By Asif Tarafdar
Is there light at the end of the tunnel? Asif Tarafdar has the answer.
Bangladesh has been dreading severe household gas shortage over the past decade. In the past, consumers were hopeful that there is an end to this crisis but that seems to be fading quickly. Households all over the country now consider gas shortage as a recurring event. Every winter, the crisis takes a turn for the worse. It forces households to look for temporary alternative measures. It includes using electricity intensive induction and a rice cooker. At times they are forced to rely on hotels and takeout. It puts pressure on low-income households as a greater percentage of their income is spent on food. It has been well known that there is a deficit in supply, but the crisis has deepened due to the rise in surplus demand. Currently, the deficit stands at 600 million metric feet. The maximum supply is about 2,700 mmcfd (Million Standard Cubic Feet per day) gas from various gas fields against the demand of 3,300 mmcfd. In households, the daily is 1.7 million cubic feet of gas against a demand of 2 million cubic feet.
In winter, shortage intensifies due to overuse. In winter, households use extra gas to boil water for personal use, to heat their food or sometimes to keep their room warm. However, the crisis is much more severe, it stretches more than just a few months of winter. Natural gas in Bangladesh is also used in other sectors such as industry and power generation. Recent expansion in the industrial sector and increasing demand for electricity has put pressure on household gas supply. Power Plants and Fertilizer factories require a large amount of gas supply. The shortage intensifies when the two sectors operate at full capacity. TITAS has been trying to manage the situation by reducing supply to the plants when demands are very high. That means these plants have to operate at much-reduced capacity. Stealing and misuse of gas increases problems as the perpetrators do not use it responsibly. As they are not liable to pay fees, they waste a lot and it ends up putting pressure on the national grid.
Provided there is no more addition (new discovery/ reserve growth) our gas reserve is set to deplete by 2025. There is no other way but to look for alternative sources. Last year, Bangladesh Government assured that the gas crisis will go once imported gas from Qatar is added to the supply chain. According to the agreement, Bangladesh stands to receive 1.8 mmtpa (Million Metric Tonne Per Annum) of LNG between 2018 and 2022 and 2.5 mmtpa of LNG between 2023 and 2032 from Qatar. First of which arrived in May, 2018. The almost entire supply of LNG is being sourced to Chittagong through floating terminals, with the expectation that it will help to reduce the shortage in other areas. According to TITAS, Chittagong is getting a daily supply of 300 million cubic feet of LNG, and an extra 50 million cubic feet gas from the national grid. But it has done little to alleviate gas shortages in Dhaka city. The city is still grappling with household gas shortages. The areas which are hit most with shortages are Mohammadpur, Shyamoli, Ring Road, Kallyanpur, Rampura, Banasree, and Uttara.
With the certainty that natural gas supply in households is going to decline and might just stop in near future, more and more people are switching over to LPG. LPG is a much more efficient energy source than natural gas. LPG provides 600 times more energy compared to combustion of a unit of natural gas. LPG is also more carbon efficient, employment of LPG can significantly reduce the emission of harmful greenhouse gases and nitrogen dioxide into the atmosphere. In addition, LPG accounts for low combustion emissions and does not produce black smoke either which makes it a comparatively better source of energy. Currently, the Bangladesh government has suspended providing new connections to households, to boost supply in industries and power sector. The absence of new connections and rampant shortages is pushing more and more Bangladeshi households towards LPG consumption. There is also a push from government to switch from natural gas to LPG that is why it is providing business incentives. Private companies have been given lots of leniencies to set up LPG terminals.
The state-owned LPG producers supply 20 percent of the market and private companies own the rest of the market share. The private entrepreneurs are in the process of constructing 23 LPG terminals and, 43 bottling plants. The number of companies operating in the market has grown exponentially. Currently, there is stiff competition between 13 companies. Of the 13, two are foreign companies, Totalgaz and LAUGFS Gas Bangladesh (formerly known as Petredec Elpiji).A number
Right now, there is stiff competition in the market as new companies are eyeing to capture previously untapped sector. It is good for consumers as it keeps the price low. The competition is helping consumers get a new cylinder at less than half the production price, but it is increasing the financial burden on the companies. An imported cylinder of 12-kg-capacity costs a company Tk 2,200 to Tk 2,400 but it is being sold at Tk 1,000-Tk 1,100 just to hook new customers, according to industry insiders. Some companies are manufacturing cylinders locally and that too costs about Tk 1,600 a cylinder. The loss incurred with the sale of a new cylinder takes 4 years of refilling has sales to make up. Not only cylinders, but companies are also selling gas much cheaper price due to competition. According to the insiders of a company, they used to make a gross profit of about $200 by selling a tonne of gas, but it has now come down to $100.
A tonne of imported LPG cost $594 (about Tk 50,000), including freight charge of $110. It yields 83 12-kg cylinders. So, the production price of a 12-kg cylinder stands at Tk610. Companies sell the gas at Tk 750-Tk 780 to wholesalers, who then sell it at about Tk 1,000 to consumers. According to the World LPG Association (WLPGA), Bangladesh is one of the fastest-growing LPG markets across the world and predicted that demand for the fuel might reach up to 3.0 million tonnes by 2025.
All the indicators suggest that our gas reserves are not going to increase enough to satisfy aggregate household demand. In addition, many experts are discontent about using natural gas for household use. The argument is that natural gas is too precious to be used on a fixed rate. Most are in favor of solely using it for industry and fertilizer. Bangladesh should look for pipeline gas import from outside to meet demand. We missed an opportunity of having a reliable supply of cross-border pipeline gas when it rejected the India-Bangladesh-Myanmar tri-nation gas pipeline proposal in 2005. As it stands, LPG is the best substitute of natural gas when it comes to household use. Bangladesh government appeared to be well prepared and willing to make this transition. It is giving multiple companies incentives to start LPG business. It appears LPG will bail Bangladesh out of this crisis.