Dhaka to seek G2G coal import, investment in solar plants during CA’s visit to Jakarta

Highlights:

• Dhaka to seek Indonesian investment in FSRU, solar plants
• Bangladesh wants to import coal from Indonesia under the G2G agreement
• Investment opportunities in Indonesian coal mines to be explored
• State-owned oil giant Pertamina keen to supply fuel to Bangladesh
• Indonesia deemed to be alternative fuel source amid Middle East volatility
• CA Yunus scheduled to visit Jakarta in mid-August

Bangladesh is gearing up its efforts to foster closer economic ties with Indonesia, with plans to explore investment opportunities in Indonesian coal mines and facilitate the entry of the Southeast Asian country's state-owned oil giant, Pertamina, into Bangladesh's energy market.

According to documents obtained by TBS, these key issues will feature prominently during Chief Adviser Professor Muhammad Yunus's upcoming visit to Jakarta in mid-August.

The visit is seen to be a crucial step in Bangladesh's evolving energy diplomacy as it looks to secure stable fuel sources while rebalancing a heavily skewed bilateral trade equation.

The Ministry of Foreign Affairs has already begun laying the groundwork for the visit, having convened an inter-ministerial meeting on 7 July, chaired by the secretary (Bilateral – East & West), to coordinate agendas across energy, trade and investment portfolios.

According to meeting discussions, the Bangladesh side will explore the opportunity of coal import directly from Indonesia under the G2G agreement.

Bangladesh will also look for Indonesian investment in solar power plants and in Floating Storage and Regasification Unit (FSRU), mooring infrastructure and gas pipelines projects with the estimated cost of $2billion.

In that meeting, ministries and agencies concerned were instructed to submit updated information on these issues by 20 July (today).

Coal import under G2G agreement 

Speaking to TBS yesterday, Energy Adviser Muhammad Fouzul Kabir Khan said Bangladesh is interested in direct government-to-government (G2G) coal imports and investing in Indonesian coal mines. 

"We have long been facing complications with tenders – allegations of manipulation, inflated prices, and substandard coal quality. A G2G arrangement could bypass these inefficiencies," said the adviser, underlining the need for more predictable and transparent procurement.

Indonesian oil giant keen on fuel supply

As part of its push into the Bangladeshi energy market, Pertamina officials held discussions with Bangladesh's energy secretary, expressing their keenness to supply fuel to Bangladesh, a market currently dominated by Middle Eastern countries such as Saudi Arabia, Qatar, and Abu Dhabi, according to Energy Division sources. 

According to BPC data, in the 2023-24 fiscal year, Bangladesh imported 67 lakh tonnes of fuel, including 15 lakh tonnes of crude oil from Middle East countries alone.

In light of geopolitical volatility in the Middle East, Bangladesh is actively seeking alternative suppliers from Southeast Asia, with Indonesia being considered a viable option given its proximity and geopolitical stability.

To further bolster its energy security, Bangladesh is also considering Pertamina as a potential supplier of gasoline, marine fuel, and lubricants. "Our oil imports are overly dependent on the Middle East, which remains geopolitically volatile," said Fouzul. "We are exploring a new window of supply from Southeast Asia as a hedge against possible disruptions."

Policymakers suggest that Pertamina's interest could herald a new era of bilateral energy cooperation, transforming it from mere trade into a strategic partnership. However, observers caution that without a parallel drive to boost Bangladesh's exports to Indonesia, the widening trade imbalance could become a politically sensitive issue. 

Investment in FSRU, solar plants

Power Division officials say the government will encourage the private sector to invest in coal mines, following a proposal already submitted by the Indonesian government. "We are also seeking Indonesian investment in FSRU. Indonesia proposed a joint investment in a coal mine, and we are now exploring that avenue. We are also thinking about the investors –government or private firms," said Fouzul.

According to meeting minutes, Bangladesh aims to make headway in implementing an earlier memorandum of understanding (MoU) for a proposed 500MW solar power plant in Maheshkhali's Matarbari. An MoU between Bangladesh Coal Power Generation Company Limited and PT Power, signed on 15 July, outlines financing of approximately $500 million for this project, with Bangladesh providing the land for the joint venture.

The energy adviser said, "Bangladesh is also reviewing the proposal of an Indonesian company to supply oil and interest in the operation of the Single Point Mooring terminal." 

Pertamina has already submitted a bid for the Operation and Maintenance (O&M) of the Single Point Mooring, which is currently being evaluated by the tender authority, BPC.

To strengthen energy cooperation, the meeting decided to establish a joint working committee in line with an MoU signed in 2023 by then foreign minister AK Abdul Momen and his Indonesian counterpart Retno Marsudi, which emphasised long-term fuel delivery and developing renewable energy sources and power plants in Bangladesh. 

Discussions during the meeting also included possible Indonesian investment in the gas pipeline from Bhola to Barisal, with instructions given for the relevant ministry to provide updates.

Bangladesh-Indonesia trade scenario 

Currently, Bangladesh annually imports around 3.5 million tonnes of coal from Indonesia, worth over $1 billion. However, the trade is heavily tilted against Bangladesh, which exported goods worth less than $64 million to Indonesia in FY23, according to data from the Dhaka Chamber of Commerce and Industry (DCCI). 

In contrast, Indonesia shipped goods worth nearly $3.38 billion to Bangladesh in the same period, mainly palm oil, coal, and refined petroleum.

Trade data shows that while Indonesia's exports to Bangladesh have grown at an annualised rate of 13.6% over the last five years, climbing from $1.89 billion in 2018 to $3.58 billion in 2023, Bangladesh's export basket remains thin, centred on knit T-shirts, jute yarn, and a few apparel items.