Energy security thoughts and challenges of Bangladesh

AKM Asaduzzaman Patwary,   Research Fellow (R&D),   DCCI   
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The current energy crisis across the nation along with frequent change over in the tariff and shocking and persistent depletion of primary energy gas supply have plunged people into deep thought and anxiety. Country has got manifold challenges which include consistent energy supply for industry. Ensuring energy security for entire population is another one. We are aware that primary resource for energy here is gas. Bangladesh is required to ensure the energy security bringing all People across the country under the safe energy network alongside meeting all gas based industrial needs. The industrial gas need is increasing at double digit as supply was shut over almost 4 years.

We are required to plan to balance the use of gas between domestic and industrial need. Both of the demand is pressing for the nation and economy but the supply is depleting terribly. In this given situation, the following aspects and recommendations are essential as cross cutting issues for longstanding energy security in Bangladesh:

Figure 1: Government is investing a lot in building infrastructure for LNG.
Figure 1: Government is investing a lot in building infrastructure for LNG.

Power and energy sector master plan:

A clear objective oriented plan, in the wake of domestic supply squeeze, to use and best utilize the gas for industry and domestic use should have been in place as we had manifold hints and indications of lowering energy reserve and gas shortage. Alongside, a clear demand and supply mapping of natural gas use, pricing needs to be formulated aiming the need of natural gas. A long term pricing policy helps all stakeholders to strategize their plan and actions of business and manage the relative competitiveness decision in local and global market.

Power sector master plan (PSMP) for power sector development was made in 2010 supported by JICA for the power sector development but it was not aligned to local natural gas reserve and required allocation. The target of 30000 MW power generations needs to be fully backed by source of resource either coal or natural gas use but no effort made for master plan for natural gas use as of today. Meanwhile the PSMP has been revised but the resource allocation has not been given any importance.

Bangladesh has got so far probable reserve of 2.7 billion MT of Coal basin concentrated in North Bengal having heating power equivalent to 36 TCF of gas. Despite having the potential of using coal in power generation and industry operation, Bangladesh has not any coal policy developed yet to deal with the coal use, allocation across the country and exploration method of coal is still a huge debate across the country depriving the entire economy from the benefit of coal.

LPG perspective:

Government is trying hard to encourage the Liquefied Natural Gas (LPG) across the country as the alternative to domestic use of natural gas in the wake of persistent slump in natural gas so that natural gas can be used more in industry and commercial use. Government seems firm to get mass people forced to flexible and feasible form of gas LPG. However, the following issues need to be addressed prior to making the LPG available for all.

Rational pricing of LPG considering the LPG availability for all relevant users-LPG pricing has to be two staged. Metropolitan area should be given one price and districts upazilla residents should be relatively low tariffed subject to diversity of living standard and income of mass people living in rural and urban area. LPG pricing should have been fixed prior to giving gas tariff rise. LPG market is largely import oriented. It does not seem feasible in long run for industry and domestic users in terms of availability and competitiveness.

Dependence on LPG is not sustainable and reliable since it is fully dependent on import. And global market is really volatile and this volatility will severely impact our mass buyers. And, LPG market is largely managed by private sector organizations in a monopolized form. Once natural gas distribution is in the hand of Government, it is not well distributed with fullest complacence. And now if private sector takes the control of LPG, people will not be guaranteed to get rid of the crisis and price volatility.

In the given unstable and disparaging aforesaid energy context of Bangladesh, the given elicited issues and concerns are expected to be better managed and focused ahead of longing energy security of Bangladesh.

  • 13 percent which is 350 mmcfd out of 2800 mmcfd of daily production of natural gas is used in domestic use. Some considers 350 mmcfd will give huge boost in industry and electricity as industry demand is increasing around double digit per annum. Even this current 350 mmcfd is allocated to Industry still industry will have the shortage of gas. Currently, 4 million of domestic subscribers have access to gas supply. And domestic demand of gas is projected another 45 million to bring entire population under domestic gas connectivity.
  • For Low cost LPG, the cross border connectivity could be addressed for easy sourcing since Bangladesh lacks sourcing.
  • The cost of off-shore exploration shows incremental trend across the world. The severe lateness in dealing the new off-shore exploration in Bangladesh will undue inflate the cost of operation and add new burden of cost of doing business of all sort of primary business users.
  • Energy diplomacy is inevitable for joining cross border gas network in TAPI. The shallow and deep off-shore bidding process, award and contract need to be faster with given timeline so that procrastination in process declines concern with all stakeholders and cost of doing business as our proven reserve of natural gas 4.5 TCF will run out before 2021.
  • Proposed India, Pakistan and Iran pipeline network could be learning. In the changing context and geo-economic order, the energy diplomacy yields multidisciplinary benefits for any nation. For instance, USA has got their strong energy diplomacy in place in foreign policy strategies.
  • BAPEX, Bangladesh Gas field and Sylhet Gas fields, the exploration companies, are losing concerns and financially dependent on PETROBANGLA. They are required to be made administratively and financially independent in decision making and technologically equipped to ease geological survey and exploration in both on and off shore locations to ease the process of another 108 on shore well rigging by 2021.
  • The cost of Shell’s Auger was $1.2 billion (1997) in 1,000-m water depth; the cost of BP’s Atlantis and Chevron’s Faith in 2,200-m (7,217-ft) water depth was about $1.8 billion in 2005; whereas the cost of Chevron’s Jack/St and Malo project in 2,200-m water depth was $8 billion in 2015.This global cost escalation trend indicates the alarming increase in cost of exploration.

Since Bangladesh as a whole lacks strength in off shore exploration, increasing cost of off-shore exploration backed by foreign companies will add huge cost burden on us as well as the increased gas tariff through this expensive exploration will be large extent unaffordable. The more delayed the process of bidding and PSC, the higher the bank guarantee and cost of rigging in off-shore blocs as Bangladesh is fully dependent on IOC in deep shore exploration and production. On the other hand, the distribution companies are not equipped enough to manage the LPG and its smooth operation instead of pipeline Natural gas to cope with the decision of Government.

The recent two staged price hike at 22.5 percent is a breach of BERC regulation and another blow to the much sought industrial and economic competitiveness of emerging Bangladesh. This price hike is not a win-win deal for the gas users as people consider that price hike unjustified unless supply and gas connection situation could be uninterrupted with significant improvement. Though it is late but we should not spare any time in relation to reaching a firm and focused consensus of all key and primary stakeholders especially Government, Ministry, upstream and downstream companies, explorers as well as private sector stakeholders in order for sustainable, affordable and competitive energy sourcing, supply and guaranteed industrial growth support backed economic graduation by 2021 and emergence of Bangladesh as the 30th largest economy through achievement of sustainable development goals by 2030.

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