[🇧🇩] Energy Security of Bangladesh

[Saif]

Reliance on captive power weakens PDB

Captive power, which the industrial sector in Bangladesh leans on heavily, has been weakening the financial health of the Bangladesh Power Development Board (PDB) by costing it customers that pay the highest tariffs.

www.thedailystar.net

Reliance on captive power weakens PDB

Captive power, which the industrial sector in Bangladesh leans on heavily, has been weakening the financial health of the Bangladesh Power Development Board (PDB) by costing it customers that pay the highest tariffs.

Currently, gas-fired captive plants -- which industries use to generate power by themselves -- produce more than 3,000 megawatts (MW) of power by using around 100 million cubic feet of gas a day.

If the PDB could shift half of the captive power users to the national grid, it would be able to earn Tk 3,414 crore a year, found the latest study by the Institute for Energy Economics and Financial Analysis (IEEFA).

The report, titled "Fixing Bangladesh's Power Sector", said the PDB can offset annual losses of $1.2 billion or Tk 13,800 crore, provided to the PDB in the form of government subsidies, through electricity sector reforms targeted at addressing core problems, including the reduction of captive power usage.

"In absence of reliable grid electricity, the tepid demand growth in the industrial sector [in grid] is largely because of its excessive dependence on captive power," the report said, adding that load shedding and sudden grid power outages disrupt industrial production, making captive generators popular.

Despite a drastic 87.5 percent increase in gas tariffs in February 2023 and a modest increase of 2.5 percent in February 2024, industries continue to find electricity from captive systems more competitive than the grid, the report said.

Based on the efficiency of plants, captives can produce electricity at a cost of between Tk 1.3 per kilowatt-hour (kWh) and Tk 3.53 per kWh less than grid electricity prices.

"The strong economics make industries heavily dependent on captive systems, resulting in lacklustre demand growth in grid power," the IEEFA said.

Currently, the national grid has a capacity of 27,086MW power generation capacity, boasting a 57.5 percent reserve margin compared to peak grid demand.

The IEEFA recommended reducing the reserve margin to a standard level of 20 percent in a bid to cut the burden of capacity charges -- a charge that the PDB must pay power producers regardless of whether plants produce.

"The surplus is a principal factor in the PDB's woes as it pays capacity charges to idle power plants, which increases average power generation cost," it said.

In addition, the study identified the inefficient use of power plants, excessive usage of expensive fuel, high transmission-distribution losses and load-shedding due to weak financial health as the main reasons behind the PDB's financial distress.

From July 2023 to May 2024, oil-fired plants contributed 10.9 percent to grid power generation while incurring 32 percent of the total fuel cost, the report said. Within the same period of time, Bangladesh experienced load-shedding on at least 23 days a month, it added.

In the past five fiscal years, the PDB's total annual expenditure increased 2.6-fold against revenue growth of 1.8 times, prompting the government to allocate a combined subsidy of Tk 126,700 crore to ensure power supply and keep the economy afloat.

Yet, the PDB recorded a cumulative loss of Tk 23,642 crore in these years.

The IEEFA suggested Bangladesh fix a realistic power demand projection by factoring in energy efficiency gains and demand shift measures.

The IEEFA's projection by factoring in such variables shows that the country's peak power demand in 2030 is likely to be 25,834MW. Meanwhile, the Integrated Energy and Power Master Plan's (IEPMP) forecast, made in July 2023, estimated it at between 27,138MW and 29,156MW.

The IEEFA roadmap also suggested halting investment in fossil fuel-based power and limiting the use of oil-fired plants to 5 percent of total power generation.

If these steps are taken along with the anticipated 4,500MW of fossil-fuel-based power plant retirements by 2030, it is expected that Bangladesh will have a system capacity of 35,239MW by that time, the report said.

"A system capacity of 35,239MW will help Bangladesh meet the peak demand of 25,834MW by 2030. It will bring the reserve margin down to 20 percent, which is comparable to countries like India and Vietnam," said Shafiqul Alam, IEEFA's lead energy analyst for Bangladesh and the author of the study.

