Home ›› 29 Oct 2021 ›› Front
The government subsidy to LNG import is going through the roof as the production of natural gas fails to keep pace with the rising demand.
Sources said some 159 crore and 30 lakh cubic feet of gas is being extracted daily from the country’s gas fields while the demand is about 360 crore cubic feet.
On average, 270 crore cubic feet of gas is being supplied with Liquefied Natural Gas (LNG) and natural gas combined, and as such, there is a shortage of about 90 crore cubic feet of gas.
In the current Fiscal Year 2021-22, a subsidy of Tk 8,500 crore has been allocated for LNG, but about Tk 10,000 crore will be required in six months till December, officials at the Petrobangla said.
“No doubt the subsidy will hit as high as Tk20,000 this fiscal year if the current market price keep going up and government does not adjust the price,” a senior official at the energy and mineral resources ministry told The Business Post.
“We are going to seek Tk10,000 in subsidy for up to December.”
This situation has arisen due to increase in the price of LNG in the international market. The government is buying LNG from the spot market at a very high price to meet the demand.
According to sources in the energy department, currently, the country extracts 1,600 million cubic feet of gas per day. The deficit of 800 to 900 million cubic feet is being made up through import.
A subsidy of Tk 10,000 crore may be required for LNG till December next. If this subsidy is required in the first six months of the financial year, it will take more in the last six months, officials estimate.
In this regard, General Manager (Finance) of Petrobangla Farooq Ahmed told The Business Post as the demand for electricity falls during winter, so does the demand for gas.
“It is not yet clear how much subsidy will be needed for the whole year. However, the more LNG will be bought from the spot market, the more there will be the amount of subsidy,” he said.
LNG prices have risen about seven times due to rising global demand while Russia has cut supplies to Europe. Bangladesh is also bearing the brunt of the high price.
The government says if LNG is sold to traders and industrialists at the price it is importing, the cost of production of their products will be higher. So, it is subsidizing the gas-producing traders-industrialists to reduce the cost of production.
Quizzed, Anisur Rahman, senior secretary to the energy department, maintained that the amount of loss is increasing due to higher purchase price of gas and a lower selling price.
“It requires more subsidies than what is earmarked in the budget. However, if prices continue to rise in the world market, we may have to think about raising its prices,” the secretary gave a hint.
It was learned that on September 22, over 33 lakh MMBtu LNG was imported at $ 29.89 per MMBtu. In just two weeks, a total of over 67 lakh MMBtu of LNG gas was imported from the spot market in two consignments each with 33.60 lakh MMBtu.
Meanwhile, one invoice shows per unit cost $ 35.89 while another $36.95 per unit, suggesting that the average cost is more than $36. LNG is currently being sold in the spot market at between $45 and $50 per unit.
As a result, a new purchase price in the spot market will presumably be high.
The government, however, is buying LNG through a long-term deal at between $26 and $30 per unit from the spot market.
On March 10, it bought LNG from Vital Energy in Singapore at a price of $7.21 per unit.
On condition of anonymity a senior official of Petrobangla’s Financial Management Division said a subsidy of Tk 4,000 crore was sought for LNG imports in September against which the finance department released only Tk 1,000 crore.
“I hope the rest will be available soon. The more it is bought from the spot market, the more there will be the subsidy. A Tk 10,000 crore may be required till December which will be the highest subsidy on LNG imports since 2018,” he explained.
The supply of gas has been strained to normalise the production of electricity that sees a spike in demand in line with increasing temperature.
The government has been keeping the CNG filling stations closed from 6pm to 10pm every day since September 19.
According to the officials of the Department of Fuel and Mineral Resources and Petrobangla, discussions are underway to procure more LNG from two companies in Oman and Qatar through a long-term contract instead of buying the high-priced LNG from the spot market.
If everything goes fine, the unit price of LNG obtained from the two will be between $6 and $10.
