Boro braces for fertiliser crisis as govt says gas supply can't be increased
BCIC seeks daily supply of 197mmcfd
Highlights:
- Fertiliser production hit by acute gas shortages before Boro season
- BCIC says factories lack gas to run at full capacity
- BCIC seeks 197 mmcfd of gas daily to run four factories
- Gas shortfall may force higher urea imports, subsidies
- Boro season urea demand far exceeds current production capacity
The fertiliser industry is struggling to maintain production targets due to acute gas shortages although the government promised a smooth supply when it increased LNG prices from Tk16 to Tk29.25 per cubic metre, raising concerns about domestic supply ahead of the critical Boro planting season.
The Bangladesh Chemical Industries Corporation (BCIC), which oversees the country's urea plants, said it is not receiving sufficient gas to operate factories at full capacity.
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In a recent letter, the corporation requested the finance and energy ministries, Petrobangla, and other relevant authorities to ensure a minimum daily supply of 197 million cubic feet of gas (mmcfd) to keep at least four of its five factories operational during the upcoming Boro season.
Without this, the BCIC warned, urea production will fall short of demand, forcing the government to increase imports and raising the overall subsidy burden on the agricultural sector.
From December to March, during the peak Boro period, domestic urea demand is around 15 lakh tonnes. However, current gas allocations would allow annual production of only 9.24-11 lakh tonnes, well below the target.
Energy and Mineral Resources Adviser Muhammad Fouzul Kabir Khan told The Business Standard that supply at BCIC's requested level is currently unfeasible. He added that any shortfall in domestic production will be met through imports.
The adviser noted that, like the fertiliser sector, industries and power plants also face high gas demand. Bangladesh can import 115 LNG cargoes annually, 109 of which have already been brought in this year, leaving no scope to increase imports. Moreover, the national pipeline can deliver a maximum of 1,000 mmcfd.
"Domestic gas demand is around 4,000 mmcfd, but imports can supply only 2,800-2,900 mmcfd. As a result, industries, power plants, and fertiliser factories are all receiving less than required," he said.
However, he assured that food security will not be affected, as urea imports will ensure demand is met.
Target against capacity
BCIC's letter to the secretaries of finance, energy, industry, and agriculture noted that while the national production target for urea is 18 lakh tonnes this year, the current gas allocation permits only two factories, including the Ghorashal plant, to operate, limiting annual output to around 11 lakh tonnes.
The BCIC said prolonged closures for more than half the year have led to the deterioration of valuable machinery. Production capacity of the five plants, originally 31 lakh tonnes annually, has fallen to 20 lakh tonnes due to inactivity. Actual output under the current gas shortage is only 8-11 lakh tonnes per year.
Current capacity at 1.1m tonnes against 1.8m demand
BCIC Chairman Md Fazlur Rahman's letter a high-level committee, comprising officials from finance, energy, agriculture, industry, and BCIC, was formed to assess how imported LNG can be used to keep domestic urea factories operational despite gas shortages.
The committee recommended that four out of five factories be kept running continuously to achieve the 18 lakh-tonne target, requiring a daily supply of 180.81 mmcfd of gas.
Adequate gas through increased LNG imports, the committee said, would boost urea production, save foreign currency, and create employment.
To support the additional LNG import costs, the Bangladesh Energy Regulatory Commission (BERC) raised the gas price for fertiliser plants to Tk29.25 per cubic metre on 23 November.
The BCIC chairman's letter of 23 December said keeping four plants operational would require 197 mmcfd daily, but BERC has authorised only 140 mmcfd.
Domestic gas demand is around 4,000 mmcfd, but imports can supply only 2,800-2,900 mmcfd. As a result, industries, power plants, and fertiliser factories are all receiving less than required.
Under this allocation, only two factories can operate, producing around 11 lakh tonnes, or if the Ghorashal plant is closed, three other factories can operate with a combined output of 9.24 lakh tonnes.
According to the Ministry of Agriculture, urea demand from December to March is approximately 14.5-15 lakh tonnes: 3.18 lakh tonnes in December, 4.23 in January, 4.43 in February, and 2.47 in March.
Factories at low capacity
BCIC's letter further highlighted that gas shortages have disrupted urea production since 2007–08, as plants routinely face supply suspensions from April to November.
Frequent closures have increased per-tonne production costs and caused corrosion and damage to machinery, reducing overall capacity.
The five BCIC plants originally had a combined annual capacity of 31 lakh tonnes against national demand of 26 lakh tonnes. Due to prolonged gas shortages, capacity has dropped to 20 lakh tonnes, with actual output ranging from 8-11 lakh tonnes. The government supplements domestic supply with imports.
The newly established Ghorashal Palash Fertiliser Company, designed to be fuel-efficient and meet foreign debt obligations, cannot be kept idle. Maintaining its 9.24 lakh-tonne capacity requires at least 72 mmcfd daily. The remaining supply should be allocated to Shahjalal, Jamuna, and Chattogram urea factories to meet production targets, according to BCIC.
Gas supply drops to 2,632mmcfd
On 3 January, Petrobangla reported supplying 2,632mmcfd nationwide, of which 930mmcfd came from imported LNG, 1,005mmcfd from Chevron and Tullow, and the remainder from Bapex, Sylhet Gas Field, and Bangladesh Gas Fields Company. Of this, 756 mmcfd went to power generation, 1,439mmcfd to other sectors, leaving fertiliser plants under-supplied.
The five BCIC-controlled factories – Jamuna, Ghorashal Palash, Ashuganj Fertiliser and Chemical, Chattogram Urea, and Shahjalal - require 266 mmcfd daily, but only 180 mmcfd was supplied on 3 January, creating a deficit of 86 mmcfd. Ashuganj has long faced supply interruptions, while Jamuna and Chattogram occasionally experience cuts.
BCIC urges higher trade-gap support
BCIC has also called for an increase in the "trade gap" support. Urea prices are government-regulated and set below production cost, meaning factories operate at a loss.
While the government covers the gap for imported fertiliser, domestic production losses remain largely uncompensated. Reduced gas supply, plant closures, and insufficient trade-gap support have led to liquidity shortages, preventing proper maintenance and replacement of critical equipment.
In 2022, the gas price for fertiliser plants was raised from Tk4.45 to Tk16 per cubic metre, creating arrears of around Tk2,000 crore. To mitigate losses, the agriculture ministry agreed to purchase urea at Tk38,000 per tonne, while the finance ministry covered Tk13,000 per tonne as trade-gap support.
In light of the latest gas price increase to Tk29.25, BCIC has requested that the trade-gap amount also be adjusted to reflect higher costs.
