Bonikbarta Exclusive

Bangladesh imports at least $13 billion worth of fuel annually, with nearly half of it—around $6 billion—required for electricity generation alone. This cost is expected to rise in the coming days; yet securing the necessary foreign currency for fuel imports remains elusive. Electricity generation is being disrupted due to inadequate imports of coal, LNG, and furnace oil. This is causing frequent load-shedding across the country. Industries and various sectors are also feeling the impact. Fertilizer production is severely affected by the gas shortage.  Experts in the energy sector note that the interim government’s most pressing challenge is maintaining a stable supply of primary fuels (oil, gas, and coal) to stabilize the economy. 

The largest consumption of primary fuel in the country is in the power sector. During the tenure of the Awami League government, planning in this sector has largely focused on increasing production capacity. According to the Bangladesh Power Development Board (BPDB), the total capacity of gas, coal, furnace oil, diesel, and LNG-based power plants is now 25,738 megawatts, with the majority of this capacity added in the past 15 years. However, while efforts have focused on boosting production capacity, ensuring the necessary fuel supply for these plants has been neglected. Investment, sufficient funding, and infrastructure development in the energy sector have not been adequate to support these power plants. Master plans have been drawn up primarily relying on imported fuel. 

Currently, one-third of the total gas supplied to the national grid comes from imported LNG. However, one of the two terminals required for LNG supply was closed for three and a half months due to an accident, leading to a severe gas shortage. Although both terminals are now operational, LNG is still not being supplied at full capacity because Petrobangla has been unable to procure the necessary LNG imports. The suspension of the Quick Enhancement of Power and Energy (Special Provision) Act has also removed the option to quickly procure LNG from the spot market through private companies. According to Petrobangla, it could take the entire month to complete the tender process for importing LNG. 

Md. Kamruzzaman Khan, Director (Operations & Mines) at Petrobangla, told Bonik Barta, “Summit’s LNG terminal has been reactivated, but full gas supply from the terminal will not be available yet. They will only provide limited supply from the reserve at their terminal. It could take until October 5-6 to achieve full capacity.” 

The country’s gas-based power plants have a total capacity of nearly 12,500 megawatts, but only 5,500 megawatts are currently being produced. Petrobangla estimates that running gas-based power plants at full capacity requires 2,300 million cubic feet of gas per day. However, even after accounting for plant maintenance and the inefficiency of some power stations, at least 1,300 million cubic feet of gas are still needed daily. Currently, the plants are receiving an average of 800 to 900 million cubic feet per day, causing BPDB to keep many plants idle due to the shortage. 

Bangladesh has fuel oil-based power plants with a capacity of 6,175 megawatts, including 5,885 megawatts from furnace oil-based plants and 290 megawatts from diesel-based plants. These plants are producing only 1,000 to 3,500 megawatts of electricity daily, leaving the rest idle. These types of plants have much higher production costs compared to others. Excluding imported electricity, the country’s coal-based power plants have a capacity of 7,179 megawatts. On average, only 3,500 megawatts are being utilized, with over half of the capacity remaining unused. 

The interim government recognizes the gravity of the fuel import crisis. To secure funding for fuel imports, the government has already requested $1 billion in budgetary support from the World Bank. Last week, the Economic Relations Division (ERD) sent a letter requesting $500 million in two installments.

The energy crisis has made it impossible to generate electricity according to demand. Load-sheddings are occurring when electricity demand exceeds 13,000 megawatts. Muhammad Fouzul Kabir Khan, Adviser to the Interim Government on Power, Energy, and Mineral Resources, is hopeful the situation will improve within three weeks. During a discussion at the ministry on Wednesday, September 11, he said, “The current state of electricity will improve within the next three weeks.”

Due to the gas shortage, not only are power plants being shut down, but fertilizer factories are also being affected. Over the past six months, three of the country’s urea fertilizer factories have been closed one after another. Most recently, production at the Hazrat Shahjalal Fertilizer Factory in Fenchuganj, Sylhet, was halted yesterday (Friday, September 13). Currently, only the Ghorasal Polash Urea Fertilizer Factory in Narsingdi remains operational. As production falls short of demand, there is growing concern about fertilizer supply for the upcoming Boro season, industry insiders say. There are also doubts about meeting the target of producing 700,000 tons of urea this year due to factory closures caused by the gas shortage.

According to sources in the Energy and Mineral Resources Division, gas is a key raw material for fertilizer production in the country. To maintain regular production at the country’s five fertilizer factories, an average of 329 million cubic feet of gas is needed daily. However, the factories are only receiving about 150 million cubic feet of gas.

At least two senior energy sector officials told Bonik Barta that there is no significant crisis in the global market affecting Bangladesh’s energy imports. There are no major issues from suppliers either. If the necessary dollars and letters of credit (LCs) for energy imports are settled, the energy supply will remain steady. However, the energy sector currently requires more dollars. The LCs that have been stuck need to be cleared as well. Without regular transactions with suppliers, some level of crisis will persist.

According to data from the Bangladesh Working Group on External Debt (BWGED), the total production capacity of fossil fuel-based power plants in the country is 24,242 megawatts. In the 2023-24 fiscal year, peak electricity demand reached 16,477 megawatts. 56 percent of these power plants remain idle, yet still collect large sums from the Bangladesh Power Development Board (BPDB) as capacity charges. Each month, $500 million is needed to import fuel for these power plants. Annually, the fuel import cost for these fossil fuel-based power plants amounts to approximately $6 billion.

The government, however, does not have the necessary foreign currency or dollars to meet these needs. As a result, electricity production cannot be increased, even as demand rises. Large coal-based power plants, in particular, are not operating at full capacity. Although international coal prices have fallen, imports are not possible due to the dollar shortage. Consequently, BPDB is sometimes forced to shut down a unit or even an entire plant.

In response to this, the government has taken a $500 million loan from the Jeddah-based International Islamic Trade Finance Corporation (ITFC) to import liquefied natural gas (LNG). For the first time, Petrobangla has taken this loan for the 2024-25 fiscal year.

Asked about the situation, energy expert and BUET Professor M. Tamim told Bonik Barta, “It is impossible to completely stop importing primary fuel for the power sector in the country. However, there is an opportunity to reduce dependency. We need to increase local production of gas and coal, and there is also scope to expand the use of renewable energy. Over-reliance on imports creates pressure on foreign currency reserves. To reduce this pressure, we must make rational use of the electricity capacity we’ve built into the grid.”