"The window to make Bangladesh's power sector sustainable is rapidly narrowing, but there is still time to get the sector back on track by following a suitable roadmap," he added.​

 

[Saif]

Gas crisis: What's the way out?

Last Thursday, a group of workers from Mahmud Jeans mercilessly assaulted the factory's deputy managing director, Rafee Mahmud, who is also the son of the factory owner and responsible for overall management of the factory. A spokesperson of Bangladesh Garment Manufacturers and Exporters Associatio

thefinancialexpress.com.bd

Gas crisis: What's the way out?
Atiqul Kabir Tuhin
Published :
Dec 05, 2024 00:34
Updated :
Dec 05, 2024 00:34

Last Thursday, a group of workers from Mahmud Jeans mercilessly assaulted the factory's deputy managing director, Rafee Mahmud, who is also the son of the factory owner and responsible for overall management of the factory. A spokesperson of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) claimed that the factory had been forced to cease operations due to a severe gas crisis. Despite this, the management had managed to clear the workers' salaries before shutting its doors. However, a group of workers began protesting, demanding the service benefits they were entitled to receive after the layoff.

Being financially distressed, the DMD was negotiating to sell off his property in Banani area to clear the outstanding payments of the workers in line with a tripartite agreement. Unfortunately, the angry mob allegedly refused to give the required time for this process and brutally attacked the DMD. While the mob attack is strongly condemnable and the perpetrators need to be booked, this incident signifies the devastating consequence of gas crisis for factory owners, workers, and the national economy as a whole.

Bangladesh has been grappling with a severe gas crisis for the past two years, driven by dwindling domestic production and an unstable supply of imported Liquefied Natural Gas (LNG). The country's daily demand for natural gas stands at approximately 4,000 million cubic feet (mmcfd) per day. However, domestic production has been steadily declining, currently standing at only about 2,000 mmcfd per day. To mitigate this shortfall, the government imports LNG through two Floating Storage and Re-gasification Units (FSRUs) at Maheshkhali, which collectively supply around 1,000 mmcfd to the national grid. Even with this imported supply, the total daily gas supply stands at about 3,000 mmcfd, leaving a significant deficit of around 1,000 mmcfd.

This shortfall has severely impacted both household and commercial consumers, with the industrial sector bearing the brunt of the crisis. Industries such as textiles, ceramics, and steel, all heavily reliant on uninterrupted gas supply, are struggling to sustain operations. To highlight the gravity of the ongoing energy crisis, Bangladesh Chamber of Industries (BCI) recently organised a seminar where a keynote paper presented by Prof. Dr. Ijaz Hossain, a former professor of BUET, revealed a terrible cost of gas crisis on industries.

According to his findings, gas crisis has led to a production decline in garment sector by 30-35 per cent, in steel factories by 25-30 per cent, and in ceramic factories by 50 per cent. Moreover, factories' increased reliance on diesel generators has significantly raised operational costs, posing severe challenges for small-scale industries, particularly in rural areas. As a result, approximately 40 per cent of these small industries are reportedly on the verge of closure.

Even though industries are badly affected and industrialists are pleading with the government to solve the problem earnestly, there appears to be no immediate end to their woes. While LNG provides a costly short-term solution, the interim government, unlike the previous Awami League administration, appears reluctant to increase the country's reliance on energy imports, primarily due to high import costs and vulnerability to global market fluctuations. It has already cancelled MOUs signed by the previous Hasina administration for establishing two additional FSRU regasification units. Instead, the current government is prioritising the drilling of new gas fields and expanding renewable energy sources. While these measures appear promising on paper, they require a time-consuming process and cannot address the current energy shortfall. The energy advisor states that the situation is unlikely to improve until any new gas field is developed. But the question is, can industries afford to wait that long?

It is, therefore, imperative for the government to immediately look at some short term options to meet industrial demand for gas.

At the BCI seminar, business leaders categorically told the energy advisor, "Give us gas, and we will give you dollars." Therefore, until an alternative is available, importing adequate LNG and increasing LNG storage and supply capacity should not be taken off the table.

