LPG is a derivative of two large energy industries: natural gas processing and crude oil refining. When natural gas is drawn from the earth, it is a mixture of several gases and liquids. Methane, which is sold by gas utilities as “natural gas,” constitutes about 90 percent of this mixture. The remaining 10 percent, 5 percent is propane and 5 percent is other gases such as butane and ethane. Before natural gas can be transported or used, the gases (which are slightly heavier than methane, the major component of natural gas) are separated out. Depending on the “wetness” of a producing gas field, gas liquids generally contain 1%-3% of the unprocessed gas stream. Some LPG is also trapped in crude oil. In order to stabilize the crude oil for pipeline or tanker distribution, these “associated” or ”natural gases” are further processed into LPG. Worldwide, gas processing is a source of approximately 60% of LPG produced.

In crude oil refining, LPG is the first product produced on the way to making the heavier fuels such as diesel, jet fuel, fuel oil, and gasoline. Roughly 3% of a typical barrel of crude oil is refined into LPG, although as much as 40% of a barrel could be converted into LPG. Worldwide, crude oil refining is the source for the other roughly 40% of LPG supplies, although the ratio between gas processing and refining varies among regions. LPG production from these sources is a natural derivative and that means production of LPG is assured since the primary motive for gas processors and refiners is to produce fuels other than LPG, and inevitably LPG is first produced. Although tied to the production of natural gas and crude oil, LPG has its own distinct marketing advantages and can perform nearly every fuel function of the primary fuels from which it is derived.  In Pakistan, there are many gas fields which are used to extract LPG. In Pakistan at present approximately 60% of LPG is produced by gas plants and 40% from petroleum refineries.