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LNG imports to cost nation dearly in FY22, says CPD

The price of imported LNG is going to be 24 times higher than that of the locally produced one, according to a study by the think tank

Update : 14 Feb 2022, 11:22 AM

With the consecutive rise of liquefied natural gas (LNG) prices around the world, everything has gotten more expensive, and a study by the Centre for Policy Dialogue (CPD) suggests the fuel will only get dearer. 

The price of imported LNG in FY22 is going to be 24 times more expensive than if locally produced, the study found.

The findings of the study were disseminated on Sunday through a virtual dialogue titled Gas-LNG Debate in Energy Supply: Costs and Consequences of LNG Import for the Power Sector

CPD Executive Director Dr Fahmida Khatun chaired the session where Dr Khondaker Golam Moazzem, research director of CPD, and Abdullah Fahad, senior research fellow of the think tank, delivered the keynote presentation.

“In recent years, major economic activities of household, industry, transport and power sectors have been facing challenges due to shortage of gas supply,” said Moazzem. 

As challenges have been getting acute in recent months, several business associations have raised concerns about this situation. 

According to the study, the government has attempted to adjust the shortage of gas by augmenting LNG imports, but the sharp increase in the spot LNG price led Bangladesh to buy LNG at $35.89 per MMBTU and $36.95 per MMBTU for the October 2021 delivery. 

“The increasing price trend of LNG in global markets is not likely to change and regional gas prices have also started to converge, thus making LNG export less profitable,” the industrial economist also said.

Abdullah Fahad said Bangladesh’s energy supply has been historically dominated by natural gas, and the current energy supply infrastructure is no different. 

Gas was the major primary energy supply source in the last fiscal year, and the share of gas-based power plants was 52%, he noted.

“In the end of the last decade, the country’s local gas production started declining, and Bangladesh shifted to imported LNG to meet the gap in existing demand. But the country’s long-term target of a clean energy-based power sector would be difficult to attain with this approach,” Fahad further said.

The government's attempt to adjust the shortage of gas by augmenting LNG imports is going to have significant fiscal-budgetary consequences.

And since LNG is an unpredictable energy commodity, suppliers of the long-term contracts are not showing interest in stable contractual obligations, the study also noted.

The need for cleaner alternatives

As imported LNG is going to be very expensive, this is an opportune moment to find an alternate solution for the power sector to resort to clean energy, according to Moazzem.

Moreover, the country's long-term target of the clean energy-based power sector would be difficult to attain unless any short to medium term alternate solution is found, the CPD study noted.

Speaking as discussant at the dialogue, Imran Karim, president of the Bangladesh Independent Power Producers’ Association (BIPPA), said that state-owned gas power plants can be capable of hydrogen burning only with minor costs.

Adding that hydrogen may be one of the cleanest fuels in the world in 10 to 15 years, he noted that new private sector power plants are including hydrogen burning capability in a bid to prepare for the future.

The way forward

It is time to revisit the country’s existing approach on the growing reliance on the LNG imports for the power generation and the associated infrastructure development plans, the study noted.

For example, establishing new LNG-based power plants does not seem logical. 

In the short term, LNG imports may need to continue to meet the existing demand-supply gap particularly for activities or sectors where there is no immediate alternative, such as household, industry, hotel, restaurant, or transports. 

CPD suggested that in the medium to long term, Bangladesh needs to consider alternatives of LNG import in the above-mentioned sector targeting a cleaner source of energy use.

Bangladesh should not consider LNG import as a long-term solution, especially for the power sector, the study also noted, suggesting instead to put emphasis on clean energy-based power generation, gradually increase the share of renewable energy in the fuel-mix, and improve energy efficiency. 

The Bangladesh Energy Regulatory Commission (BERC) should also not consider increasing the gas prices as it might become unaffordable for the low-income populations and households, CPD also said.

Dr M Tamim, former special assistant to the chief advisor and professor of Department of Petroleum and Mineral Resources Engineering at BUET; Dr Badrul Imam, honorary professor of the Department of Geology at Dhaka University and former chairman of Petrobangla; and Razeeb Haider, managing director of Outpace Spinning Mills and director of the Bangladesh Textile Mills Association (BTMA); also spoke at the event.

Md Abdul Jalil, chairman of BERC, joined as the special guest at the dialogue, while Mohammad Hossain, director general of the Power Cell under the Power Division, attended as the guest of honour.

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