Gas crisis puts mounting pressure on fuel oil

Steel manufacturing company BSRM has kept production running with diesel and furnace oil amid the gas crisis, though output remains below half of its capacity. Due to the gas and electricity crisis, many other institutions across sectors, including pharmaceuticals and textiles, are following the same path. Multiple gas-dependent pharmaceutical factories in Pabna and Kaliakair, Gazipur, also relying on diesel to continue production.

The gas crisis is increasing pressure on fuel oil from two directions. Industries are using more diesel and furnace oil to run generators and boilers, while furnace-fired power plants are also consuming more fuel to offset electricity shortages. This information was obtained by analyzing the sales figures of the first 15 days of August from the three state-owned oil marketing companies—Padma Oil, Meghna Petroleum and Jamuna Oil.

Compared to the same period last year, Padma Oil's total diesel sales increased by nearly 29 per cent and furnace oil sales by 174 per cent in the first 15 days of this current August. Meghna Petroleum's diesel sales increased by nearly 21 per cent and furnace oil by 152 per centproductio. Jamuna Oil's diesel sales to industrial institutions increased by 33 per cent and furnace oil sales to industrial and power plants increased by 224 per cent.

Md. Mofizur Rahman, Managing Director of Padma Oil, told Prothom Alo that the demand for fuel oil from industrial factories has increased due to the gas crisis. The pressure is relatively higher in industrial belts around Dhaka, especially in Narayanganj and Gazipur. However, he said the situation is being managed.

The country’s industries had already been facing gas shortages but the crisis intensified after a fire accident at Excelerate Energy's floating liquefied natural gas (LNG) terminal in Maheshkhali on 21 July. Under normal conditions, about 1 billion to 1.10 billion cubic feet of gas is added daily to the national grid from the two terminals in Maheshkhali. Following the accident, there was a major shortage in supply for about 25 days. The situation improved somewhat when Summit's terminal became fully operational and Excelerate's terminal became partially operational on 15 August.

However, that relief did not last because there was no new LNG cargo. Supply from Excelerate's terminal gradually decreased and came to a complete halt around 3:00 PM last Wednesday. Consequently, gas supply to the national grid dropped again, currently standing at around 2.22 billion cubic feet per day, whereas the country's demand is about 3.80 billion cubic feet.

This gas deficit is disrupting industrial production, with many institutions increasing their reliance on diesel and furnace oil to sustain production. Petrobangla has stated that the situation may improve when a new LNG cargo arrives tomorrow, on Sunday.

In industrial factories, diesel is primarily used to run generators to generate electricity. In some cases, diesel is also used in boilers. Meanwhile, furnace oil is mainly used for generating heat in industrial boilers and furnaces. It is also used as fuel in furnace oil-fired power plants. Consequently, when gas and electricity shortages increase, the demand for both types of oil rises.

According to Padma Oil's calculations, 4,892 tons of diesel were sold to industrial institutions in the first 15 days of the current August. During the same period last year, it was 3,781 tons. This means diesel sales to industries increased by nearly 29 per cent.

The growth rate for furnace oil is even higher. Padma's sales to industries increased from 189 tons to 1,809 tons—a growth of nearly 857 per cent. However, in terms of volume, the vast majority went to power plants, where sales rose from 7,911 tons to 20,350 tons. Overall, Padma's furnace oil sales increased by nearly 174 per cent.

The pressure becomes clear just by looking at the sales figures of some of Padma's major industrial customers. Insepta Pharmaceuticals took 265.60 tons of diesel from Padma between 1 August to 15 August last year. During the same period this year, the company took 443.93 tons. This means their diesel intake increased by nearly 67 per cent.

Bengal Glass took 22.77 tons of diesel in the first 15 days of last year. This time, during the same period, it purchased 53.12 tons. That means diesel intake more than doubled, with a growth rate of nearly 133 per cent.

AKM Knitwear of the Al-Muslim Group took 37.94 tons of diesel during the same period last year. This time it took 113.83 tons, meaning the institution's diesel intake increased by 200 per cent.

A major increase was also seen in the case of Acme Laboratories. In the first 15 days of August last year, the company took 68.30 tons of diesel. This time it purchased 276.98 tons, meaning diesel intake increased by nearly 306 per cent. The Jamuna Group purchased 15.18 tons of diesel during the same period last year. This time it took 68.30 tons, with a growth rate of 350 per cent.

Eskayef Pharmaceuticals had purchased only 7.59 tons of diesel in the first 15 days of last year. This time, during the same period, it took 60.71 tons, meaning the institution's diesel intake increased by 700 per cent.

Far East Knitting and Dyeing Industries did not take any diesel from Padma during the same period last year. This time the company took 83.47 tons. Similarly, Crown Wears (Private) Limited did not take any diesel during that period last year, but this time took 75.89 tons.

Three oil company officials told Prothom Alo that more than 500 industrial factories, both small and large, regularly buy oil from the three companies. Compared to last year, 40 to 50 per cent of the factories are taking extra diesel and furnace oil.

Diesel sales by Meghna Petroleum to industrial customers increased from 7,122 tons to 11,722 tons—a growth of nearly 65 per cent. Over the same period, the company's total diesel sales increased by nearly 21 per cent. Furnace oil sales to industrial customers of this company increased from 236 tons to 623 tons.

However, the major pressure came from power plants, where furnace oil sales rose from 7,637 tons to 19,236 tons. As a result, the company's total furnace oil sales increased by nearly 152 per cent.

When asked, Md. Shahirul Hasan, Managing Director of Meghna Petroleum, said that although extra demand has come from industrial institutions, supply remains normal. This extra demand is relatively higher in the Dhaka region, especially with the demand for oil increasing from industrial institutions.

On the other hand, Jamuna Oil's diesel sales to industrial customers increased from 4,928 tons to 6,564 tons. Furthermore, combined furnace oil sales to industries and power plants rose from 3,989 tons to 12,928 tons.

The same trend was observed in the data of the Bangladesh Petroleum Corporation (BPC). In the first 15 days of the current August, 179,538 tons of diesel were sold in the country, with a daily average of about 11,969 tons. This is about 22 per cent higher than the daily average for the entirety of August last year.

Over the same period, 66,688 tons of furnace oil were sold, with a daily average of about 4,446 tons, which is about 76 per cent higher than the daily average for the entirety of August last year.

When asked, BPC Chairman Md. Manzur Alam Pradhan told Prothom Alo that although extra demand for fuel oil has come in, there is no shortage in reserves. The import process is normal, and regular oil tankers are arriving. According to BPC's figures for 15 August, the deliverable reserves of diesel in the country stood at 349,882 tons and furnace oil at 51,348 tons.

Although industrial institutions are sustaining production by using extra oil, their costs are increasing. Tapan Sengupta, Deputy Managing Director of BSRM, told Prothom Alo that after gas supplies were shut off, they had to use diesel and furnace oil. Their oil usage has increased by up to 70 per cent, raising their production costs at least fourfold.

The pharmaceutical industry faces the same pressure. Md. Zakir Hossain, former secretary general of the Bangladesh Association of Pharmaceutical Industries and managing director of Delta Pharma, told Prothom Alo that electricity from the national grid costs them about Tk 15 per unit.

Generating the same electricity with a diesel generator costs Tk 41 to 42. According to his calculations, overall energy costs are increasing by 75 to 80 per cent. Added to this are generator maintenance costs and losses from reduced production.

Running generators for long periods also requires more frequent servicing. Moreover, in sensitive production like pharmaceuticals, power outages sometimes require entire batches to be discarded.