Petrobangla has sought Tk 32,219 crore to import high priced LNG. However, only Tk 4,000 crore has been allocated for subsidy in the entire energy sector. Petrobangla has already received Tk 2,000 crore.
According to Petrobangla, the cost of gas produced by domestic companies is taka 1.27 per unit. And the cost of gas produced from domestic gas fields through foreign companies is taka 2.91 per unit. On the other hand, the LNG price will reach Taka 50.39 this year. So, it will need Tk 44,265 crore to import LNG this year.
The Energy and Mineral Resources Division has sent a letter recently to the Finance Division to allocate the extra amount of money, which has not been finalized yet.
According to the Energy and Mineral Resources Division, there is no alternative but to import Liquefied Natural Gas (LNG) from the spot market to meet the country’s gas demand. But the LNG price in the world market has increased a lot now. That is why extra money is needed.
However, energy experts say the purchase of a huge quantity of LNG from the spot market is ‘a wrong decision’. Besides, Bangladesh has not given priority to exploration of domestic oil and gas. As a result, the energy crisis is gripping the country.
Bangladesh had signed two long-term agreements on liquefied natural gas (LNG) imports. After that, the demand for imports increased, but the government could not sign a new long term agreement.
As a result, compensation has to be paid since last year, because, meanwhile, the price of LNG in the spot market increased five times last year. Last year, 20 percent of the imported LNG came from the spot market.
The government has a plan to import around 50 percent of the LNG from the spot market this year. However, LNG prices are likely to rise in the next two years. So, Bangladesh will have to import LNG at a higher price. As a result, government subsidies will increase along with the hike in gas prices at the consumer level.
Six state-owned gas distribution companies of the country submitted proposals seeking over a 117 percent increase in natural gas prices to the commission last month.
Meanwhile, the Bangladesh Energy Regulatory Commission (BERC) has set a date for a public hearing to adjust gas prices. The four-day hearing is going to be held from March 21.
Petrobangla has set a target of importing 85 crore cubic feet of gas per day this year. Currently, the price of LNG per unit in the spot market is more than $30. On the other hand, under the long-term agreement, LNG is now being imported from Qatar at $10.7 and from Oman at $10.2.
Bangladesh is importing LNG from Qatar Gas and Oman Trading International under a long-term agreement. The first LNG cargo in the country arrived from Qatar in April 2018. Then 63 cargoes came from these two countries in 2019, 66 in 2020 and 75 last year. Apart from this, 16 cargoes were imported from the spot market last year.
Petrobangla last year sent a letter to Qatar and Oman requesting them to increase supplies of LNG. However, it didn't work. Instead, Oman said it would reduce supplies.
Petrobangla officials said that the supply of LNG was offered under a long-term contract two years ago. However, it could not be done.
On the contrary, the RPGCL cannot buy LNG from the spot market at an instant price even if it wants to because of the longer government approval process. So, the foreign company wants the price by estimating the price two weeks later, which is also high.
Mohammad Mahbub Hossain, Chairman of Bangladesh Oil, Gas & Mineral Corporation (Petrobangla) told Bangladesh Post that although the price of LNG has increased in the world market, alternative plans have been made considering the country’s gas demand. Under the long-term agreement, 850 million cubic feet of RLNG is to be imported, but we have a plan to import at least 800 million cubic feet of RLNG.
If it is not possible under the long-term agreement, it is being considered to import it from the spot market. However, the price of LNG usually goes down a bit in March-April.’
Terming the purchase of a huge quantity of LNG from the spot market ‘a wrong decision’, energy experts say a maximum of 10 percent LNG should be purchased from the spot market and the rest 90 per cent should be procured through long-term agreements with multiple countries.
According to sources, the price of LNG per thousand cubic feet was only $10 before August last year in the international spot market, but now it has climbed to around $30.
Professor M Shamsul Alam, Energy Advisor of the Consumers Association of Bangladesh (CAB), said, "LNG imports have been made compulsory to provide special facilities to some groups by creating a gas crisis. The country should give priority to domestic oil and gas exploration to lessen the dependence on imported LNG, but the issue has long been neglected.”
The nation has a total demand of about 420 crore cubic feet of gas per day. The total production capacity in the country is about 375 crore cubic feet of gas per day.