Energy crises caused by excessive dependence on imports

Power and gasCollected

One of the major reasons behind the prevailing power and energy crisis in the country is excessive dependence on imports. The global energy crisis has been created by problems in the supply of natural gas and its increased costs. The Ukraine war has exacerbated the situation.

Experts are comparing the prevailing economic crisis with the global economic recession of the seventies. Back then the main cause of the crisis has been short supply of fuel oil. This time the crisis has been caused by the abnormal increase in gas prices.

Bangladesh has gas, no oil. But instead of extracting the gas, the government is focusing on imports to ensure energy security. Energy is the most unreliable commodity in the world. Its price never remains stable. Yet the government has chosen to rely on risky imports. As a result, whenever a global crisis arises, Bangladesh can’t avail LNG (Liquefied Natural Gas) at low prices. And this is disrupting power production, leading to frequent power load-shedding, suffering of the people and decreased industrial production. Basically, while focussing on power generation over the past decade or so, the government has failed to give due attention to the supply of the required raw material.

Inclination towards import

French technology company Schlumberger carried out a survey in 2011, stating that if the existing gas fields could undergo certain changes and renovations, it would be possible to increase gas extraction by around 500 million cft of gas over a span of three years. While the government had hired Schlumberger to carry out the survey, it did not follow up with the recommended renovations.

Experts at the time said that it had been touted that gas reserves were dwindling simply as an excuse to import costly LNG

Bangladesh won the maritime dispute with Myanmar in 2012 and with India in 2014. On 14 March 2012 Bangladesh gained around 101,631 sq km from Myanmar and on 8 July 2014, it gained around 1,900,467 sq km from India. Bangladesh has failed to take up any effective oil or gas exploration there either, though Myanmar got gas there.

Without taking any measures to extract gas, suddenly in 2015 the government declared that the gas reserves were fast dwindling. The gas that was there would last for another 15 years. Even at a seminar on 26 October 2015, the prime minister’s energy advisor Tawfiq-e-Elahi said, hard times are ahead. The country’s gas reserves will be completely exhausted within 15 years.

After creating this panic, the government then began strongly promoting the idea of importing Liquefied Natural Gas or LNG. Experts at the time said that it had been touted that gas reserves were dwindling simply as an excuse to import costly LNG. And that was eventually done. The energy sector was thus made almost completely import dependent, increasing the risks. Much had been written on the matter, but the government paid no heed.

All focus on LNG

All plans in the country’s energy and power sector are now focused on LNG. And the entire amount of LNG is imported. Huge investments are being made in constructing terminals and laying pipelines in this regard. The government is also taking up large projects in this connection.

Qatar is the largest producer of LNG in the world. Bangladesh basically buys LNG from Qatar and Oman. Even just a year ago, LNG cost 3 to 4 dollars per million British thermal units (MBtu) in the spot market. That has now exceeded 38 dollars and so the government has stopped buying from the spot market.

Sources in the government say that, the demand for gas in the country at present is 3.7 billion cft. Normally 3 billion cft is supplied on average. But this supply has been steadily decreased in the past few days. A large part of the gas supplied in the country is used in power production. Industries also use large quantities of gas. And if the purchase of LNG is not increased, there is no way that gas supply can be increased either, for the time being. With prices of LNG shooting up in the global market, the ministry for power, energy and mineral resources has decided to hold up gas imports for now.

Global scenario

Gas is now the hottest topic of discussion around the world. Increased gas prices are the main cause of the prevailing inflation globally. Over the past one year, in Europe alone gas prices have increased by 700 per cent. This has pushed the global economy towards a recession. Earlier it was fuel oil that dictated global economics and politics. Gas has now taken over.

As it is, prices of commodities were increasing due to Covid-19. But the crisis took a turn for the worse when Russia attacked Ukraine on 24 February. Almost entire Europe would rely on Russia for gas. But the pipeline through which Russia supplies Europe with gas, is being closed reportedly for renovations. Russia has said that this pipeline will remain closed for 10 days from 11 July. But Europe fears this pipeline will not be reopened anytime soon, in order to increase pressure. If that is so, the price of gas will go up once again.

If gas cannot be procured from Russia, then Europe will have to buy gas from the US. Already the US, Canada and Qatar have announced large amounts of new investments in order to increase LNG exports. Germany and other European countries are setting up terminals to bring in LNG. Experts feel that the price of LNG will shoot up further if the wealthy European countries start buying this product. They feel that low income countries like Bangladesh will not be able to survive this competition.

Myanmar has halted the purchase of LNG. Pakistan has taken up a wide scale rationing of electricity. China, India and Thailand have slashed their LNG purchase. Bangladesh has had to take the same path

The gas crisis is no longer restricted to Europe. Over the past one week, gas prices in Asia have gone up 60 per cent. The increased LNG prices have created power crises in various countries. Myanmar has halted the purchase of LNG. Pakistan has taken up a wide scale rationing of electricity. China, India and Thailand have slashed their LNG purchase. Bangladesh has had to take the same path.

The way out, according to experts

Speaking to Prothom Alo, geologist Badrul Imam said 2017 was the peak period of gas production. It began to decrease from then on. It has fallen from 2.7 billion cft to 2.3 billion cft. This will fall to 1.5 billion cft in 2030.

He feels that this present crisis has basically been created by wrong policies adopted by the government. He said, the government made three mistakes in the gas sector. Petrobangla had projected a decrease in gas production, but no gas exploration was carried out. But that is what is done all around the world. That is the norm. Now they are in a flurry. Instead of increasing production, the government has started importing LNG. Local gas costs less than a dollar. And long-term import of LNG costs 10 dollars. As Russia will not supply gas, Europe will step up LNG imports and Bangladesh will not be able to complete with them in this. Further crises lie ahead.

Badrul Imam went on to say, 50 per cent of the gas in this country is dependent on Chevron. The gas field which they operate in Bibiyana may collapse in a few years. It is not reliable. Shoddy makeshift arrangements won’t do. Myanmar is extracting gas from the sea, yet within the same boundary Bangladesh hasn’t been able to drill even one well. Bangladesh has the lowest gas exploration in the world. Import should have only been taken up if gas was not discovered after exploration. Now the crisis has gone deep. There is only one way out and that is to go for exploration and discover gas locally.

* This report appeared in the print and online edition of Prothom Alo and has been rewritten for the English edition by Ayesha Kabir