At the same time, increasing extraction capacity from existing gas fields by adopting advanced technology can offer some relief. As reports from Petrobangla and the Ministry of Power, Energy, and Mineral Resources show, extraction from local gas fields is far below their actual capacity. For instance, the Bangladesh Gas Field Company, despite having a capacity of 815 million cubic feet per day (mmcfd), is currently producing only 555 mmcfd. Similar shortfalls are evident in the Sylhet Gas Field Company and Bapex.

According to Dr. Badrul Imam, an honorary professor at the Department of Geology, University of Dhaka, Petrobangla had engaged Schlumberger to identify ways to boost gas production from existing fields. After carrying out their work for a year or so, Slamburger found that production in the country's gas fields was low due to technical weaknesses. The company recommended certain simple technical management in these fields, basically involving certain repairs, adjustments and addition of certain equipment (such as tubing with a wider diameter), etc. But Petrobangla did not undertake any operations to carry out these recommendations. He thinks the authorities can optimise gas production from local gas fields by adopting advanced technologies and best practices.

Besides, it is indeed an irony that when the country is grappling with severe gas crisis, a massive 2.5 trillion cubic feet (tcf) of natural gas reserve is lying unused in Bhola. It cannot be utilised because of lack of pipeline. If measures can be taken to bring gas from the island district in the form of compressed natural gas (CNG) or liquefied natural gas (LNG), gas shortages in industries can be alleviated to some extent.

The gas crisis is not merely an energy issue; it threatens the viability of industries, livelihoods of workers and the nation's economic growth. The government must act swiftly to implement both short and long-term solutions. Failure to address the crisis could result in more factory closures, job losses, and a significant setback to the country's growth momentum. The lessons from Mahmud Jeans should serve as a wake-up call to prioritise industrial demand for energy before the situation worsens further.​

 

[Saif]

Uninterrupted LNG supply to cost Tk 50b in state subsidy soon

Uninterrupted supply of import-dependent liquefied natural gas (LNG) until this month-end will cost some Tk 50 billion in state subsidy as Petrobangla seeks the money before long, officials say. The amount is in addition to Tk 20 billion given to the state-run gas-and-oil supplier until last

thefinancialexpress.com.bd

Uninterrupted LNG supply to cost Tk 50b in state subsidy soon
Petrobangla airs fear of fuel crunch if fund not footed in time for Dec
Syful Islam
Published :
Dec 07, 2024 00:02
Updated :
Dec 07, 2024 00:02

Uninterrupted supply of import-dependent liquefied natural gas (LNG) until this month-end will cost some Tk 50 billion in state subsidy as Petrobangla seeks the money before long, officials say.

The amount is in addition to Tk 20 billion given to the state-run gas-and-oil supplier until last month.

In the last fiscal year, the government gave Tk 60 billion as LNG-import subsidy to the Oil, Gas and Mineral Corporation or Petrobangla.

The Petrobangla authority in a letter to the Energy and Mineral Resources Division, which was forwarded to the Finance Division late last month, estimated that the shortage of funds to import required LNG until December 30 will stand at Tk 57.82 billion.

"Payment of LNG-cargo-import cost will face uncertainly unless the government pays subsidy," the letter reads-incidentally at a time when the post-uprising interim government gasps under accumulated financial burdens of yesteryears.

The corporation further mentions that unless the payment invoices can be paid in time, there is a possibility that the suppliers under long-term agreement can stop delivering the liquid gas.

Moreover, the master sales and purchase agreement (MSPA)-signing companies, which supply LNG from spot market, may feel discouraged from participating in bidding if payment is disrupted, it has said in the alert note.

The suppliers may also encash standby letters of credit if invoices cannot be paid off in time. Also, if payment is delayed, there is an obligation of paying interest at the rate of LIBOR-plus 5.0 per cent which is also quarterly compounded.

According to Petrobangla officials, the agency incurred Tk 249.81 billion worth of financial loss in the fiscal year 2021-22 for having to fix LNG-selling price lower than the import cost. Moreover, due to gas-price hike on the international market by 80 per cent in February last year it incurred loss worth Tk 42.87 billion in fiscal year 2022-23.

