The dollar crisis in the energy sector shows no signs of easing. Foreign companies are exerting pressure to settle outstanding dues, and the regular opening of letters of credit for fuel oil imports is facing challenges.
The process involves releasing dollars from Bangladesh Bank before banks can open the LC, raising concerns about the continuous supply of fuel oil. Jet fuel stockpiles are nearing depletion, and diesel stocks are also diminishing.
Bangladesh Petroleum Corporation (BPC) consistently reports the dollar crisis to the Ministry of Power, Energy, and Mineral Resources. The ministry is in discussions with the Finance Division and Bangladesh Bank, but the required dollars are not readily available. Late payment penalties are becoming routine, and due to the uncertainty, international banks are imposing various conditions on the LC, leading to increased import costs.
BPC sources indicate that the available stock of jet fuel can last until 1 January. However, two ships carrying jet fuel and diesel are expected to arrive at Chattogram port on Friday.
The unloading process from the ship to the depot may take up to two days, but officials believe it will not lead to a crisis.
A responsible BPC official informed Prothom Alo on Thursday that there was a debt of 10.5 million dollars to PetroChina (Singapore), the fuel oil supplier. After settling 10 million dollars, the company dispatched a new ship.
However, the release of oil from the vessel was delayed due to outstanding dues. A payment of 5 million dollars was made on Wednesday, and the confirmation for the release of oil was received on Thursday. Ships from another oil supplier, Unipec Singapore, are also en route. Both companies are Chinese.
On 11 December, BPC issued a warning to the energy division through a letter, stating that prolonged outstanding dues are prompting various suppliers to propose delaying or canceling fuel supplies. Despite repeated requests, suppliers are uncooperative, with some continuously pushing back the scheduled arrival dates of their ships.
PetroChina has declined to provide additional diesel, and Singapore's Vitol has not confirmed the arrival date of a new ship. If this situation persists, the stocks of diesel and jet fuel are anticipated to be nearly exhausted by the last week of December, posing a risk to maintaining an uninterrupted fuel oil supply.
State of stocks and dues
According to BPC sources, the usual practice is to maintain a one-month stock of fuel oil. As of 28 December, the storage capacity for diesel in the country is 600,000 tonnes, with a current stock of 170,000 tonnes, sufficient to meet the demand for 14 to 15 days.
The storage capacity for jet fuel is 65,838 tonnes, with a current stock of 9,685 tonnes, providing for an additional four days. However, BPC has ample stock of petrol, octane, and furnace oil.
BPC has been facing irregularities in receiving dollars for fuel bill payments for the past one and a half years. In May of the previous year, BPC proposed to the ministry the option of paying bills in yuan with China and in rupees with India as an alternative to using dollars. This proposal has not been finalised yet. As of yesterday, BPC's arrears have reached 253 million dollars, although the dues surpassed 450 million in October. Approximately half of these dues have been repaid under pressure.
BPC requires approximately 6 million tonnes of fuel oil annually, and the country's sole refinery has a capacity of 1.5 million tonnes per year. The remaining fuel oil is imported directly.
However, 75 per cent of the various types of fuel oil used in the country is diesel, and 80 per cent of diesel is directly imported. Foreign companies selling oil to BPC have issued threats to cut off the fuel supply.
BPC Chairman ABM Azad reassured yesterday that there is no possibility of running out of jet fuel. New oil shipments will be added to the depot before the current stock is depleted.
Two ships carrying 31,000 tonnes of new jet fuel are scheduled to arrive. Diesel is also in stock, with additional shipments expected. Therefore, there will be no issues with the fuel supply.
Fuel demand to increase in summer
The upcoming irrigation season, scheduled to run from January to April, is expected to witness an increased electricity demand of 1800 MW compared to the previous year.
To meet this demand, the Power Division is actively working on stockpiling various types of fuel for additional power generation. The Energy and Mineral Resources Division has assured that furnace oil and diesel will be supplied as per the demand.
An inter-ministerial review meeting was conducted recently to ensure a consistent and uninterrupted power supply for irrigation. The expected maximum electricity demand during the irrigation season is projected to be around 17,800 MW, up from 16,000 MW in April of the previous year. To accommodate this increased demand, there is a focus on augmenting the supply of gas, furnace oil, and diesel.
The Power Division emphasises the importance of storing fuel oil in power plants to sustain electricity generation for two months during the upcoming irrigation season. The anticipated gas demand for power generation during this period is estimated to be between 1.54 to 1.76 billion cubic feet per day. The required fuel includes 154,950 tonnes of furnace oil and 15,600 tonnes of diesel.
Concerns are being expressed about the fuel supply situation, particularly for private sector power plants, which often import furnace oil themselves. Complications related to outstanding bills and the process of opening Letters of Credit (LC) contribute to the overall apprehension about fuel availability. Gas demand is particularly challenging to meet, and the concerns stem from the experiences of the last summer season when electricity production fell short of demand. This led to regular load shedding, with rural areas.
M Tamim, Special Assistant to the Chief Advisor of the former Caretaker Government on Energy, expressed concerns, stating that if the bills remain unpaid, suppliers may create problems at some stage. He emphasised the importance of providing dollars on a priority basis to settle fuel bills and avoid potential disruptions in the oil supply business with Bangladesh.
*This report, originally appeared in Prothom Alo print edition, has been rewritten by Farjana Liakat