Many countries around the world are facing an energy crisis with a 500 per cent surge in prices of liquefied natural gas within a year. That piled pressure on Bangladesh, one of the biggest LNG importers in South Asia.
The government was forced back into the spot market to buy LNG to secure energy supply. The government also ordered a four-hour daily pause in CNG stations to boost natural gas supply to power plants. More than half of Bangladesh’s electricity comes from natural gas, although some power plants also run on heavy fuel oil and diesel.
Record gas prices are hitting countries such as Bangladesh hard as they typically import bigger volumes of spot cargoes than other nations in Asia, leaving them exposed to price volatility.
Some of the world's biggest importers of LNG are reducing orders in the face of the price hike, raising concerns among major producers about potential long-term destruction of demand.
LNG buyers, including numerous emerging economies in Asia, are balking at prices that have doubled just within the past month, while a growing number of exporters in North America are straining to boost export capacity that will still take years to come online.
The price of LNG per million British thermal units (mmBtu) has moved past $40 in the international market recently from $8 in early 2021 after consumption increased following the reopening of economies amid the coronavirus pandemic.
Bangladesh bought LNG at $7.21 per mmBtu from Singapore-based Vitol in March. Earlier this month, Bangladesh bought two LNG cargoes for delivery in October at record prices, as low inventory in Europe boosts competition with Asia for supplies ahead of winter.
Bangladesh bought one cargo from trader Vitol for delivery in mid-October at $35.89 per mmBtu and another from Gunvor for late October delivery at $36.95 per mmBtu.
In the international market, LNG price soared to a level near $50 per mmBtu, but Energy and Mineral Resources Secretary Anisur Rahman said Bangladesh would not have to pay at this rate until December.
Prices of power-generation fuels are surging globally with industrial growth pushing up electricity demand, leading to a tightening of coal and LNG supplies, reports bdnews24.com.
The rebound in economic activity from coronavirus restrictions has exposed alarmingly low supplies of natural gas leaving traders, industry executives and governments scrambling as the northern hemisphere heads into winter.
The energy crisis, which has led to fuel shortages and blackouts in some countries, has highlighted the difficulty in cutting the global economy's dependence on fossil fuels as world leaders seek to revive efforts to tackle climate change at talks next month in Glasgow.
China ordered miners in Inner Mongolia to ramp up coal production and oil prices jumped on Friday as a record surge in the cost of gas revived demand for the most polluting fossil fuels to keep factories open and homes heated.
The chief minister of New Delhi on Saturday warned of a looming power crisis in the Indian capital of 20 million people due to coal shortages, which have already triggered electricity cuts in some eastern and northern states.
Europe’s increasingly expensive gas and electricity prices are sending a strong signal to manufacturers to consider temporary plant closures and to home and office owners to turn down thermostats to conserve fuel this winter, Reuters columnist John Kemp wrote last week.
In the short term, Europe is unlikely to attract significantly more gas because production is fixed and there is already a worldwide shortage, which is also pushing up prices in Northeast Asia and North America, he added.
“Escalating futures prices signal traders think lower consumption will be necessary to prevent stocks eroding to critically low levels and risking fuel supplies running out this winter.”
In the global LNG market, 70 per cent is supplied to Asia. Bangladesh, India, and Pakistan account for 20 percent of Asia’s LNG import.
The government was criticised for relying “too much” on the international market for energy.
Professor Shamsul Alam, adviser to the Consumers Association of Bangladesh or CAB, said they have long flagged the risks of global price swings, but the government turned a deaf ear to their advice.
“This energy crisis proves their [government’s] lack of foresight and plan. We don’t even think about learning a lesson from the crisis for the future. The purchase committee sent back a proposal to buy LNG, and then we bought it at a higher price.”
“It would have been alright if we had admitted our mistakes, and progressed towards self-sufficiency in energy. But we always damage our capability by looking to the world market.”
