Eastern Petroleum, partners plan to put up Asean LPG hub in PH

The Eastern Petroleum Group and its European partners are considering setting up a regional manufacturing hub in the Philippines for a new LPG product in time for the Asean (Association of Southeast Asian Nations) integration in 2015.

Company chair Fernando L. Martinez told reporters that the group was targeting as its initial potential market for  “EC Gas for Eastern Composite” or EC Gas some 500 million customers in Vietnam, Indonesia and the Philippines, with a potential to expand elsewhere. In the Philippines, alone, the potential market is about seven million households.

EC Gas is encased in an innovative plastic composite tank with an automatic shutdown mechanism to ensure the users’ safety. Netherlands-based LiquiGaz will supply the LPG and the tank will be supplied by Norway-based Hexagon Ragasco AS.

“We are encouraging them (partners) to manufacture here so that when 2015 comes for the Asean integration, we will be opening a market of 500 million customers in VIP (Vietnam, Indonesia, Philippines),” Martinez said.

Another benefit for the Philippines in hosting the factory for EC Gas is the eventuality that the product will become cheaper locally. Martinez said EC Gas, which is available in 11 kg. tanks, is sold  at the same price level as existing products but it could be made here if manufactured locally.

“We have a VAT (value added tax) of 12 percent and duties of 15 percent, so we are paying taxes equivalent to 27 percent (of the value) just to bring the product in,” he said.

He said Eastern Petroleum’s partners would test first the Philippine market for household LPG with the commercial launch of EC Gas in September this year.

“The minimum is 500,000 (cylinders) in sales which I think the Philippines can deliver,” Martinez said, adding that the partners might be ready to manufacture in two or three years.

The Eastern Petroleum Group is spending P3 billion to roll out EC Gas. Martinez said the initial investment would fund the opening of 200 outlets for EC Gas by September this year. That number is seen reaching 1,000 by September 2014.

So far the partners have not set a budget for the local manufacturing of EC Gas but they are now looking at sites in the country, Martinez said.

Martinez said Eastern Petroleum and its franchisees would promote EC Gas to consumers who were concerned about safety and were willing to pay  a premium for it.

Data from the National Headquarters of the Bureau of Fire Protection showed that since 2005 until the first quarter of 2013, more than 800 LPG-related fires occurred in the country, making it the third cause of fire after short circuits and faulty electrical wirings and candles and lamps. A yearly average of 100 fires were registered in the last eight years.