Gas theft and inadequate funding of the drilling infrastructure combined with poor policies have led to a devastating gas shortage in Bangladesh. The current pipeline gas shortage threatens to cause irreversible damage to major industries in Bangladesh and threatens to wipe some of them out if immediate damage control measures are not taken. Bangladesh now awaits IMF intervention and loan sanctions to mitigate the crisis and revive some of the badly affected industries.
As per reports, the gas pressure at around 400 gas fuelled mills and plants in Gazipur, Narayanganj, Dhamrai, Konabari, Shafipur, and Manikganj, dropped to almost zero which has severely impacted their activities. President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Mohammad Hatem said even though electricity shortages are there in Bangladesh, the gas shortage is the real trouble.
Hatem has said that the banking sector stopped giving back to back letters of credit and closing them altogether if payments are overdue. As per Hatem, the sector has a requirement of over 2000 million cubic feet of gas per day but the current supply is only 1000 mmcf/d. Another official from a Titas Gas distribution company pointed out that Gazipur alone needs 600-700 million cubic feet of gas daily while only 450 million has been supplied. Also, this shortage has pushed industries towards LPG and CNG which has skyrocketed production costs.
Bangladeshi News media signalled that the US Tariffs might cause an estimated loss of 70 billion dollar in investments amidst the ongoing gas crisis. Bangladeshi Textile and garment mills have taken the worst hit with the textile mills operating at 30% to 40% ocapacity. One of the mills named Israq Spinning Mills in Gazipur is now running at only 50% capacity. The Managing Director of the factory, Fazlul Haque, said, “Our daily production capacity is 170 tonnes of yarn, but due to low gas pressure, we are only managing 75 tonnes a day.” Haque also blamed the new US tarriffs for creating uncertainty over placement of orders from the buyers.
As per reports, many Textile mill owners are giving up their mills to avoid loan defaults and rising production costs. Gas shortage also wrecked havoc in the employment of this sector with thousands of employees rumoured to be put on leave while the BTMA (Bangladesh Textile Mills Association) claims large-scale layoffs as inevitable.
What has caused the Gas Shortage Crisis in Bangladesh?
As Bangladesh deploys crisis management strategies and waits for IMF rescue, it is worth analysing the factors that have caused this sudden Pipeline Gas Crisis:
(1) Bangladesh Authorities have been downplaying the gas shortage as a consequence of the recent US Tariffs and weak FX reserves while they expect a temporary relief by June-July provided IMF release the funds this year. However, IMF has been warning Bangladesh about wrong project selection and makeshift infrastructure funding for several years. Projects like Padma Bridge rail link, Dhaka expressway and Metro line have incurred huge cost overruns while funds towards energy budgets were blocked. Also, drilling projects stalled as funds were redirected towards transport projects or fiscal deficit.
(2) Gas thefts like illegal connections and pipeline leaks steal around 8-10% of the deliverable gas. Distributors like the Titas Gas conduct heavy raids at places like Gazipur, Narayanganj, Savar and Dhaka areas to cut leaks and illegal gas connections. A September 2024 article reported that around $1 billion worth of gas is being stolen every year in Bangladesh in the name of system loss. Prominent energy expert Ijaz Hossain claimed, “If systems losses, currently at 9.82%, can be reduced by half, we could save $500 million annually, which would provide an opportunity to save on imports.”
(3) State-Owned Petrobangla (Bangladesh Oil, Gas and Mineral Corporation) had earlier this year caused a significant disruption and halt in its gas supply saying its LNG regassification units were under maintenance. Last year Petrobangla had cancelled LNF Cargoes due to financial constraints. Reports also suggest that Petrobangla has been failing to clear overdue payments to both long-term and spot LNG suppliers. One of the officials even blamed Russia Ukraine war for the repayment crisis “Global economic turmoil caused by the ongoing war between Russia and Ukraine, which has led to swelled prices for various commodities, including oils and grains, is the main cause of the country’s eroding repayment capacity,”
Responding to this Gas Shortage Emergency, Bangladesh has initiated immediate reforms that include immediate resourcing of gas from power plants to industry. Extra LNG Cargo tenders have been floated for June. Emergency drilling of wells is expected to take place while the Bangladesh government awaits for IMF funds to be cleared. The Energy Crisis could not come at a worse time for the country, as it deals with the political instability that has gripped it.
