Can LNG spearhead energy security?
Power, energy and mineral resource division of the government and Petrobangla are aware of the declining reserve and are working for sustainable and alternative primary energy sourcing
AKM Asaduzzaman Patwary
Once we glimpse our economy steadily progresses against many challenges, hopes pile up with commoners for new economic thinking ahead. It is widely believed that our broad based Industrialisation is the catalyst of incremental economic growth. Most of the macroeconomic dynamics are powered by the primary energy as it is pivotal for multiple economic engagements. The mobility of growing economys dynamics can be ensured if the energy security in terms of relentless primary energy sourcing and supply. Natural gas is the mostly used primary energy to support all energy dependent manufacturing and economic activities. Natural gas is the cheapest source of energy as of today in Bangladesh and lowest ever in Asia. The unplanned natural gas use has almost exhausted the reserve. The escalating energy demand caused by consistent industrial growth against depleting natural gas adds woe and concern in realizing the economic visions of Bangladesh by Year 2021 and beyond. Our energy sector is dominated by IOCs since ages. Different geological survey forecast our proven and probable natural gas reserve entirely in both off and on shore is 14.5 TCF. UNGS reported potential reserve off-shore gas is much less than on-shore gas.
The rapid increase of energy consumption and demand made tensed all concerned stakeholders as the energy intensive industrialisation end up with scarcity. Energy experts and geologists alerted that current reserve finishes by 2022 based on gas demand with average annual consumption of 2 TCF.
Power, energy and mineral resource division of GoB and Petrobangla are aware of this declining reserve and seemed working for sustainable and alternative primary energy sourcing from possible sources and proposed LNG as mere solution to meet extensive demand led long term energy security. As per the 7th five-year plan of Gov. and JICA found 500 mmcfd gas from LNG at estimated $12 per mmbtu.
Against this state of energy, people plunged into deep uncertainty regarding the gas supply as mixed opinions are there as Government claims that LNG will be the key and mostly dependent energy source of given energy mix. Against this view of Government, some observations on lasting energy security on LNG and futuristic economic development are being elicited:
The estimate of primary energy demand by Government will be 6000 mmcfd by 2022 and about 10,000 mmcfd by 2030 and against this proven gas reserve is expected to be diminished by 2022 which means our reserve of gas come down to zero and only 500 mmcfd LNG will be in pipeline to be primarily used in Chittagong though cumulative demand in Chittagong will grow by then.
The Matarbari FRSU by USA based company Excelerate is under construction alongside couple of land based re-gasification terminals. The pipeline construction is limited to Chittagong which needs expansion to serve entire Bangladesh gas grid.
A recent study of Petrobangla has indicated the LNG tariff to Industry user will be $7 per mmbtu excluding transmission cost, vat and other duty. Petrobangla also indicated that VAT and SD could be maximum 122 percent. The indicative gas tariff increase will be 55% in power generation, captive power 80%, industry 93%, CNG 63% above all Commercial use 105% if LNG is mixed with local gas. Against the current projection of gas consumption and supply, the local natural gas reserve will severely be low and LNG is thought to secure the shortage. In this scenario, the gas tariff will be manifold times higher than Petrobangla projection. For instance, 1 unit gas @TK100 will be priced at end consumer level TK.222. If all taxes are considered, the price incidence on end users is terribly devastating. The indicative LNG price in 7th five-year plan was at $12 per mmbtu and $2.5 billion annually. This dual and independent assessment of price creates panic among all potential gas dependent investors and stakeholders. It was also stated that all duties except Vat in import of LNG will be exempted though it wont help as supply stage SD, VAT and distribution cost are incremental soaring the end price. If we consider the networking and distribution channel infrastructure development from Matarbari to Anwara through 36 maximum diameter pipeline, far from national grid, the consumer price of LNG will be much higher. The defocused PSMP showed gas consumption trend in power and industries is to some extent misleading as Gas demand and supply forecast in 7th five-year plan does not align with PSMP and other national master plan documents for our trade, investment and economic planning.
Considering the large volume of gas requirement, Government signed 4 different MoUs with Oman, Indonesia, Singapore and other sourcing countries for 4000 mmcfd.
Our economy has come up todays flourishing stage which is on incremental backed by export led manufacturing industry, private investment growth but this alarming gas scenario will harshly stagnate the consistent manufacturing industrialization and potential FDI of East Asian business relocation in Bangladesh. Though the International energy market is always volatile, the plan of LNG import from Spot market will be a nightmare for the nation.
Hereafter some critical issues about the stated LNG perspective and effects are brought into the attention of all energy concerned.
Pricey LNG cant ensure long term energy security as security requires multiple primary energy sources. A realistic and target driven Gas sector master plan and relevant distribution and periodic pricing policy are required towards energy and economic lifeline of Bangladesh. The GSMP can be a basis to review PSMP for clear account of long-term power system and need.
The PSMP targets 34000 mw by 2030 and 50000 mw by 2041 generation capacity largely based on Coal but the local coal exploration is not gearing rather imported coal based power plants are more visible alongside Coal policy, gas exploration, allocation policy and other regulatory endeavours are non-existent. The PSMP has limited focus on gas based power generation around 7000 mw but we doubt this percentage of total may be unrealised as only LNG is unable to meet need of power generation and imported gas based electricity will be unaffordable for all. LNG seems available in Year 2018 though it meant to be in 2017 and delay adversely affects industrialization.
We need to bear in mind the learning of imported liquid fuel i.e crude oil, furnace and diesel which fail to ensure complacence to people irrespective of low and high international crude price rather added subsidy pressure on Balance of Payment. With this experience, how we become optimistic and confident that an expensive import oriented LNG will help us to steer our growing economic operations and soothe growing local market demand. In the changing geo-political context, the economic diplomacy often shifts. We never know countries which were friends of Bangladesh today may not be in future.
We perceive dependence on Qatar and other Gulf Countries may change due to swinging geopolitical course of actions, dimensions which may limit bilateral economic fraternity leading to economic slump. Current global LNG market is lowest ever however the debate on LNG tariff demands robustly focused research considering purchasing capacity, economic implications to present a realistic tariff scenario to the nation. Alongside, hope is slim in local off-shore gas exploration as seismic survey and bloc allocation take ages.
People feel like to have crystal clear picture of natural gas reserve rather than being fooled with hopeless propaganda Bangladesh-floating on Natural Gas. Bangladesh is on fast track economic growth journey having spectacular and focused vision of graduating into Middle Income Country by 2021 and Developed Country by 2041 based on forging economic growth. These epoch making economic visions intensively require foreign and local investment in cross-section and export oriented industries, double digit growth, higher per capita income and liberalised global trade where energy security is undoubtedly indispensable. Taking futuristic economic visions into account, we must opt for right and diverse energy mix composing Gas, Liquid oil, Coal and LPG featuring affordable and readily available depending on actual local market demand to present a glorious legacy to next generation economic leaders to drive economic momentum to ultimate destination of excellence.
The writer is Research Fellow, DCCI
