A year with worst energy crisis

For Bangladesh’s energy and power sector, the outgoing year was the worst in recent memory. A surge in worldwide demand after the Covid-19 pandemic, the Russian invasion in Ukraine, and a prolonged dollar crisis were the main reasons behind the crunch, which ultimately strained an already volatile economy. 

As the crisis grabbed the globe, Bangladesh witnessed a record fuel price hike, 12-13 hours of regulated load shedding, and halt in business operation– all of which caused intolerable sufferings for common people. 

To tackle the crisis, the government amended the Bangladesh Energy Regulatory Commission (BERC) Act, adjusted fuel prices, took initiatives to remove fuel subsidies, introduced drastic austerity measures. Experts fear the situation might worsen next year.

“2023 could be worse for the world, including Bangladesh. The government should focus on timely finishing the construction works of coal-fired and nuclear power plants, and phasing out low efficient power plants. In addition, attention should be paid in domestic gas exploration,” said M Tamim, professor of Bangladesh University of Engineering and Technology.

The war that initiated it all

Right when the world began to recover from a crunch owing to the impacts of the Covid-19 pandemic, the Russian invasion of Ukraine hit the fragile supply chain. Top energy companies began to leave Russia following a flurry of sanctions from Western countries.

On top of it, post-pandemic inflationary pressure took things down a few more notches. Within a few months, gas prices broke records and oil prices hit nearly $140 a barrel as the world fell into a deep energy crisis. Bangladesh, which is highly dependent on fuel import, was no exception.

The country was facing pressure months before the Russia-Ukraine war began. In December 2021, the state-owned Petrobangla, responsible for exploring, producing, transporting, managing and selling oil, natural gas, and its six gas distributors had applied to BERC to increase fuel prices citing an increase in the global market. But the move was heavily criticised by experts.

In a public hearing in March 2022, energy expert Professor M Shamsul Alam said Petrobangla had previously increased gas prices in 2019 with promises to deliver 850 MMcfd of LNG per day. But the agency failed to keep its promises despite a price hike. Also, residential customers were not getting the gas they were billed for.

“Gas prices should be reduced rather than increased,” he said at the time.

Despite the backlash, the government increased the fuel prices again with promises of importing 850 MMcfd LNG.

In the meantime, a strong dollar began to wreak havoc on the country’s foreign reserves in the following months, making it hard to open letters of credit (LCs) for fuel import. Businesses experienced a downfall, cost of living rose, and the government grappled to get a grip on the situation. 

A month after fuel price rose, the government was importing 380 million MMcf/d of gas due to the dollar crisis. 

22.78% gas price hike, scheduled load shedding

By June things were out of hand. Consumers were slapped with a 22.78 per cent natural gas price hike.

According to the Power Division, 24 per cent of the country’s electricity demand is generated from diesel and furnace oil-fired power plants. Besides, 56 per cent power is generated from gas-fired power plants.

In July, prices of diesel per barrel exceeded $140 in the global market.  Furnace oil, coal and LNG prices rose as well.

Amid the price hike and an unstoppable dollar crisis, Petrobangla stopped 100 MMcf/d LNG imports from the spot market, leading to a shortage of gas in the power plants. Besides, a decrease in domestic gas production made matters worse.

Things seemed bleaker when the government shut down the diesel-fired power plants as the cost of power generation increased, leaving the country with a power deficit of 1500-2000 MW.

In response to the situation, the government introduced a two-hour schedule load-shedding nationwide from July 19. But the power outage lasted 12-13 hours per day in different parts of the country. The energy shortage resulted in a production shortfall from residential to industrial factories.

Government also reduced power usage in public offices. Work shifts were adjusted to cope with the situation. Shops in the city were instructed to close down by 8.00pm. Air conditioner use at mosques was barred.

Record fuel oil price hike

In August, the government claimed that Bangladesh Petroleum Corporation (BPC) is making losses in fuel oil and increased the prices by a record 42-43 per cent. 

The government had hoped that the power crisis would improve by October, but in reality, it did not. The situation improved slightly in November when temperatures dropped across the country.

Meanwhile, fuel prices in the country did not fall even as the situation improved in the global market. The decision faced massive backlash from the public and authorities reduced fuel price by Tk 5 per litre in November. But media reports said the reduction was highly disproportionate to the fall in the international market and that BPC is now earning crores in profit. 

BPC chairman ABM Azad recently told the media BPC is making profit in all products except diesel. He also said there is no possibility of reducing the price yet.

A domestic failure?

The power division was awarded the state's highest civilian honour, the Freedom Award, for 100% electrification of the country earlier this year. The government blamed the Russia-Ukraine war for the energy crisis.

But domestic and foreign energy experts argued that the country’s import-dependence on fuel without its own energy exploration was the main problem.

Apart from this, they also blamed the government's mismanagement in the power sector. 

Energy expert Professor Badrul Imam said, “The instability in the world market affected all countries. But the countries that are self-dependent in energy benefited during the crisis.”

He said, “The energy crisis worsened after 2000, as all governments continued to withdraw from their own energy exploration.”

The energy sector is feared to face another big crunch in 2023. Experts recommend taking steps from now on to tackle the looming crisis.

Prof M Tamim said, “Gas prices are currently decreasing slightly in the spot market. But the market will not be stable before 2025. We have to go for long term contracts along with a new floating storage regasification unit to prepare for the crisis.”