3 months spent just tackling the crisis, progress on solutions remains slow

Three months have passed within the government's first six months in addressing the energy crisis. The war in the Middle East began just 10 days after the government was formed, and March-April was spent trying to keep the supply of fuel oil stable. And now, for almost a month, there has been a gas crisis, accompanied by severe load shedding. Although some initiatives have been taken by the government to handle the situation, the implementation pace is slow.

People involved with the energy sector say that it is true that the current government is not responsible for the energy crisis. The crisis has been escalating for a decade and a half. And from the beginning of their tenure, the war in the Middle East has put the government in a difficult position. Recently, this has been compounded by an LNG terminal accident.

However, a lack of maintenance on the government's part has also been seen in addressing the crisis, with no effective measures taken for a swift resolution.

In March, fear spread about the oil crisis. In the first four days of March, oil sales doubled compared to usual. When the government introduced rationing to control this, people became even more anxious, and crowds began to increase at filling stations. Although rationing was withdrawn after some time, supply was not increased. Decisions taken by the government kept backfiring one after another.

For nearly two months, there were continuous crowds at filling stations. Towards the end of April, after a record price hike, the introduction of fuel passes, and increased market supply, the crowd lessened.

Though it was suggested to increase the stockpile of fuel oil based on this experience, it has not been done. The fuel oil sector still relies on regular imports. Meanwhile, order after order for oil has been issued through direct purchase without tender. Although no one supplied oil in the first phase, several companies have now been given the same opportunity in the second phase. Yet, if imports are disrupted for any reason, the crisis will resurface.

The only government refinery for fuel oil in the country dates back to before independence. The last Awami League government undertook the initiative to build a refinery with a three-million-tonne capacity in 2012. However, the project work did not start.

Towards the end, it was handed over to S Alam Group, but the interim government canceled it and adopted a project for government implementation, which was approved by the advisory council last February. Although the current government is continuing with it, no project director has been appointed, so no progress has been made.

In 2010, the last Awami League government enacted the Act for Quick Enhancement of Electricity and Energy Supply (Special Provisions), known as the indemnity law. Under this law, contracts were made one after another without tenders.

To benefit special groups, more power plants than needed were built without ensuring energy, and these plants, with almost 45 per cent average capacity kept idle, had to be paid rent (capacity charges). The government's losses in the power sector increased annually.

The Awami League government left a huge debt in the power and energy sector in arrears, which is why the new government struggled from the start. Experts also say that solving the energy crisis in six months is impossible.

The government has taken the initiative to sell fuel oil through the private sector. Currently, only government companies Padma, Meghna, and Jamuna sell oil through their dealers.

Recently, the energy division has been directed to create a policy to allow private sector oil sales, enabling private companies to import refined fuel oil (diesel, petrol, octane) and sell it through their dealers.

Previously, the Awami League government made a policy to bring in crude oil for refining and market it. They even approved one company at the last moment.

However, allowing oil sales in the private sector might destabilise the market. The entire market for Liquefied Petroleum Gas (LPG) is controlled by the private sector, which sells at higher prices than government-set rates, putting pressure on the government. Hence, stakeholders are opposing giving the fuel oil market to the private sector.

The State Minister for Power, Energy, and Mineral Resources, Aninda Islam Amit, told Prothom Alo, "The steps that needed to be taken within six months have been taken. Tenders have been invited for oil and gas exploration at sea. Work has begun on constructing oil refineries with twice the current capacity and establishing floating LNG terminals. These three large initiatives have been taken in a short time."

"The entire world has struggled with the energy crisis. The government has faced that challenge. If the Middle Eastern crisis hadn't started, the government might have been in a better position," he added.

The interim government has abolished the special provision law. Although the law does not exist under the new government, the tendency to make contracts without tender has been more prevalent. Contracts have been made without tender at government-to-government levels to buy at lower prices.

Despite efforts to purchase fuel oil and LNG without tenders, supplies have not arrived on time. With no LNG cargo arriving, the gas crisis has intensified. There is a government-to-government agreement with a US private company. The process for a government-to-government agreement with a Chinese company for setting up a new LNG terminal is underway.

The state minister of power and energy said, "Like the Awami League government's dark laws, the government hasn't created any new laws. Contracts and purchases are being made following the existing procurement regulations of the government. This had to be done because of the special situation."

Sources from Bangladesh Oil, Gas, and Mineral Corporation (Petrobangla) state that the daily production of domestic gas decreases by more than 150 million cubic feet every year. Since last year, it has been declining every week or almost every day.

According to the sources, over a decade, daily gas production in the country has reduced by 1 billion cubic feet. In 2017, 2. 7 billion cubic feet of gas was produced daily in the country, whereas now, 1. 63 billion cubic feet is produced, while the daily demand is now 3. 8 billion cubic feet.

At one stage, the Awami League government shifted its focus to imports instead of exploration. Liquefied Natural Gas (LNG) imports began in 2018, with two floating terminals at Moheshkhali in Cox's Bazar to supply the imported LNG converted into pipelines—one terminal belonging to Summit, and the other to the US company Excelerate. Together, these two have a supply capacity of 1.1 billion cubic feet of LNG.

Apart from that, the Awami League government had initiated the construction of two more floating and inland terminals. A contract was signed for a floating terminal under a special law with Summit, and a term sheet was signed with Excelerate for another terminal.

The interim government canceled Summit's contract and decided not to contract with Excelerate. Thus, no new terminals have been added in the last two years. Hence, imports cannot be increased even if desired.

On 21 July, after the Excelerate terminal was shut down due to a fire, the gas crisis became severe. By 15 August, although the terminal was fully prepared to supply gas, only partial supply could be made due to the absence of LNG. Due to the lack of LNG, gas supply from the Excelerate terminal stopped last Wednesday evening. Now, gas is only being supplied from Summit's terminal.

