability of power and some regions are experiencing \\$quot;˜brown-outs\\$quot;. This is something the Indian Government needs to invest in.
Demand is also being driven by more sophisticated industries \\$quot;“ such as electronics, nuclear research and the space programme. All these industries demand higher quality and more complex gases. Cryogenmash of Russia has been very much involved in constructing the liquid hydrogen storage tanks at the Indian Space Flight Centre.
According to Spiritus Consulting, demand for gases is likely to increase between 10-12 per cent per year in value terms over the next five years.
Pakistan industrial gases totalled US$ 40 million in 2003///
The Pakistan industrial gas business is relatively small and totalled US$ 40 million in 2003. This market is essentially dominated by BOC Pakistan (70 per cent market), whose presence goes back to the 1930s. The gases business has had a bit of a turbulent time in recent years due to the poor relationship with its larger neighbour, India, and then the problems in Afghanistan, both of which have affected the local currency against the US$. However, the gas companies in the country survive and continue to grow.
In 1958, BOC Pakistan (then named Pakistan Oxygen) became a Public Limited Company when its ownership was restructured to provide 40 per cent to Pakistan Nationals and the structure remains the same today although BOC changed the name to its current form in 1995. BOC has recently completed a new CO2 plant based in Multan. While BOC dominates this market, there are two smaller independent gas companies also operational in Pakistan worth mentioning \\$quot;“ Fine Gas and Bawany Air Products.
Fine Gas is an unquoted public limited company and was established in 1978. The company has an important position in the supply of industrial gases in the Lahore region of Pakistan but has recently expanded into the south of Pakistan. The company is the No.2 player in Pakistan.
Bawany Air Products (BAP) was established in 1978 and the first plant was started up in 1983. The company is listed on the Karachi Stock Exchange. BAP is considered the third largest player in Pakistan.
A number of other smaller independent players did start up operations as a result of the large ship-breaking business but several have either been liquidated or have become distributors. BOC has a number of important production facilities located throughout Pakistan \\$quot;“ namely Lahore, Hub, Karachi and Port Qasim.
The only other gas company that has any significant production capacity is Fine Gas, with locations at Lahore and Karachi. This company has a trading relationship with Air Products Middle East. The three companies mentioned account for 93 per cent of the market in Pakistan. In terms of demand for gases, there are a few on-site supply schemes, all managed by BOC and are related to the refining and chemical sectors.
The market for merchant gases can be described as \\$quot;˜oxygen driven\\$quot; with a number of mini-mills (EAFs) and while there was a significant ship-breaking business this has since declined. The nitrogen market is very under-developed with few applications other than refining/chemicals driving demand.
Demand for CO2 has grown, particularly following the start-up of BOC\\$quot;s CO2 plant as the improved availability has helped promote demand in the country.
Sri Lanka industrial gases is relatively small and reached US$ 8 million in 2004///
The Sri Lankan industrial gas business is relatively small and reached US$ 8 million in 2004. There are only two producers in the market in Sri Lanka, Ceylon Oxygen (owned by Yara Industrial) and Messer. We understand that there could be up to 150 very small distributors of cylinders spread throughout the island.
Ceylon Oxygen was established in the 1930s and was the former BOC owned company before it was nationalised in the 1970s. However, the Sri Lankan Government privatised the company in 1990 and Norsk Hydro acquired 60 per cent of the company \\$quot;“ the rest was launched on the stock market in Colombo. The company is now owned by Norwegian based Yara Industrial following the spin out from Norsk Hydro in late 2004.
Messer entered the market in 1997 when it acquired a small private company. There is one important source of liquid gases \\$quot;“ that belongs to Ceylon Oxygen\\$quot;s ASU supplied by Cosmodyne (Aspen 1000). This is a relatively modern plant as it replaced a very old BOC built unit. Messer does own a small Chinese built facility, which is used to fill cylinders. The Messer Group decided to keep its business in Sri Lanka despite the major divestment programme that took part between 2001 and 2004.
Most gas production facilities are based around the capital Colombo, in the South West of the country, which contains an acetylene plant and some CO2 production facilities. There are a couple of captive plants belonging to fertiliser plant and a small steel facility.
Most demand for gases are related to the basic requirements of cutting & welding but also in food production (inert food atmospheres, medical and beverages).
We believe that consumption in 2005, was boosted following the Tsunami tragedy as there has been an increase in re-construction activity in the country following the damage caused.