In that two fiscal years the state agency faced a total loss of Tk 292.68 billion which it met by spending money from energy-security fund, government subsidy, gas-development fund, and retaining earnings of companies under it.

Until November 18 this year, the corporation had unpaid invoices against eight LNG cargoes and two floating storage and regasification units (FSRU) totaling $266.70 million or Tk 32.80 billion, for which it already asked the banks to make payment.

Moreover, it owed some Tk 12.31 billion to the International Islamic Trade Finance Corporation (ITFC) on account of loan installment.

While the total debt was Tk 45.11 billion, the Petrobangla had a balance of Tk 15.78 billion in its bank account, it mentions in the letter.

Contacted, a finance-division official told the FE that the subsidy requirement of Petrobangla has been growing every year.

"We are under tremendous pressure from the Intentional Monetary Fund to lessen subsidy and incentives while Petrobangla's demand is growing constantly," he said about what feels like to be on the horns of a dilemma.


The official notes that public-sector expenditure has to be lowered by any means as revenue earnings not rising as expected.​

 

[Saif]

Numerous IOCs upbeat about bay gas exploration

Hopes run high about a good response from international oil companies (IOCs) in bidding for bay gas exploration as the deadline for tendering in the offshore bidding round ends tomorrow (Monday). "We are hoping that a good number of IOCs will submit bids for oil-and-gas exploration in the Bay of

thefinancialexpress.com.bd

Numerous IOCs upbeat about bay gas exploration
M Azizur Rahman
Published :
Dec 08, 2024 00:42
Updated :
Dec 08, 2024 00:42

Hopes run high about a good response from international oil companies (IOCs) in bidding for bay gas exploration as the deadline for tendering in the offshore bidding round ends tomorrow (Monday).

"We are hoping that a good number of IOCs will submit bids for oil-and-gas exploration in the Bay of Bengal as many of them purchased bid documents and kept enquiring on it for long," a senior Petrobangla official told the FE Saturday.

He said the previous deadline for submitting bids, September 9, was extended up till December 9 following requests from some potential IOCs.

Petrobangla floated the international tender on March 10 with a total of 24 offshore blocks -- 15 in deep sea and nine in shallow sea - on offer for exploration lease.

The bidding process is launched fronting the banner 'Oil and Natural Gas Exploration Under Bangladesh Offshore Bidding Round 2024'.

The energy corporation also held a promotional seminar on May 8 wherein more than a dozen international oil companies took part.

A good number of them, including reputed ones from the U.S., Europe and Asian countries, have shown interest in joining the bidding, he said.

The 15 deep-sea blocks on offer are DS-08, DS-09, DS-10, DS-11, DS-12, DS-13, DS-14, DS-15, DS-16, DS-17, DS-18, DS-19, DS-20, DS-21 and DS-22.

The nine shallow-water blocks are SS-01, SS-02, SS-03, SS-05, SS-06, SS-07, SS-08, SS-10 and SS-11.

Production-sharing contracts (PSCs) will be inked with the IOCs in line with the newly approved model PSC through which the terms have been made 'lucrative' with more sweeteners for the contractors.

"The IOCs will not be required to submit any signature bond," he said, adding that they will not have to pay any royalty either.

"No import duties will be charged from the firms for import of machinery and equipment necessary for exploration and drilling," the official said about baits.

Petrobangla will bear the income-tax liability on behalf of the IOCs.

The gas price for the offered blocks will be tagged to the price of brent crude on the international market so that the gas price becomes flexible in line with the movement of global oil-price indices.

The gas price will be 10 per cent of Brent Crude, meaning if the Brent crude is traded at $85 per barrel, the gas price would be $8.5 per million British thermal unit (MMBTu).

The pricing modalities will be same for both shallow and deep-water blocks. Petrobangla will purchase the explored IOC gas at the Brent crude-linked rate, which will have no capping.

Capping-free price means Bangladesh will have to purchase the gas, to be extracted by the contractors, at a rate as high as it goes or as low as it slips. The foreign firms will also have the liberty to export natural gas after meeting domestic demand following Petrobangla's first right of refusal.

