Gas crisis: Jamuna Fertiliser closed to start off newly built Ghorashal

TBS Illustration

Jamuna Fertiliser Company Limited (JFCL), the country's largest urea producer in Sarishabari upazila of Jamalpur, joined the list of urea factories that were shuttered recently amid gas shortage, a crisis the country has been grappling with since June last year. 

The Jamuna Fertiliser, one of four fertiliser factories under the Bangladesh Chemical Industries Corporation (BCIC), was closed indefinitely on Tuesday.

According to BCIC officials, the factory was closed after the government decided to cut the gas supply to it completely in order to increase supply to the newly built Ghorashal Palash Fertilizer Public Limited Company, which is currently in trial production and expected to go into commercial production by the end of this year.

The Ghorashal fertiliser plant, which will be the new biggest urea producer, was constructed in Palash upazila of Narsingdi at a cost of more than Tk10,000 crore with an aim to boost local urea production and reduce import dependency and costs.

Supplying gas to this new factory has forced the closure of old factories, calling into question the government's aim of reducing import dependence.

The Ghorashal plant also has a capacity to produce 10 lakh tonnes of fertiliser annually. The annual demand is 26 lakh tonnes.

The BCIC has set a target of 10 lakh tonnes of urea production from its factories — Shahjalal Fertiliser Company Ltd (SFCL), Jamuna Fertiliser Company Ltd (JFCL), Chittagong Urea Fertiliser Ltd (CUFL) and Ashuganj Fertiliser and Chemical Company Ltd (AFCCL) — in the current financial year. 

But the CUFL was closed in November 2022 and the AFCCL was closed in April this year. Now with the closure of JFCL, meeting the production target has become uncertain.

Md Shaheen Kamal, director (Production and Research) of BCIC, told The Business Standard, "We have asked Petrobangla — the oil, gas and mineral corporation of Bangladesh — to keep at least two urea factories operational, considering their capacity. But Petrobangla has announced to supply gas only to SFCL and Ghorashal, due to which JFCL had to be closed. It is not yet clear when the gas supply will return to normal."

According to BCIC sources, the JFCL set a target of four lakh tonnes of urea production in the fiscal year 2023-24. In the first two months (July and August), it produced about 65,977 tonnes with an average of 1,250 tonnes per day.

What is the gas distribution strategy?

Petrobangla supplied 250 mmcf (million cubic feet) of gas per day to the fertiliser factories till the middle of last year. The supply was reduced to 130 mmcf a day from June 2022 onwards. However, at least 189 mmcf of gas is required to run BCIC's four plants continuously.

Of the 130 mmcf supplied by Petrobangla, JFCL was using 41-42 mmcf per day. 

"The Ghorasal fertiliser plant will require about 72 mmcf of gas per day. To supply the volume to Ghorashal, we had to reduce supply to other plants," said Engineer Md Salim Miah, general manager (operation division) of the Titas Gas Distribution Company Limited.

"The JFCL factory was closed based on the government's decision. As the Ghorashal factory is about to start, the government has asked us to supply gas there at full speed."

The Ministry of Industries also held a meeting with the concerned parties last Thursday (31 August). The Ministry of Industries and the BCIC wanted to keep JFCL operational considering its capacity. However, since the location of the Shahjalal Fertiliser Company Ltd (SFCL) is close to the Sylhet gas field, it was decided in the meeting to continue the gas supply to SFCL and Ghorashal instead of JFCL. 

In light of the decision, Petrobangla continued to curtail gas supply from 4 September and the JFCL was completely shut down on 5 September.

Chairman of Petrobangla Zanendra Nath Sarker told TBS that currently 130 mmcf of gas is allocated daily for fertiliser factories including Karnafuli Fertiliser Company (Kafco). Both Jamuna and Shahjalal Fertiliser plants require 80 million cubic feet of gas per day. But with less gas requirement, the new Ghorshal plant will be able to produce 20% more fertiliser.

"If gas is available in the future, gas will be supplied to JFCL for resuming production," he added.

Sources said previously Petrobangla's gas production was 2300-2400 mmcf and the allocation for fertiliser factories 250 mmcf. But now PetroBangla has a production of around 2,900 mmcf including LNG, but the supply to the fertiliser factories has been halved.

Impact of local factory closures

Being the biggest urea producer till now, the JFCL supplied fertilisers to 21 districts of the northern region. 

From now on, fertilisers to these districts have to be sent from other factories, which will require additional transportation costs. And if the three factories are closed in the long term, that will also affect agricultural production. 

At present, Aman season rice has been planted all over the country. Around 12 lakh tonnes of urea is required this season. The BCIC currently has a stock of 6.63 lakh tonnes. At the same time, imports are ongoing.

The Ministry of Industry and BCIC sources said there will be no problem with fertiliser in the Aman season. However, if the Ghorashal factory is not started within this year, there will be a big crisis in the next Boro season.

Moreover, due to the closure of these factories, import costs will rise. 

According to JFCL sources, the factory used to spend Tk22.84 for producing a kg of urea fertiliser. However, the BCIC currently spends Tk70 per kg to import urea, which is three times more than the production cost of the local factory.

There will also be difficulty in achieving the urea production target. BCIC Chairman Md Saidur Rahman recently sent a letter to the Ministry of Power, Energy and Mineral Resources, the Ministry of Agriculture and the chairman of Petrobangla.

In the letter, the BCIC chairman said that it is possible to achieve the target of the year if at least three factories can be kept operational by increasing the supply of gas. It is important to increase the supply of gas to ensure local production and maintain supply by saving foreign currency.

The JFCL will also incur huge losses due to the indefinite closure.

Shahidullah Khan, managing director of JFCL, told TBS, "With the factory closed, it will cost us at least Tk13 crore per month to cover salaries, allowances and operating expenses."

"Even though the plant is old, it has the highest fertiliser production capacity among the four factories of BCIC," he added.