Furnace oil stock plummets now

3D printed oil barrelsReuters file photo

Following the shortage of coal, both government-owned and private power plants are currently grappling with a shortage of furnace oil as the import of this fuel has been impeded due to dollar crunch. Nearly 27 per cent of the power plants run with this fuel.

According to sources from the Bangladesh Petroleum Corporation (BPC), the sole state-owned agency responsible for fuel oil imports, BPC currently has a one-week supply of furnace oil. However, two new vessels carrying furnace oil are due to arrive soon, with the oil becoming available by the end of the month. Consequently, the shortage of furnace oil may lead to a decline in power generation, resulting in a potential increase in load shedding.

BPC has an average demand of 4,000 tonnes of furnace oil per day. Of this, Eastern Refinery Limited (ERL), the country’s only fuel oil refinery, provides with 1,100 tonnes of furnace oil while the remaining oil is imported.

According to BPC sources, BPC had a stock of 18,000 tonnes of furnace oil which would suffice for six days as per daily requirement. Typically, BPC maintains a one-month stock.

A BPC official told Prothom Alo that a cargo ship with 25,000 tonnes of furnace oil is scheduled to arrive in the country by 22 June. The ship was scheduled to arrive on 12 June. It has been delayed due to overdue bill payments. After the ship reaches the port, it will take at least eight more days to transport the oil to the power plant. The daily requirement cannot be met with the current stock. The daily supply should be reduced for the time being. However, another ship is scheduled to arrive by 26 June with 25,000 tonnes of furnace oil.

On the other hand, there are approximately 65 furnace oil-fired power plants with a total capacity of around 6,500 megawatts. Due to the shortage of coal and the subsequent reduction in power generation, about 5,000 MW of electricity is currently produced using fuel oil during the peak hours at night. However, it is no longer feasible to sustain this level of production using fuel oil.

BPC (Bangladesh Petroleum Corporation) imports approximately 6 million tonnes of various fuel oil types each year, with diesel accounting for 70 per cent of the total. Currently, the country continues to import around 10 to 12 cargoes of diesel per month, ensuring a diesel stock of 30 days. However, the import of furnace oil is limited to only one or two cargoes per month.

Power plants in Bangladesh require over 5 million tonnes of furnace oil annually, with around 4.5 million tonnes being imported directly by the power plants’ authorities themselves. Nevertheless, these power plants have reduced their imports since last year. Consequently, BPC is facing an increased demand of furnace oil, receiving additional requirements of over 850,000 tonnes in the current financial year (2023-24). This demand is expected to rise further, exceeding 1 million tonnes.

Given the circumstances, BPC is encountering difficulties in meeting this escalating demand for furnace oil, which poses a challenge for ensuring an adequate supply for power generation and other sectors.

Banks are currently facing challenges in providing the necessary dollar supply for importing fuel oil in Bangladesh. The issue has been brought to the attention of Bangladesh Bank on multiple occasions. According to two officials from BPC, as of 13 June, outstanding bills for fuel oil amount to approximately USD 210 million. The delay in settling these outstanding payments has resulted in certain suppliers refusing to provide fuel. Additionally, some suppliers have cancelled purchase orders, while others are delaying in shipping the fuel due to the unsettled bills.

According to ABM Azad, the Chairman of BPC, there will still be some pressure even after the first ship’s arrival. However, the situation is expected to improve once the second cargo ship arrives later this month. Power Development Board (PDB) is yet to provide the monthly demand for the upcoming year. It would allow for better planning and coordination of imports to meet the required fuel oil quantities once the demand is known.

Power plants fail to purchase oil

The private sector power plants in Bangladesh are facing challenges in receiving timely payments for their electricity sales, resulting in outstanding bills of over Tk 200 billion to the Power Development Board (PDB). Consequently, they are unable to settle their bank dues, leading to difficulties in obtaining new letters of credit from banks. This has hindered the import of furnace oil required to operate their power plants.

Some private sector power plants have approached the PDB for furnace oil supply. As a result, the PDB has increased its demand for furnace oil from BPC (Bangladesh Petroleum Corporation). However, some private sector power plants are still independently importing furnace oil to run their facilities.

Faisal Karim Khan, president of Bangladesh Independent Power Producers Association and director of Summit Power International, told Prothom Alo that the power plants have unpaid bills with the Power Development Board (PDB) for six months, which prevents them from opening letters of credit. Summit is importing more furnace oil than BPC despite such difficulties. Power generation continued despite bill payment delays and financial losses due to dollar exchange rate.

Load shedding may increase

PDB officials said the shortage of dollars has been causing disruptions in coal imports for over six months, leading to increased load shedding. The Payra power plant is currently shut down due to coal scarcity, while the Rampal power plant is operating at only half of its capacity. Additionally, the Bashkhali power plant was closed shortly after a four-day test run. As a result of these coal shortages, the Power Development Board (PDB) is attempting to compensate by increasing power generation from fuel oil. However, even the stock of fuel oil is running low now.

The demand for power was not high as the temperature was low for the past five days due to scattered rains. Load shedding has begun to increase since last Tuesday, with around 2000 MW of power cuts implemented at midnight that day. Additionally, a load shedding of 1905 MW was carried out nationwide on Wednesday at 4:00 pm, except in Dhaka. Dhaka did not witness loadshedding yet.

Speaking to Prothom Alo, Consumer Association of Bangladesh (CAB), a consumer rights body, senior vice president M Shamsul said the power production would decrease more if the fuel oil supply decreases after coal shortage. That means it is tough to achieve a load shedding free country. And, load shedding should be implemented in a balanced way, not in villages only.

* The report, originally published in the print edition of Prothom Alo and has been rewritten in English by Farjana Liakat