Home ›› 16 Dec 2022 ›› News
The government has proposed increasing per cubic metre (m3) gas prices to Tk 40 for industries amid low export orders and high inflation, citing high liquefied natural gas (LNG) prices in the spot market.
Currently, captive power plants pay Tk 16.33 for per m3 gas while it is Tk 11.98 for large industries, Tk 11.78 for medium ones, and Tk 10.78 for small factories.
The new proposal was placed on Thursday at a meeting with stakeholders at the Bangladesh Investment Development Authority office in the capital.
It came at a time when industries are facing severe gas shortages, forcing them to cut their production by up to 40 per cent, and the export sector witnessed negative earnings in September and October this year.
Industry leaders, however, opposed the proposal, saying they will face huge losses. They also said they are willing to pay Tk 22 for per m3 gas if the government can ensure uninterrupted supply.
Bangladesh Textile Mills Association (BTMA) President Mohammad Ali Khokon told The Business Post factory owners cannot afford the government’s proposed price.
“We proposed Tk 22 for per m3 gas, which is affordable for all industry owners. Also, the government will not lose much if this rate is implemented.”
According to Petrobangla, a government-owned oil company, the country currently has 20 operational gas fields with a supply of 2,300 million cubic feet of gas per day (MMcf/d) against the countrywide demand of 3,500 MMcf/d.
To cover this gap, the government signed long-term agreements with Qatar and Oman to import 500 MMcf/d through LNG. Besides, it imported LNG from the spot market on various occasions to increase supply.
However, after Russia invaded Ukraine in February this year, the price of per m3 gas in the spot market rose from $6-7 to $35 while Bangladesh’s forex reserves declined gradually to an alarming level. For this reason, the government stopped LNG imports from the spot market in July to save forex reserves.
Besides, the government failed to import 140 MMcf/d gas under the agreements with Qatar and Oman due to the failure to notify them in advance, which is a required step.
This series of events triggered a severe gas shortage in the country, hitting industries hard.
Current situation
According to the power, energy and mineral resources ministry, the government supplied 3,085 MMcf/d gas to the national grid in June, including 2,341 MMcf/d of domestic supply and 744 MMcf/d of LNG.
That month, the government imported six cargos of LNG as part of the long-term agreements and another three cargos from the spot market.
But when it stopped LNG imports from the spot market, gas supply to the national grid declined to 2,747 MMcf/d in July. This November, the government supplied 2,501 MMcf/d gas to the national grid where 2,133 MMcf/d came from domestic sources and 368 MMcf/d arrived as part of the agreements. That month, the government imported four cargos of LNG.
Five cargos of LNG will arrive this month and the total supply will be 2,755 MMcf/d, the ministry data shows.
Industry gas consumption
The ministry data shows industries used 1,140 MMcf/d gas in February, which was the highest since July last year. Of this, captive power plants used 535 MMcf/d and other entities used 605 MMcf/d.
In October this year, industries used 936 MMcf/d gas. Of this, captive plants used 455 MMcf/d and other entities consumed 481 MMcf/d.
Bangladesh Knitwear Manufacturers and Exporters Association Executive President Mohammad Hatem told The Business Post industrial zones have been identified and the government can now easily set up industrial pipelines to ensure uninterrupted gas supply.
“Gas is the lifeblood of industries. If the government sets up separate gas lines for industries, it will be able to ensure uninterrupted gas supply to us. In that case, the government will have to import LNG only to meet supply shortages in industries, if any.”
“We agree to contribute if the government takes initiatives to set up a separate gas line for industries,” Hatem added.
Govt’s proposal
Thursday’s meeting sources said domestic production of gas will not increase from the existing 2,300 MMcf/d even next year.
Besides, LNG imports will not increase next year, except in April and July. That is why gas supply to the national grid will be severely hampered in 2023, something that happened
in the second half of this year.
However, the government has taken steps to drill 46 wells, which will continue till 2025. The initiative will help increase gas supply to the national grid gradually.
To meet the existing demand, the government has proposed importing eight cargos of LNG in 2023 from the spot market if industries agree to pay Tk 40 for per m3 gas.
In that case, the government will also be able to make additional profits of Tk 174 crore while revenue will rise by Tk 29,765 crore.
If industries and power plants pay Tk 40 and Tk 10 for per m3 gas respectively, the government will import 12 cargos of LNG from the spot market. This will push up revenue by Tk 28,213 crore while Tk 638 crore will come in extra profit.
If industries and power plants pay Tk 40 and Tk 12 for per m3 gas respectively, the government will import 16 cargos of LNG from the spot market. In that case, the government will lose Tk 2,148 crore despite a Tk 30,508 crore revenue rise.
Besides, the government has proposed importing 24 cargos of LNG from the spot market if industries pay Tk 40 for per m3 gas. But the government will face Tk 20,102 crore losses in that case despite a Tk 31,247 crore increase in revenue.
Hatem said gas prices will fall if the government opts for less revenue, for example by reducing LNG import taxes.
“Besides, gas wastage is a big problem, and the authorities concerned have failed to address that. Why should we pay the price of other people’s
negligence?”
