In a sign of the energy crisis that hit the country in July 2022 possibly easing, Bangladesh resumed importing LNG from the spot market at the end of January, after a nearly six-month hiatus due to high prices, government officials told trade publication S and P Global Platts.

France's Total offered the lowest price $35/MMBtu, while two other suppliers, Switzerland's AOT Trading AG and Singapore's Vitol Asia, offered prices as high as around $35/MMBtu for one 138,000 cubic metre LNG cargo, a senior official at Rupantarita Prakritik Gas Company Ltd, or RPGCL, was quoted as saying by S and P Platts, on condition of anonymity.

Later during February's first weekly meeting of the cabinet committee on public purchases, the tender was duly rewarded to Total, quoting an even lower price of $19.74MMBtu. The country plans to purchase another cargo for late-February delivery, the official who declined to be identified told Platts.

State-owned RPGCL, which handles the country's LNG imports, will float the tender for late-February delivery soon. The country had planned to resume spot LNG purchase from January, but exorbitant bids from suppliers forced RPGCL to cancel the previous tender.

RPGCL had received price quotes as high as around $51/MMbtu from Switzerland's AOT Trading AG and around $40/MMbtu from Vitol Asia for January delivery, the official said, adding that currently, Petrobangla imports LNG from long-term suppliers at oil-linked prices of around $11.5/MMBtu.

The S and P Global Platts JKM (Japan Korea Marker, an LNG benchmark price assessment for spot physical cargoes maintained by S and P Platts) for March was assessed at $29.7/MMBtu on Jan. 28. It was trading over $40/MMBtu toward the end of 2021 and had dropped below $20/MMBtu in the week ended Jan. 21 but rebounded amid concerns around the Ukraine conflict.

State-run Petrobangla is currently able to utilise only one floating storage regasification unit, or FSRU, out of the country's two units, due to a rupture in a 'mooring line' at Summit Group's FSRU facility in November that suspended ship-to-ship transfers of LNG and halved the country's overall LNG import capacity. This is largely the explanation behind why loadshedding seemed to persist throughout the winter.

Thanks to Summit's crocked FSRU, Bangladesh's LNG regasification dropped to around 384,000 million cu ft/d, from the usual supply of over 800,000 Mcf/d, with only Excelerate Energy's FSRU operational, according to Petrobangla statistics released January 27.

The country's overall natural gas output has meanwhile dropped to around 2.72 billion cu ft/d, from a previous supply of around 3.20 billion cu ft/d, affecting bulk consumers in particular, such as the country's burgeoning industries and power plants.

Around half a dozen LNG cargoes were scheduled to arrive in January from two long-term suppliers -- Qatargas and Oman Trading International, or OTI.

Before ceasing spot LNG purchases, RPGCL had purchased two LNG cargoes at $35.89/MMBtu and $36.95 per MMBTU, respectively, from Vitol Asia and Gunvor during October 2021 deliveries, the highest prices the country ever paid for gas, indicating the severity of shortages. RPGCL purchased one LNG cargo for $28/MMBtu from Vitol Asia Pte Ltd. in2022.

RPGCL's spot purchases were as low as $4-$15/MMBtu in 2020, when energy prices reached record lows amid the pandemic-induced lockdowns. RPGCL started importing LNG from the spot market in September 2020, two years after it initiated LNG imports from long term suppliers in September 2018. Prices have since bounced back to record highs, briefly resulting in Bangladesh, anxious to preserve its precious forex reserves, being effectively priced out of the market.

Touchstone of reform

The government's negotiations with Total, the French hydrocarbons giant, were going on at almost exactly the same time as the executive board of the International Monetary Fund was meeting to put its final seal of approval on a $4.7 billion loan package program for Bangladesh. The government's successful negotiation of the package it sought would raise confidence in the macroeconomy amid a volatile foreign exchange market, analysts said.

They said that the IMF loan program can help bring stability to the macroeconomic situation in two ways- increasing the US dollar supply, which is directly related to the country's forays into the energy markets, and igniting a process of reform in the financial sector.

Economist and adviser to the last caretaker government Dr ABM Mirza Azizul Islam told our sister newsagency UNB that the IMF loan works as a standard for the economic strength of a country. Other international financial organisations would be encouraged to provide loans and in other financial dealings with Bangladesh now.

He said that the loan will contribute to a stable exchange rate by strengthening the foreign exchange reserve for the short term. Besides, the IMF loan will work as a remedy while inward remittance flow and repatriation of export income have slightly decreased, Mirza Aziz said.

The government will be implementing reforms in the financial sector as per the advice of the IMF, which will bring good results in the long run for the macroeconomy, he pointed out.

Many countries are seeking IMF's loan support to face the foreign exchange crisis due to the fall of global economic growth. Bangladesh's process for securing the loan has been much smoother than some other countries, which is a good endorsement of Bangladesh's macroeconomic stability.