They will be able to repatriate full profit, too.

There will be provision for assignment of interest and share-transfer and 100-percent cost recovery with an annual cap of 75 per cent.

They will, however, have to provide bank guarantees for performance of the minimum exploration programme.

Meanwhile, contractors must have a mandatory work programme consisting of a 2D seismic survey and the mandatory purchase of available 2D multi-client seismic data to get relief from mandatory work obligations proportionately.

They will have minimum work obligations in each of the exploration periods of nine years, of which the initial-study phase will last four years, then an exploration phase of two years and another three years for subsequent exploration.

Over the last decade Bangladesh had launched only one bidding round - in 2017 - and that was only for three deep-water blocks, according to Petrobangla data.

Although Posco-Daewoo was awarded one deep-water block - DS-12 - after the bidding, the South Korean oil-and-gas -exploration company left the block in 2020 after carrying out a 2D seismic survey. Previously Petrobangla had floated a bidding round in 2012, through which three shallow-water blocks and one deep-water block were awarded to contractors.

Currently, four IOCs have active PSCs, either individually or under joint venture, to explore three shallow-water blocks in Bangladesh.

U.S. oil-major Chevron is active in exploring and producing natural gas in three gas fields under onshore blocks 12, 13 and 14. Singapore's KrisEnergy is producing natural gas from the Bangura field under Block 9. ONGC Videsh and Oil India are jointly exploring shallow -water blocks SS-04 and SS-09.​

 

[Saif]

A welcome step towards renewable energy

The government offering entrepreneurs land and interconnection to the national grid for a rapid expansion of solar energy is welcome. The Power Development Board is also scheduled to, as the energy adviser announced on December 7, begin open calls for 40 renewable energy projects, mostly for...

www.newagebd.net

A welcome step towards renewable energy
09 December, 2024, 00:00

The government offering entrepreneurs land and interconnection to the national grid for a rapid expansion of solar energy is welcome. The Power Development Board is also scheduled to, as the energy adviser announced on December 7, begin open calls for 40 renewable energy projects, mostly for solar power. The Awami League government awarded the projects without bidding and the interim government has cancelled the earlier awards to go for an open invitation. The initiative, if properly implemented and followed by more such offers and facilitation, can help to produce a significant portion of the energy from renewable sources. An overwhelming dependence on imported fossil fuels for power generation and the absence of initiatives to promote cost-competitive renewable energy have, as experts say, held back the transition to renewable energy. Successive governments, especially the deposed Awami League government, came up with a number of road maps and promises to project the transition from fossil fuel to renewable energy in 5–15 years. But when it came to investment and work, there was a pronounced disinclination. This is what was problematic and worrying. All talks about a transition to renewable energy appear to have been nothing but rhetoric.

A report by the United States-based Institute for Energy Economics and Financial Analysis says that Bangladesh did not receive any significant renewable energy investment in 2023. As a signatory to the Paris agreement, Bangladesh is meant to generate 100 per cent electricity from renewable sources by 2050 as it has pledged in the Climate Vulnerable Forum. The government spoke of generating 5 per cent of power from renewables by 2015 and 10 per cent by 2020. But it could not meet the target. Studies show that the investment gap to achieve even the minimum target of power from renewables is huge. The share in the generation of solar and wind power, in fact, declined to 0.77 per cent in 2022 from 0.93 per cent in 2015, as the Berlin-based think tank Agora Energiewende says. The lack of promotion and the placement of barriers to rooftop solar systems have also held back the potential of solar power. An earlier Institute for Energy Economics and Financial Analysis report, published in December 2023, says that Bangladesh lags way behind its neighbours in promoting rooftop solar power and 5,000MW can be produced using only the roofs of industries.

In such a situation, the government offering land and connection to the national grid is a step forward. With more such steps, the authorities can unlock the potential of power production from renewable sources. For that, the authorities need to invest adequately and facilitate private investments. The authorities should also promote rooftop solar power. It is high time the authorities reviewed its renewable energy policy and recommitted to renewable sources.​