In July 2022, Bangladesh temporarily suspended spot purchases of liquefied natural gas due to rising prices in the global market. In recent weeks, sugar prices have risen sharply due to a lack of gas supply at refining factories, resulting in increased prices. During a meeting of the secretaries on November 27, a secretary raised the issue with the Prime Minister, who instructed that LNG be imported through the private sector from the spot market in order to eliminate the industrial energy crisis and maintain Bangladesh’s growth momentum at the right pace.
Also, inflation has risen about 8.75 percent on average in the first four months of the 2022-23 fiscal year, leaving Bangladesh far short of the annual budget target of 5.6 percent. While the partial tax waiver and move away from the ad valorem duty model may help somewhat, the situation will not improve properly until normal gas services resume to factories, according to the secretaries. Ad valorem duty is a type of duty that is imposed on the value of the imported goods rather than on the weight or unit.
In the meeting, a secretary requested the Prime Minister to allow the import of LNG so that regular gas supply to factories could resume. In response, Sheikh Hasina directed the Energy Ministry to bring in small LNG cargoes from the spot market as soon as possible. The representative of the Ministry of Power, Energy, and Mineral Resources then pointed out that the increase in LNG prices in the global market would require a large amount of greenback.
This week, European gas prices rose as cold weather was forecast, and Russian gas producer Gazprom threatened to further cut gas flows to Europe. That saw Asian spot LNG prices hit a seven-week high, according to a Reuters report.
A secretary in the secretarial meeting said that as per the law, private factory owners are allowed to import gas directly, contrary to Prime Minister Ballon, since factory owners are willing to pay higher prices for gas, let them buy gas from the private sector as per their requirement. This way government will not have to subsidize the payment. Currently, Bangladesh is producing LNG under a long-term Government-to-Government agreement with Oman and Qatar, but when asked for more gas, both countries refused to provide more. However, from the next year, Bangladesh will be importing LNG from Brunei, and it was confirmed after Brunei’s Sultan Hassanal Bolkiah’s three-day visit to Dhaka.
During the meeting, the Hon’ble Prime Minister criticized the Ministry of Energy for lack of foresight and progress planning.