By Enayet Kabir
Yesterday, I wrote that Bangladesh has fallen into the trap of the United States’ “global energy politics.” In the next three months, during the Boro season, Bangladesh’s new government is likely to face a crisis in meeting the demand for fertilizer and electricity. Bangladesh will be forced to buy fossil fuels from U.S. companies at high prices.
After QatarEnergy suspended supply under its long-term contract and declared “force majeure” (an unavoidable situation), the Bangladesh government has started gas rationing in the country. Gas supply to at least four fertiliser factories has been completely shut down.
To keep supplies stable, the state-owned Petrobangla has arranged to import two LNG cargoes for March from the US-based company Gunvor through spot purchases at a high price of $28 per MMBtu.
Compared to the LNG bought at the beginning of the year, the current price is several times higher.
Even in January, Bangladesh was able to buy LNG from the spot market for around $10 per MMBtu. Within just two months, the price jumped from $10 to nearly $29, causing the country’s energy import costs to rise abnormally.
Due to disruptions in global energy supplies amid tensions from the US-Israel-Iran conflict, imports of liquefied natural gas (LNG) from Qatar have stopped. As a result, Bangladesh, facing a severe energy crisis, has been forced to buy LNG from the spot market at unusually high prices.
According to information from a senior Petrobangla official, one shipment was purchased from Gunvor at $28.28 per MMBtu, expected to arrive around March 15–16. Another shipment has been bought from Vitol at $23.08 per MMBtu, expected to arrive around March 18-19.
Several Petrobangla officials, speaking on condition of anonymity, said that since gas supplies under the long-term contract with Qatar have stopped, the government has no option but to buy gas from the spot market at high prices.
Because of the supply shortage, priority is currently being given to electricity generation and other essential sectors. As part of this, four fertiliser factories have been shut down and their gas supply diverted elsewhere.
Officials warned that if the deadlock caused by the US-Iran-Israel war continues for a long time, Bangladesh will have to depend on the unstable spot market for a longer period.
Petrobangla has tried to find alternative sources to deal with the situation, but the current high price of gas in the international market has become a major challenge for the country’s economy. The conflict in West Asia has not only disrupted supply systems but also put the energy security of developing countries at serious risk.
The instability in the energy sector has already created concern in the country’s industrial production and agricultural sectors. Since fertiliser factories are shut, there are fears that a fertiliser shortage may occur in the future.
Sources in the Energy and Mineral Resources Division say there is no reason to panic about the energy situation. The country’s fuel oil reserves have not run out. Considering the war situation, the supply has been reduced by 10 percent.
Many people are buying and stockpiling diesel, creating fear among the public about a potential shortage. Petrol stations are allowed to store fuel, and monitoring has been increased to prevent artificial shortages.
According to the Bangladesh Petroleum Corporation (BPC), about 98,000 tons of diesel have been sold in the last four days, compared to 55,000 tons during the same period last year. Currently, 1,81,000 tons of diesel are in stock. Although there have been delays, several ships carrying diesel are expected to arrive next week.
Prime Minister Tarique Rahman has tried to inspire people to save electricity by reducing the use of electric lights and air conditioners in his office. However, reducing usage will not be enough to control the upcoming peak demand period for electricity.
From the second half of February until roughly the end of May—sometimes even June—Bangladesh experiences the highest electricity demand. During the Boro cultivation season, around 500,000 irrigation pumps operate across the country, and all of them run on electricity.
In the past, diesel engines were used, but during Sheikh Hasina’s government, the country developed sufficient electricity production capacity and switched to electric pumps.
Demand is highest in April. During Hasina’s tenure, the policy was that if extra electricity was needed for irrigation, load shedding could be implemented in urban areas. As a result, electric pumps replaced diesel engines. To keep roughly 500,000 pumps running—especially in April—about 5,000 megawatts of additional electricity will be needed.
To avoid an energy crisis caused by the war, the government is taking several measures. It has already purchased two LNG cargoes from the open market at high prices. At the same time, businesses are importing liquefied petroleum gas (LPG) at higher costs. The cabinet and the Ministry of Energy have also issued several directives to save energy.
State Minister for Power, Energy, and Mineral Resources Iqbal Hasan Mahmud told the media on Thursday that there is currently no energy shortage in the country. Precautionary measures have been taken considering the global situation.
Supply has been slightly reduced, and energy is being purchased from alternative sources despite higher prices. Everyone has been asked to conserve energy, and the private sector is being supported in importing LPG.
Gas supply has been reduced by 200 million cubic feet per day due to concerns about shortages. However, two LNG cargoes were secured from the open market last Wednesday.
Singapore’s Vitol Asia is charging about $24.50 per unit, with delivery expected on March 20, while Gunvor will deliver at $28 per unit around March 17. Before the war began, the price was about $10 per unit.
Sources at Petrobangla say that since the war began, global energy prices have been rising daily. Countries like China, Japan, and European nations are competing to buy energy.
Meanwhile, LNG supply from Qatar remains suspended. Two cargoes scheduled to arrive from Qatar on March 15 and 18 will no longer arrive.
Petrobangla believes that by purchasing LNG from the spot market, gas supply can be maintained for the current month.
However, uncertainty has also arisen regarding LPG supply in the market. Previously, reduced LPG supply in December caused a major shortage in January. A 12-kg LPG cylinder, used for cooking, was sold at 1,000 taka above the usual price. The government then allowed private companies to import more LPG, which somewhat normalized the supply.
Currently, LPG cylinders are being sold 500–600 taka above the official price. The government-set price of a 12-kg LPG cylinder is 1,341 taka. Due to the war situation, LPG imports are again being disrupted.
Yesterday, the State Minister for Power, Energy, and Mineral Resources held a meeting with LPG importers. Business leaders explained their problems and requested solutions. The minister assured them that steps would be taken to ensure there is no LPG shortage and that the market price remains under control.
Officials and business representatives who attended the meeting said that many companies have not imported LPG for a year. Some cannot open letters of credit because their bank accounts are frozen. In some industrial groups, loan complications in one company have caused the suspension of credit facilities for all companies in the group.
Business leaders requested priority arrangements to open letters of credit for LPG companies and asked for easier access to bank loans. The minister said he would discuss the issue with the Ministry of Finance and Bangladesh Bank and consider price adjustments.
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There is little doubt that this situation will put heavy pressure on the country’s foreign currency reserves.
The “artificial reserves” of the US-backed Yunus government will be depleted quickly. After that, Bangladesh may once again fall into the cycle of loans from the IMF and the World Bank.
(The writer is a political and economic analyst)
