Govt suspends new gas connections, load increases amid worsening supply crisis

Inforgraphics: TBS

Highlights: 

• Decision driven by falling domestic production and limited LNG import capacity
• Around 1,857 pending applications remain on hold
• Investors warn billions of taka worth of industrial projects are stuck awaiting gas
• Experts say a third LNG terminal has become critical for future industrial growth

Industries that have already invested heavily and have been awaiting gas connections for some time to start production now take yet another blow: the government has frozen all new industrial gas approvals amid a worsening supply crunch.

With domestic gas output falling and LNG import infrastructure stretched to its limit, state distribution companies have been instructed to halt all fresh connections and load upgrades; the Energy and Mineral Resources Division (EMRD) formally communicated the decision to Petrobangla in a letter issued on 14 July.

Addressing Petrobangla's chairman, the EMRD said, "Due to the continued decline in production from domestic gas fields and the country's dependence on only two floating LNG import terminals (FSRUs), the government has decided not to approve any new gas connections at this moment for any company."

The letter said 1,857 applications for new gas connections remain pending with the country's gas distribution companies.

On 17 July, Petrobangla issued identical directives to Titas Gas, Bakhrabad Gas Distribution Company, Jalalabad Gas Transmission and Distribution System, Karnaphuli Gas Distribution Company, Paschimanchal Gas Company and Sundarban Gas Company, instructing them to suspend approval of new gas connections and load enhancements.

Pending applications in limbo

Monir Hossain Chowdhury, joint secretary (Operations) at the Energy Division, told The Business Standard that businesses continue to apply for new gas connections and load enhancements, but approvals are impossible under the current demand-supply situation.

Asked about the 1,857 pending applications, Monir said the boards of the six gas distribution companies had approved them during the Sheikh Hasina administration without assessing actual gas availability.

"Investors were given hope without considering the supply situation. We have prioritised those applications so gas can be supplied once the country's supply improves," he said.

Petrobangla Chairman Md Abdul Mannan said the restriction applies to all businesses seeking new gas connections or additional gas load.

"Given the country's persistent gas crisis, it will not be possible to approve new applications for either new gas connections or load enhancement," he said.

Petrobangla currently supplies 2,500-2,600 million cubic feet per day (mmcfd) against demand of around 3,800 mmcfd. Of the total, 800-900 mmcfd comes from the country's two floating LNG terminals, depending on weather, with the remainder coming from domestic gas fields.

Factories wait, investment stalls

Business leaders say the decision has stranded billions of taka in industrial investment.

Mustafa Haider, director of TK Group, said two of the company's new factories remain idle because they have yet to receive gas connections.

He said entrepreneurs with billions of dollars tied up in factories awaiting gas are struggling to service bank loans while plants sit idle. Continued suspension of new connections, he warned, would discourage fresh investment and undermine the government's employment objectives.

Khondoker Ahadduzzaman, company secretary of Global Heavy Chemicals Ltd, said the gas crisis has forced the company to slash production of import-substitute products – including caustic soda, hydrochloric acid, bleaching powder, chlorine, sodium hypochlorite and chlorinated paraffin wax – by 85%.

"The limited production we are maintaining with electricity is not enough to cover operating costs, resulting in continuous financial losses," he said.