With the geopolitical situation in Europe getting complicated, European nations have turned to LNG (liquefied natural gas) in a big way. The problem is that LNG supplies have not increased and the global LNG supply is now increasingly requisitioned for quenching Europe's energy needs. According to media reports, Europe has bought more in 2022 than any preceding year. The Russian invasion of Ukraine and the subsequent halt to the Nord stream supplies from Russia have led to a massive increase in demand for LNG in Europe.
According to the Independent Commodity Intelligence Services (ICIS), LNG demand in Europe increased sharply over the January-September period. "Demand in France rose by 88% compared with the same period in 2021, the Netherlands by 109% and Belgium by 157%." In fact the ICIS forecasts a tight global LNG market until 2024 with limited new production coming on to the market. Correspondingly, Germany, Netherlands and Belgium are all in the process of increasing capacity of their terminals to handle more LNG. Other countries like Italy, Malta and Croatia are also not far behind. ICIS data show, "Italy will increase its LNG capacity in 2023 after grid operator Snam Rate Gas purchased the 3.6mpta FSRU Golar Tundra. The Adriatic LNG terminal in Italy will optimise capacity in 2022 and its gauging interest in further expansion in 2025." Greece is in the midst of planning for several FSRUs and terminal expansion.
The fallout from all this flurry of activity to secure as much LNG as possible prior to winter setting in on the European continent, is a detrimental effect on the rest of the world, including countries like Bangladesh. Prices of LNG are up globally with the increased demand and more or less static supply of the fossil fuel. The squeeze in supply has hit Bangladesh hard. Energy shortage causes hours of load-shedding and low pressure of natural gas to industry is affecting productivity and causing untold miseries to the population at large.
As Bangladesh has become overly dependent on imported fuels, the sudden surge in demand for LNG in Europe means that prices will go beyond its purchasing power. It is not simply a matter of having enough foreign exchange to buy what we need from the international market, but availability is also a major issue. Professor Mohammad Tamim of the BUET has recently stated that countries like Bangladesh and others in the region have been significantly affected by these changes in the LNG market as of 2022. In a recent interview he said "Europe is trying to grab every molecule of gas wherever it is available." Countries like Bangladesh, India and Pakistan cannot match Europe's purchasing power.
Demand for LNG has apparently dipped 10 per cent in Bangladesh according to media reports. Power cuts on account of energy crisis means loss of productivity in RMG, textile, spinning and dyeing factories - many of which have their own captive generators, but those too run on natural gas. With low pressure in gas, plants simply cannot run optimally. Due to 50 per cent surge in the price of diesel, it is fast becoming a losing proposition for industry at large. Although about 6,000 mw (megawatts) of electricity is produced from oil-fired power plants, we have a supply shortage because of international prices. But the majority of industries are heavily dependent on gas. The shortage of gas has forced reduction of power generation to 11,000 mw. We are in the midst of a full-blown energy crisis today.
Apart from the rising price of LNG, soon we are going to face problem in importing coal too. Recent media reports tell us that Europe is turning to Southeast Asia's coal supplies because of the European Union's ban on coal import from Russia. Indonesian coal mining giant PT Adaro Energy has reportedly sold 300,000 tons of coal to the Netherlands and Spain. Another of Indonesia's state-owned coal companies PT Bukit Asam has exported 147,000 tons of coal to Italy in 2022 and apparently discussions for export are on with Germany and Poland.
It makes one wonder how energy planning is done in this country. For years Bangladesh has failed to seriously explore its domestic gas resources, onshore and offshore alike, opting instead for everything to be imported, leaving energy security in the lurch. Similarly, the country's proven coal deposits were also put on hold on the excuse that it was a dirty fuel. Even if the country decides to start the process of excavation of coal, using open pit mining method (since no internationally reputed mining company will be remotely interested in closed pit method), commercial coal extraction will take a few years. So there is a need for all-out exploration, along with coal exploration because we are out of choices now. On the international front, Russian offer to sell refined oil needs to be accepted and the import procedures expedited. The fuel shock experienced now should provide for an impetus to plan for the country's future energy need.
