The price of liquefied natural gas (LNG) is now at a record high. Besides, prices of crude oil, an alternative product, are also on the rise with energy experts suggesting that the government can overcome the situation through subsidies.
It is expected, around Tk. 10,000 crore in subsidies will be needed in the energy sector this year. Petrobangla and Bangladesh Petroleum Corporation (BPC) will need this subsidy due to sudden rise in energy prices in the world market.
At the beginning of January this year, the price of crude oil was $49 per barrel, which rose to $61 in mid-February. Four months later, in mid-June, it rose further to $71. At the end of September, the price of crude oil was $75 per barrel. It has since risen steadily to $80, which is the highest in the last seven years. As a result, BPC is incurring a loss of Tk 20 crore every day.
According to BPC, there is a loss of Tk 13.60 per liter for diesel. The loss in the sale of Furnace Oil is at around Tk 8.50.
State-owned oil marketing companies under BPC sell an average of 12,800 tonnes of diesel daily. At the same time, two thousand tons of furnace oil is being sold. In other words, every day there is a loss of Tk 19 crore 9 lakh on diesel and Tk 1.86 crore on furnace oil.
If the trend of price increase continues, the people concerned think that there could be a loss of Tk. 7,200 crore per year.
Prof. Dr. Ijaz Hossain, an energy expert told Bangladesh Post that despite the rise in the world market, there is not much opportunity to raise the price of fuel oil in the country at the moment. Because at a time, when oil prices were low, BPC sold at current prices. As a result, they have made a profit from selling oil. Additional prices can be adjusted from the profits. However, it may take at least another 6 months for the additional growth to take effect.
According to the Energy Division, a subsidy of Tk 9,307 crore was proposed till December 2021. However, the Finance Division has been allocated taka one thousand crore against this subsidy.
For several years there was no subsidy in the energy sector. BPC has made gains even after importing and selling oil as fuel prices have remained stable in the international market.
BPC and Petrobangla are incurring huge losses due to the recent rise in LNG and fuel oil prices. As a result, the government has to keep the supply of fuel normal with subsidies.
The Energy Division says it is no longer possible to buy LNG from the spot market below $32 to $36 per MMBTU (British thermal unit). However, it was $10 a few months ago. Now three LNG cargoes are being bought at higher prices. In all, the government is losing more than Tk 2,000 crore. Apart from this, the amount of subsidy has also started increasing due to huge losses in fuel oil.
Anisur Rahman, Senior Secretary of the Energy Division said ‘if the price of fuel in the world market remains the same, it will become unbearable for the energy division. We are discussing what can be done in that case.’
The country has to meet 92 percent of the fuel oil needs through imports. The increase in the price of LNG has reduced the production of gas-fired power plants and increased the production of fuel-based power plants. BPDB has already issued a demand letter for import of additional 40,000 tonnes of furnace oil to meet the additional demand. On the other hand, the demand for fuel oil is also increasing in the transport sector.
BPC Chairman, ABM Azad said, "We are following up on the rise in fuel oil prices in the international market. Next year, when we import fuel oil, we will adopt a plan based on the price. So far, the price of our fuel oil will remain the same. Basically it is a product by product change. There is not much change in diesel and octane. Furnace oil prices are changing. This is what we import from the open market. As a result, it may change.”
About 50 per cent of BPC's imported fuel oil comes under the G2G agreement. The other half comes from the open market. The fuel is supplied by seven state-owned companies from different countries. The imported oil is refined at the Eastern Refinery. It is then supplied across the country through three state-owned marketing companies. At present, 65% of fuel oil is being used in the transport sector. On the other hand, the demand for fuel oil is also increasing in the power sector.
At present, BPDB is generating electricity from 80 per cent plants from 1,200 MW diesel-based power plants due to declining gas supply. The daily use of diesel is about 40 crore. In all, the need for diesel is at Tk. 1,200 crore per month.
In addition, most of the energy used in the furnace oil based power plants with a capacity of 5,500 to 5,800 MW is being imported directly. Furnace oil prices are currently fluctuating in the international market at $450-500 per tonne. The cost of BPDB has also increased significantly due to the imposition of 32 per cent duty and tax on the product at the import stage. In the meanwhile, about Taka 16,000 crore has been given to the concerned department for financial assistance in electricity in the current financial year