Ensuring industrial energy security in Bangladesh
As Bangladesh prepares to become a developing country by 2026 and a developed country by 2041, industrialisation with uninterrupted gas supply is extremely crucial
Energy plays a pivotal role in the industrial and economic development of a country. Natural gas has been the major and proven primary energy source in Bangladesh for the last five decades, contributing to industrial and economic demands.
Estimated daily demand of gas is around 3700 mmcfd against supply of 2900 mmcfd and the gap of supply and demand is increasing.
In light of rising energy demand and dwindling supply, developing an alternative fuel-led energy mix has become essential. The Government has planned a Power Sector Master Plan primarily based on gas, imported fuel, and coal.
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Industry is the second largest gas user after the power sector in Bangladesh. Because of concerns about climate change, the government has reduced its reliance on coal.
As Bangladesh prepares to become a developing country by 2026 and a developed country by 2041, industrialisation with uninterrupted gas supply is extremely crucial.
Given the widespread use of gas across the country, the reserve gas is insufficient to meet our demand.
While the reserve is depleting, our gas exploration fund, gas development fund, and technology engagement are limited.
The growing energy demand for diverse economic operations, as well as household usage, necessitates a blended energy mix to compensate for gas shortages.
We must place a greater emphasis on both LNG imports and the production of alternative fuels such as LPG, as these two types of gases are cleaner hydrocarbons.
Our LNG imports account for 1.2% of global imports, or around 800 mmcfd, while LPG meets around 2% of domestic energy demand. However, the demand for both fuels is increasing.
Our government wants to increase the LNG import to 1500-2000 mmcfd to meet the deficit.
To assess LNG or LPG as an alternative industrial fuel, the government must develop an energy security roadmap supported by a national level expert advisory committee.
Though coal has long been used to meet energy demand in developed countries, the global trend now discourages it because it is not environmentally friendly.
According to the IEA, global coal consumption fell by 7% between 2018 and 2020, while LPG use increased by 5% and LNG saw significant growth.
As a result, despite having a 70 TCF gas equivalent coal reserve in Bangladesh, we are also shifting our focus away from coal and toward other energy sources, including renewable energy.
In this regard, the government has taken a number of initiatives, including imposing discipline in a variety of areas, such as bringing LPG under price regulation and amending the Bangladesh Energy Regulatory Commission (BERC) Act.
Following a High Court decision, the LPG price for domestic use and transport auto gas were fixed to ensure a level playing field for all producers and affordable tariffs, as the LPG market was dominated by various private sector players.
Although BERC established a competitive and reduced tariff twice during Covid-19, it was not implemented by LPG distributors and auto gas owners.
We are in a position where we must be able to predict energy needs for the country's long-term security. The following issues must be addressed in order to reshape the future of industrial energy:
Tariffs on these fuels must be reviewed holistically in order to prioritise a rational living standard and a business perspective. Establishing LPG and LNG terminals, network infrastructure in light of rising LPG demand, bottling, and storage under a private-public partnership model that fits the urban and industrial context is also of paramount importance.
Technology, know-how transfer, and development are essential for fixing the LPG-based industrial operations.
Tropical cyclones and rough seas limit FSRU operation and Bulk LNG/LPG transportation in coastal areas, which necessitates the construction of fuel-based terminals and land terminals. To address energy shortages, cross-country regional gas or energy pipelines can be built.
Gas consumption in all sectors is now expected to be around 1 TCF per year. If this trend continues, our gas reverse will reach zero before 2030.
Considering the current situation, the government may be forced to rely entirely on fuel imports to meet local demands.
Bangladesh may be back at square one after 2030, with gas production falling below 10% due to insufficient exploration and alternative gas arrangements, and daily demand approaching 4600 mmcfd unless gas reserves are increased through a transparent roadmap.
Our onshore exploration capacity is nearly fully utilised. Before the situation worsens, the terms of the Production Sharing Contract (PSC) for offshore exploration must be revised, even if it becomes unilateral.
Many IOCs, including Chevron, Cairns, and Tullow, have left Bangladesh. However, renowned companies with a proven track record can be invited to Bangladesh and engaged in a time-bound action plan through a joint venture with BAPEX in order to avoid a gas crisis before 2030.
Until then, the nationwide gas distribution network must be expanded to ensure greater gas reach. Pipelines for larger LPG use in domestic and industrial units can be built in a synchronised fashion before the energy crisis cripples the economy.
At the same time, to make the best use of our insignificant gas reserves, we must conduct cost-benefit analyses to determine whether or not to use them.
Because the majority of the 26 gas fields are depleted, they must be repaired and maintained.
Our energy sector budget appears to be relatively slim in recent years, and more can be allocated to the energy sector than to the power sector.
Because we are a resource-constrained country, the power purchase agreement must be revised to create a win-win situation for both the government and the power producers; which may include a local currency deal, and no production no payment mode.
Industries must be made energy-efficient through cutting system loss and rational gas planning.
In fact, all stakeholders in the energy sector should develop a holistic, time-bound, and implementable energy sector master plan that includes projections and plans for revised PSMP with a proper sourcing, supply, distribution, and pricing strategy.
AKM Asaduzzaman Patwary is the additional Ex. Secretary, R&D Dept., DCCI.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.
