Home ›› 21 Mar 2022 ›› Front
The purchase of fuel from the spot market to meet the domestic consumption turns out to be cost-intensive, thereby putting a chilling effect on the capacity of the state-owned Petrobangla.
Bangladesh needs 100 million cubic feet of liquefied natural gas daily which costs around Tk 50 crore.
The price is 30 times higher than domestic gas, and four times as much as the price set for a long-term contract.
Economists and energy experts believe that the procurement of such small volume of fuel for daily needs is a threat to the country’s economy.
They say the price of LNG in the spot market has already exceeded $ 56 per million British thermal units (MMBTU) due to the Ukraine war.
As a result, buying LNG from the spot market will cost twice as much, and will further intensify the government inaction on subsidies for the energy sector.
Petrobangla officials, however, say they are facing challenges due to the rising prices of gas and are hard up.
“If not bought again, the country will run the risk of gas shortage from next month,” they warned.
To this end, experts suggested taking steps to operate the long-closed domestic wells to solve the crisis.
Renowned Geologist Professor Badrul Imam told The Business Post that the government is spending around Tk 1,500 crore to buy one cargo of spot LNG (3,000 million cft).
“It is possible to drill 15 exploration wells in the country. There would not have been necessary to import LNG if gas exploration had been going on over the last 10 years,” he opined.
“People have to endure the government subsidy burden if LNG is imported at the current spot price.”
Petrobangla faces price-hike challenge
According to the Centre for Policy Dialogue (CPD), the Asian countries use the highest 70 per cent of LNG in the globe while Bangladesh is the 14th largest LNG importer in the world.
According to Rupantarita Prakritik Gas Company Limited (RPGCL), the daily LNG supply in the country is 692 million cft, with 100 million cft from the spot market.
Petrobangla says it invited tenders in February to buy 13 cargoes of gas from the spot market to meet this year’s gas shortage.
A New Zealand company has already supplied two cargoes of LNG priced at $ 32 per MMBTU (Tk 1,400 crore per cargo).
Several other companies had submitted bid for the remaining 11 cargoes. But the issue is in limbo since the bidders propose high price. After the Russian invasion of Ukraine, the United States has imposed sanctions on Russian oil, gas and coal. As a result the spot LNG price crossed record. The Japan-Korea Marker (JKM), Asia’s largest LNG market, hiked the fuel price from $ 40 to $ 56 per MMBTU this week.
Given the circumstances, Petrobangla is in a fix as about Tk 22,000 crore will be required to buy 11 cargoes of spot LNG at the current price, and the state-owned organisation does not have that sum of money.
A Petrobangla official said they have Tk 13,000 crore to import LNG (spot and long term) this year.
“We have already proposed the energy ministry for fund, but the ministry has informed us of its inability,” he added.
RPGCL General Manager (LNG) Rafiqul Islam told The Business Post that buying spot LNG at the current prices would cost more than Tk 2,000 crore per cargo. “We don’t have that much money. Therefore, it has become difficult to take any decision. Now we have two cargoes. It will end this month. There will be a deficit again,” he said.
Domestic gas field alone can provide 100 million cft
According to Petrobangla, the country’s daily gas demand is 3,000 million cft. The production from IOC and state-run fields is 2,286 million cft.
On the other hand, the daily supply of LNG is about 692 million cubic feet. Of this, 100 million cubic feet is bought from the spot market. Petrobangla says from the third week of March, Chevron will supply another 76 million cft of gas to the national grid from Jalalabad, Moulvibazar and Bibiana gas fields.
The amount of gas produced in the country will stand at 2,382 million cft. Adding 592 million will add up to a total of 2,812 million cft.
An official from Bangladesh Energy Regulatory Commission (BERC) told The Business Post that the 100 million LNG could be produced from domestic wells.
“The work over Sylhet gas field is going on which will produce 50 million cft of gas from next month. Besides, obtaining gas from a few more wells is also in the pipeline. The purchase of spot LNG in a hurry will waste hundreds of crores of taka,” he said, preferring to remain unnamed.
In this regard, Petrobangla Chairman Nazmul Ahsan told The Business Post, “We need a few thousand crores of taka for the current price of gas in the spot market. But we do not have that much money.” “There is, however, no alternative to increasing exploration and extraction of gas in the country for long lasting solution to the fuel crisis.”
LNG import gains upper hand over domestic sources
Various studies have shown that Bangladesh has huge potential for gas resources. The Gas Sector Master Plan-2017 also emphasises increasing domestic gas production, but it is in paper only.
Bapex has dug only 20 exploration wells in the last 12 years. Almost half of the wells in the domestic gas fields have been closed for a long time.
In this situation, LNG is being bought from abroad (11 per MMBTU under long-term contract) since 2018 to meet the gas shortage. Experts however have been criticising the authority’s decision on LNG import from the beginning because of the high price. Noted Economist Anu Muhammad told The Business Post that the economy cannot bear the burden of LNG import. As its price is increasing, electricity generation cost is going up, and so is its price. This is shooting up production cost, and ultimately having an effect on the market.
