Inadequate energy supply is a predominant feature of all the underdeveloped nations across the globe. It is extensively acknowledged in empirical studies that the incompetence of these nations to meet their own demand for energy is one of the main factors hampering their development processes. Although Bangladesh, belonging to the group of developing nations, had some promising macroeconomic performances, notably maintaining an annual growth rate of about 6.34 per cent on average since 2011, it still has not been efficacious in matching its demand for energy. Thus, energy crisis mitigation is set to be one of the top-most prioritized agendas of the current government. Moreover, the government has also committed to increase access to electricity and achieve maximum electrification rate by 2021; at present only 74 per cent of the population has been brought under the national grid.
The policymakers should come up with strategies to not only combat the prolonged energy crisis but also to ensure future energy security within the Bangladesh economy. A possible way of resolving this crisis could be by increasing energy generation, but due to resource constraint, such enhancement is not always feasible. Thus, the focus should be on energy source diversification whereby energy generation can be increased using indigenous renewable energy resources.
As a part of the fuel diversification plan, Bangladesh can look forward to the development of markets for liquefied gaseous energy sources like Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG) as alternative sources of energy. At present, use of these alternative energy sources are pretty much unattended mainly because of lack of awareness regarding the potential benefits that can be generated by using LNG and LPG both in domestic use and commercially. For instance, LNG is a relatively cheaper source of energy compared to traditional fossil fuels. The lower cost of LNG makes it a preferred choice of an energy source that can be considered for partial fuel-diversification drives. Moreover, LNG has the high energy content which can effectively cut down energy demand to a huge extent. This is because it has been estimated that, combustion of a unit of LNG provides 600 times more energy compared to combustion of a unit of natural gas. The Bangladesh government imports a vast amount of petroleum products for electricity generation as well as to supply transport fuel within the economy. In addition, it also has to provide subsidies to keep the oil prices within the reach of the consumers. However, such import-subsidization strategy not only exerts pressure on the nation's balance of payments but also creates a possible crowding out of public investments in other productive sectors. Thus, imported LNG can be used for similar purposes relieving the government's burdens arising from oil imports and subsidies due to LNG being relatively cheaper. The average spot price for LNG in Asia hovers around US$ 4.241 per million British thermal units while spot price of crude oil is as much as US$ 52 per barrel. It is to be noted that use of LNG to produce electricity in Egypt, Poland and Jordan commenced in 2015 and it is expected that electricity generation would be doubled in these nations by the end of 2017. The sub-Saharan African countries are also on the verge of adopting LNG to produce power. LNG is being considered to be the main transport fuel in European countries in near future. Furthermore, LNG usage is comparatively more environmental friendly. According to pioneer oil company Shell, LNG can emerge as a lower-carbon transport fuel all over the world. Employment of LNG can significantly reduce the emission of harmful greenhouse gases and nitrogen dioxide into the atmosphere. Conversely, burning imported fossil fuels aggravates environmental adversities in the form of depletion of the ozone layer and initiation of climate changes. In comparison to natural gas, LNG is comparatively easier to be transported across national boundaries.
Similarly, LPG can be a potential energy for cooking purposes and reduce natural gas demands. Acute shortages in natural gas supply are one of the main reasons for electricity crisis in Bangladesh. An unplanned transition to use of highly subsidized natural gas has led to inefficient use of this energy source and as a result, Bangladesh is on the verge of exhausting its natural gas reserve by 2030. This is alarming from the perspective of the nation's energy security. The use of LPG as an alternative energy source can solve this problem to a major extent. A unique property of LPG is that it readily burns and gives off heat instantly. The basic difference, apart from different physical states, between LPG and natural gas is that LPG is made from propane while natural gas is processed from methane. In addition, LPG accounts for low combustion emissions and does not produce black smoke either which makes it a comparatively better source of energy. More importantly, LPG is produced as a bi-product following processing of natural gas and petroleum refinery which keeps LPG costs low and within the affordable range of consumers.
Energy is considered to be a strategic input that attributes to socioeconomic security, food security, health security and environmental sustainability. The socioeconomic costs of burning fossil fuels across the developing world are enormous and devastating. For instance, it has been estimated that exposure to indoor air pollution from combustion of fossil fuels causes around 4.0 million premature human deaths per year in the developing countries across the globe. Moreover, the use of biomass for energy generation leads to environmental degradation through deforestation causing natural calamities like floods, especially in tropical countries like Bangladesh. Hence, keeping the huge prospects and economies of usage into consideration, a switch from the employment of traditional fuels to LNG and LPG would ideally improve the standard of living of the people of Bangladesh and would also help attain the far-reaching social, economic and environmental benefits.
However, in order to reap the benefits of using these two relatively eco-friendly energy sources as alternative fuels, the concerned markets need to be developed properly. Moreover, favourable government regulations, improvement of infrastructure in port areas, awareness building and, most importantly, proper pricing of LPG and LNG are necessary to ensure effective energy diversification for solving energy crisis in Bangladesh.
Different studies show that transition to use of LPG and LNG is one of the potential ways through which energy security in Bangladesh can be achieved. For instance, through providing access to clean cooking and heating solutions mainly via LPG, Bangladesh can gradually solve its energy crisis to a great extent and can effectively establish security in its energy sector. The strategy of enhancing the use of LPG and LNG within the economy is very much in line with the United Nation's Sustainable Development Goals (SDGs). Moreover, certain factors affecting the potential use of these energy sources and hampering development of the associated energy markets in Bangladesh need to be identified and appropriate policies have to be taken to rectify them.
Dr. Sakib B. Amin is Assistant Professor, School of Business and Economics, North South University; Muntasir Murshed is Research Assistant, School of Business and Economics, North South University
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