Another economist, although perhaps one with a less market-orientated view, and also former Governor of Bangladesh Bank Dr Atiur Rahman told UNB that the IMF board decision indicates strong confidence in Bangladesh's macroeconomic management and willingness to undertake necessary reforms for inclusive and sustainable growth.

Besides budget support, the approval of a new loan of $1.4 billion from the Resilience and Sustainable Fund also demonstrates the IMF's recognition of Bangladesh's capacity to address climate change challenges, he said.

"The loan, of course, is focused on addressing high inflation and falling foreign exchange reserves. Indeed, Bangladesh, though not in the same club as Sri Lanka and Pakistan, has still made this pre-emptive move of asking for long term low-cost funding support from the IMF, to avoid future pressures on its macroeconomic indicators that have already been affected to some extent by the ongoing global economic crisis," he added.

Dr Atiur said the state-of-the-art technical knowledge of IMF experts in Bangladesh will certainly benefit from this program in undertaking necessary reforms in the financial sector for raising revenue and foreign exchange reserve, improving governance of the banking sector to reduce non-performing assets, and targeting better social protection for the extreme poor.

These reforms are, however, already in place as a part of the indigenous development strategy of Bangladesh. The program will only further consolidate their implementation process, he said.

"Other development partners like the World Bank, ADB, and JICA will be encouraged to come forward with additional support for infrastructural development in Bangladesh. FDI will also flow at a faster pace to take advantage of the conducive investment environment in Bangladesh which will be further strengthened by the presence of the IMF program," said Dr Atiur, also a professor of economics at Dhaka University.

The IMF said that the loan will help stabilise Bangladesh's macroeconomy, implement the necessary reforms to build capacity for social and development spending, strengthen the financial sector, modernise policy frameworks, and address climate change.

Summer of torment?

A series of power outages kept hitting the country over the past two months despite the comparatively low demand for electricity associated with the winter months.

Officials of power generation, supply and distribution companies said most of the power stations that run on oil remained shut in a bid to reduce production cost. In the meantime, power generation dropped significantly at three coal and gas-fired power stations, causing deficits in power supply at different times over the course of the last two months.

The Rampal thermal power plant in Bagerhat, through one of its two units, started supplying electricity to the national grid on a trial basis last December 18. After about three weeks, the trial ended and the plant is yet to commence full operation. Around the same time, power supply from two plants in Bhola and Barishal also dropped for maintenance issues. Officials said lower supply of electricity from these three stations triggered power outages. Is it acceptable though, for a plant's trial run to have such an impact on the national grid?

According to the Power Division, Bangladesh has a total installed capacity to produce more than 24,000 megawatts of electricity. Its highest demand ever was 14,742 MW on a hot summer day in 2022, that it met. of electricity was generated in summer against a demand of 12-14 thousand megawatts daily.

Demand falls to around 7000 MW-9000 MW in winter. Yet, power outages kept hitting the country. There was loadshedding to the tune of over 1000 MW recorded on a number of days, meaning generation was languishing around 8000 MW - just around a third of installed capacity. The unused capacity is not just the result of flawed projections of demand and supply causing the huge mismatch. Within the mismatch is the failure to meet demand that is there, and that is the sector's greatest anxiety at the moment, because it comes down to a shortage of fuels.

Some time around the middle of the last decade, a decision was made at the highest level to adopt LNG as the preferred replacement for the country's natural gas, once it runs out. Officials now say they never expected the LNG price to skyrocket as it has done in the last one year. Amid criticism that the government has not done enough to explore new gas sources in recent years, Petrobangla has started exploration work at existing gas fields to extract all they can out of these.

Petrobangla officials in Dhaka say the initiative to dig new wells is part of the government's plan to drill a total of 46 exploration, development and work-over wells during the period 2022-2025 to increase production of natural gas from local sources against the backdrop of nagging gas crisis. Petrobangla statistics show that the country currently produces about 2,648 million cubic feet of gas per day (mmcfd) against a demand for over 4000 mmcfd.

Petrobangla Managing Director Mizanur Rahman said that three more wells were being dug under Sylhet Gas Fields, and a significant amount of gas would be added to the national grid by 2023 if everything goes well.

Power Division estimates say that this year, the country needs to generate around 16,000 MW of electricity to serve the extra load for irrigation pumps during the upcoming irrigation season, that starts in February and continues till May 30.

The forecasts were made by the Bangladesh Power Development Board (BPDB) at an inter-ministerial meeting recently, convened by the Ministry of Power, Energy and Mineral Resources. State Minister Nasrul Hamid presided over the meeting.

Last year, the electricity demand during the irrigation season was 15,500 MW, in 2021 the demand reached 14,097 MW, while in 2020 it was 11,997 MW. BPDB officials told the meeting that the gas demand for power plants will go up to 1500 million cubic feet per day (mmcfd) during the irrigation season while the demand for furnace oil will increase to 70,000 metric tons and diesel to 30,700 metric tons.

Will the officials be up to the task of meeting this demand?