The BNP government has initiated the construction of two new floating and one land-based terminal. Talks are on the verge of conclusion with a Chinese company to set up a floating terminal. This will be contracted on a government-to-government basis, while land acquisition has begun at Matarbari for the land-based terminal, and consultant appointments are in the final stages.

Compared to exploration, the success rate of gas field discovery is higher than the global average in Bangladesh. Still, appropriate exploration has not been conducted in the country. Even after 14 years of maritime boundary victory, oil and gas could not be discovered in the Bay of Bengal.

During the Awami League government, four companies started working but left without completing them. There was no emphasis on gas exploration onshore either. During the interim government, no companies participated in tenders for oil and gas exploration. The current government invited tenders again last May, but even if contracts are made this time, it may take at least five years to discover gas.

In 2022, due to the dollar crisis, the Awami League government suspended open market LNG imports for seven consecutive months. Then, in the middle of that year, the government planned to drill 50 wells, including exploration, renovation, and development. If this could be done, around 650 million cubic feet of gas could be added to the national grid daily. This was not prioritised for implementation either.

The interim government undertook the responsibility to accelerate the first 50 wells and planned an additional 100 wells. The BNP government has stated from the start the intention to speed up the work on 150 wells. However, till now, only 30 have been completed. Work on eight more is ongoing, although the work on 50 wells should have been completed by 2025.

Over the past six months, there has been no effective initiative to increase the pace. The government hasn''t finalised any decisions to utilise the unused gas from Bhola.

After the formation of the new government, the Energy Division published a five-year plan concerning the energy sector. It stated a plan to bring in 115 cargoes this year, with no opportunity to bring in more due to lack of infrastructure capacity.

By increasing LNG imports, enough gas supply can be achieved by 2030. Besides, it has been announced that a 10-year plan for the power and energy sector will be presented in the next parliamentary session.

During the decade and a half of the last Awami League government, electricity prices were increased 12 times at the wholesale level and 14 times at the retail level, yet government subsidies increased annually.

After the change of power, an interim government formed a committee on 5 September 2024 to review all power contracts without raising prices to cut costs. The final report was submitted on 20 January, identifying extra costs in contracts. Even in the last financial year, the capacity charge for power plants may exceed Tk 450 billion.

However, the new government formed a committee from the power division to review the contracts, and they are working. Meanwhile, electricity prices were increased by an average of 19.85 per cent at the wholesale level and 16.68 per cent at the consumer level last June.

During the Awami League tenure, it was stated that importance would be given to electricity production from renewable energy, but practically nothing was done. However, the new government sincerely emphasises this sector.

A target to produce 10,000 megawatts of electricity from renewable energy in the next five years was set. The current budget has abolished import duties, regulatory duties, supplementary duties, and advance tax on the import of crucial ingredients related to the solar power sector. This can reduce the cost of solar power production by 25 to 30 per cent, although setting some conditions may hinder the potential of solar power, as per relevant stakeholders.

Regular load shedding occurred in the country last April and this month. Notably, severe load shedding followed the gas crisis nationwide. Due to unpaid bills of power plants, the energy crisis worsened.

The Power Development Board (PDB) owes power plants more than Tk 500 billion, which is disrupting the fuel supply to power plants. Thus, although there is a capacity of over 28,000 megawatts, barely 14,000 to 16,000 megawatts are being produced, necessitating more than 3,500 megawatts of load shedding during peak demand.

In its election manifesto, the BNP stated that due to limitless corruption over the past one and a half decades, opaque procurement processes, costly short-term contracts, self-destructive capacity charges, and excessive reliance on imports, the power and energy sector in Bangladesh has become a costly, corrupt, and fragile structure.

The BNP's aim is to establish an affordable, reliable, and environmentally friendly power and energy system by transparently, efficiently, and optimally utilising domestic resources as the driving force of national development, the manifesto added.

It also mentioned that short-term and rental capacity charge agreements would be reviewed to reduce unnecessary and unreasonable costs and ensure transparency and efficiency. Identifying import dependency in the power and energy sector step by step will balance domestic sources and imports.

The election manifeto further said an initiative will be taken to construct a new crude oil refinery with a refining capacity of seven to eight million tonnes step by step in Chattogram or coastal industrial areas.

The party also pledged BAPEX will be strengthened in geological surveys and well drilling to expedite onshore and offshore gas exploration, ensuring a transparent, technical structure in resource management.

The effectiveness of the tariff determination process will be enhanced to keep energy prices affordable and transparent, and independent review processes will be initiated as needed, it stated. Renewable energy and energy efficiency will receive tax relief and low-interest financing options.

The Power and Energy Division states that several of those initiatives have already been taken. The power division has already prepared a National Renewable Energy Development Strategy Paper (2026-2030).

Duty exemption benefits have been provided in the budget, progress has been made in setting up new terminals, construction of oil refineries is moving ahead, and emphasis is being placed on gas exploration and production. A committee is working on contract reviews to reduce power generation.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), told Prothom Alo that the energy sector's problems are accumulated and left by the previous government.

Pointing out that the Middle Eastern war has further complicated the situation, he said, "There is a lack of effective management in tackling the crisis due to prolonged decision-making and reliance on bureaucrats. There hasn't been swift decision-making prowess."

According to him, more efficiency was needed in immediate measures. Steps towards a long-term solution by moving away from import dependency are seen, but it takes time to yield results. Although there is sincerity in a few areas, the government should have been more prepared for comprehensive change.

But privatisation of the power and energy sector will not yield any practical outcome; rather, it might increase prices in the market along with the government's financial burden, he argued.