Drastic fall in LNG imports

Bangladesh’s import of liquefied natural gas (LNG) fell an astounding 93.77 per cent in 2022, mostly owing to a halt in purchase from spot markets following record price hikes and dollar shortage.

During the period, import of most other fuels has increased significantly to meet the country’s growing demand, shows government data.

However, the country saw a rise in its revenue collection from fuel imports last year, despite a decrease in total purchase by the government.

Natural gas accounts for nearly three-quarters of Bangladesh’s power generation, of which LNG meets nearly 11.5 per cent of the demand.

The government has long-term contracts with Qatar and Oman to import LNG at a low cost of $11-$17 per million British Thermal Unit (MMBtu). But the amount of natural gas available through these contracts is insufficient to fulfil the country’s huge need. To meet the demand, the government has been importing LNG from the spot market through 16 multinational companies at high prices.

Over the years, the country has become more and more dependent on LNG imports to meet its hydropower needs owing to a decreasing domestic gas reserve, growing unviability of coal power, and a lack of alternative renewable energy generation capacity.

But things went a bit awry last year, when summer demand pushed spot prices to record high with the weekly Asian assessment hitting $70.50 per million British thermal units (MMBtu) on August 26, which was three times the low of $23 reached in the week to Jan 21.

In July, when spot prices hovered at over $30 per MMBtu, Bangladesh decided to stop buying LNG from the spot market even amid a crippling energy crisis with resultant power outages to save the country’s foreign exchange reserves.

According to data from the National Board of Revenue (NBR), Bangladesh imported just over 3.12 lakh tonnes of LNG at Tk 1,205 crore in 2022, compared to 50.15 lakh tonnes at Tk 14,877 in 2021.

The fall in import also meant lower revenue collections. NBR collected a total of Tk 2231 crore in revenue against LNG imports in 2021, while the agency collected only Tk 180 crore in 2022.

Overall, year-on-year, Bangladesh imported 47.03 lakh tonnes less LNG in 2022, saving the government Tk 13,671 crore in import expenditure.

Meanwhile, the fall in LNG imports resulted in interrupted gas supply by Petrobangla, the state-owned agency responsible for exploring, producing, transporting, managing and selling oil, natural gas and other mineral resources.

Around 16.62 per cent of the country’s total gas is used by the industrial sector.

Industry leaders reported a lower gas supply, amid power cuts, resulted in production fall of up to 50 per cent in some factories during last July. Some factories were even forced to suspend production.

Lack of sufficient gas also ended up shutting down 30 power stations in the country, further exacerbating the energy crisis.

Bangladesh’s high-dependency on gas is pushing it towards a more severe crisis, according to experts.

According to a Bloomberg New Energy Finance Reports, the country is likely to see gas shortages till 2026.

Aditya Lolla, senior electricity policy analyst, Ember, Asia, said, “Bangladesh aggressively expanded its gas-based generation in the last decade to meet its rising electricity demand. But the country’s domestic gas production is now unable to keep up with the increasing gas demand.”

Revenue growth and increase in other fuel imports

Meanwhile, as LNG imports reduced, Bangladesh stepped up the purchase of other fuels.

According to Chattogram Customs House data, high spirit diesel import increased by 4.54 lakh tonnes in 2022 from 38.07 lakh tonnes in 2021.

Against the imports, the NBR collected a total of Tk 4,631 crore last year, up from the previous year’s Tk 4,188 crore.

In 2022, compared to the previous year, the import of petroleum oil increased by 83.7 thousand tonnes from 14.30 lakh tonnes in 2021. The government spent a total of Tk 3,659 crore to import the fuel in 2021 against which custom revenue was Tk 759 crore. On the other hand, a total of 15.13 lakh tonnes of petroleum oil was imported in 2022 at a cost of Tk 4075 crore, against which the customs collected Tk 845 crore in revenue.

Besides, lubricating oil import increased by 853 tonnes in 2022, pushing up revenue growth to Tk 551 crore from Tk 872 crore in 2021.

Motor spirit import increased by a whopping 4.77 lakh tonnes last year from 2.27 lakh tonnes in 2021. Year-on-year, revenue collection from the imports grew by Tk 288 crore.

Imports of coal also increased in the bygone year. Customs data shows that a total of 36.80 lakh tonnes of coal came through the Chittagong Port in 2022 compared to 29.64 lakh in 2021. The import value of this widely used fuel stood at Tk 5,395 crore last year, leading to a year-on-year revenue growth of Tk 345 crore.

However, furnace oil import declined by 3.86 lakh tonnes in 2022. But revenue from the imports grew due to an increase in import cost and duty. Last year, the NBR collected a total of Tk 6,167 in revenue against a total of 44.70 lakh tonnes of furnace oil import at a cost of Tk 23,271 crore. In 2021, revenue collection against this oil import stood at Tk 3,783 crore.

Despite the rise in revenue collection from the fuel imports, customs officials say it will be difficult to achieve the revenue target for the ongoing fiscal year 2022-23 because of the decrease in imports of many other high-tariff products.

In the first half of the fiscal, the tax administration authority earned Tk 30,180 crore, which is 17.45 per cent less than the target. The target for the whole fiscal is Tk 74,206 crore.

“It is natural that if imports decrease, our duty collection will decrease too. But there is nothing that we can do to increase imports,” Chattogram Custom Commissioner Mohammad Faizur Rahman told The Business Post.

“The dollar crisis has reduced imports of many high-tariff products. But we can try to achieve the goal by stepping up monitoring of duty evasion related activities. That is all we can do,” he added.