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LNG cost to be 24 times higher than local gas: CPD

Staff Correspondent
14 Feb 2022 00:00:00 | Update: 14 Feb 2022 00:20:17
LNG cost to be 24 times higher than local gas: CPD

The per unit LNG import cost for the 2021-22 fiscal year will be 24 times higher than national production by national companies, according to an estimate by the Centre for Policy Dialogue (CPD).

The financial burden for imported LNG is about Tk 6,500 crore in FY21. The cost will be higher in FY22 due to a rise in LNG prices, said a CPD report based on available secondary information.

At a virtual dialogue on ‘Gas-LNG Debate in Energy Supply: Costs and Consequences of LNG Import for the Power Sector’, organised by CPD on Sunday, speakers said the ongoing gas crisis need to be addressed through short, medium and long term measures.

They noted that the impact of LNG should not be the lone measure rather enhancing efficiency in gas use in power plants, reducing captive power generation, promoting clean-energy based power generation are important to address the crisis.

Bangladesh Energy Regulatory Commission Chairman Abdul Jalil said the country would not need to import LNG if the national grid gas system loss could be brought below 5 per cent. He said the annual system loss is 8-10 per cent.

In the keynote presentation, CPD Research Director Dr Khondaker Golam Moazzem and Senior Research Associate Abdullah Fahad called for revisiting the existing approach on a growing reliance on LNG import for power generation and associated infrastructure development plans.

Increasing LNG imports is going to have significant fiscal-budgetary consequences, they noted.

Chairing the session, CPD’s Executive Director Dr Fahmida Khatun mentioned that in short to medium terms, finding alternate sources of energy to meet the demand seems difficult without LNG import. On the other hand, the power sector has to choose alternative sources to reduce the burden of imported LNG.

“This is an opportune moment to find an alternate solution for the power sector to resort to clean energy,” she said, adding that high import prices will have an adverse impact on consumer’s purchasing power and LNG dependency is not environmentally sustainable.

The CPD study showed that a sharp increase has been spotted in LNG price which led Bangladesh to buy the liquid gas at $35.89 MMBTU and $36.95 MMBTU to maintain October 2021 delivery.

As per the report based on available secondary information, the sharp increase in the spot LNG price led Bangladesh to buy LNG at $35.89 and $36.95 (per cubic metre) for October 2021 delivery.

But the total cost of LNG from spot market at least $75. In FY2020-21, gas was the major energy supply source (46 per cent) as the share of gas-based power plants was reported to be 52 per cent. Former Buet teacher Dr M Tamim emphasised gas exploration.

Dr Badrul Imam, honorary professor of Dhaka University said the current gas price crisis can be linked to the negligence towards the exploration of our own gas sources and recommended increasing exploration pace both in onshore and offshore gas fields.

“Increase in price of gas along with cost of production will be major constraint for textile sector to turn around from the pandemic situation,” said Razeeb Haider, a director of Bangladesh Textile Mills Association.

Imran Karim, President, Bangladesh Independent Power Producers’ Association (BIPPA) said that short-term market issues should not get priority in formulating long-term policies and noted that import of electricity from the neighbouring countries produced by advanced renewable energy based technologies can make renewable energy mix of the country efficient.

Power Cell Director General Mohammad Hossain emphaised both gas and LNG to provide electricity. “Nuclear energy is an option as a cheaper means of electricity production,” he suggested.

BERC Chairman Jalil proposed more government subsidy or less tax/tariff as a short-run measure and recommended increasing the rate of gas field exploration in the medium-run. As a long-term solution, he suggested increasing onshore and offshore gas field study, increasing gas reserve when there is low price in spot market and better maritime transportation system.

The keynote said that in the short-term, LNG imports may need to continue to meet the existing demand-supply gap particularly for sectors where no immediate alternative are available. In short, medium to long term, Bangladesh needs to put emphasis on gas supply from domestic gas reserves.