Shahnaj Begum: Energy experts feel that the country need to appoint ‘Risk Manager’ for hedging the volatile energy market for it future LNG procurement plan to absolve the ‘price shock’ as she is now procuring LNG from the international market.
Meanwhile, failing to procure LNG from the spot market due to high cost, the government has cut the supply of imported LNG to the national grid by more than 200 million British thermal units (mmBtu) down from the regular volume of 550 to 650mmbtu.”A well-designed LNG acquisition strategy can ensure stability in supply at relatively better terms than a single long-term contract. First of all a LNG acquisition strategy should be defined, grounded in forecast demand for LNG which can benefit from both lower prices and greater flexibility if it were to use a mix of G2G, shorter-term, and spot contracts,” Former Energy Adviser Dr M Tamim told the Daily Observer on Saturday.
“US$40 billion reserve can’t create a value here, it just ensured our deposit or availability of foreign currency in the Bangladesh Bank, Petrobangla should procure the money from local market first then buy the foreign currency to offset their bills,” the former adviser said.
He said, “To do all these things we need to appoint a ‘Risk Manager’ like the other countries. Otherwise, we need to hike the gas price time and again.”
Due to this price shock, the Energy Division is facing serious problems in procuring LNG from spot market as the price in the international market has shot up six folds in the last one month that is very new thing for the Energy Division. And failing to manage the situation it has cut energy supply to the national grid.
The unprecedented LNG tariff hike in the international market with an escalation of international oil prices has caused double burden for Bangladesh as it failed to calculate the sudden rise in the price of the essential petroleum fuel which have already created a pressure on the balance of payment, the Former Energy Adviser said.
Policy Research Institute’s top boss Dr Ahsan H Mansur said, “To address the LNG pricing or importing liquefied natural gas issues we need to change our mindset first.
“We had started to import the item from international market so first of all it price could be up and down and we need to adjust with it,” Mansur said.
“To optimize the market in the best possible manner we have to fix a procurement policy, understand forward market, long term and spot market of liquid fuel and hedge the market first,” he added.
“We do not have expertise in this area but we can hire a consultant, engage local people with him any try to make our people well equipped so that they can do the job like Bangladesh Petroleum Corporation (BPC),” he opined.
Meanwhile, the Energy Division has already started working on the issue and calculated that it needs Tk 2,000 crore extra from the Finance Ministry for LNG bill payment.
On January 17, the Energy Division Senior Secretary M Anisur Rahman ordered the gas distribution agencies to deposit all of its gas selling amount to the Petrobangla account (after cutting the distributing cost) just to manage the situation.
“We are working on the additional cost of the LNG import and oil prices, however, it may require Tk 2000 crore to cope with the sudden tariff hike of LNG,” an official of the Ministry of Energy said.
We are really at a risk as the tariff of the crude oil in OPEC Basket also increased remarkably and stands at $55.07 per barrel which was below $20 in mid 2020.
He added the Energy and Mineral Resources Division has sale and purchase agreements with 14 international suppliers
The Energy Division estimated that the delivered cost of LNG (spot market) in Bangladesh could be $12 per mmBtu to $14 per mmBtu but just last week it was around $30 per mmBtu.
“Hedging is not possible for a country like Bangladesh, as there is a risk of loss and profit like gambling, so we cannot go for it as a government official,” a senior official of the Energy Division said.