Business Desk :
Initiatives are underway to formulate a liquefied natural gas (LNG) subsidy policy to make a stable funding arrangement for imports to cater to the growing demand in the country amid a global crunch.
Sources said that the government believed providing subsidy on LNG imports in a structured way would pay off in multiple ways, such as by helping meet mounting domestic demands, augment production in industries and factories, and continue generating employment opportunities.
The Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) has already drafted the LNG subsidy policy and hopes to implement it within several months, a senior official of the ministry told the media.
The MPEMR took the initiative following a directive from the Prime Minister’s Office (PMO) as imported LNG prices are showing unorthodox volatility for supply disruptions due to the ongoing Russia-Ukraine war while domestic gas production remains limited.
Finance ministry will provide subsidies to state-run Petrobangla on a regular basis for the import of LNG from both long-term suppliers and spot markets once the policy gets the government’s seal of approval.
Currently, Petrobangla purchases LNG from the international market and sells regasified LNG to consumers at much lower prices than import costs.The Bangladesh Oil, Gas and Mineral Corporation or Petrobangla gets subsidy on piecemeal basis from the ministry of finance.
Under the proposed LNG subsidy policy the subsidy requirement to foot LNG-import bills will be determined considering the import prices of LNG, import duties, tax at source, re-gasification cost, financing cost, operating costs etc.
The corporation will seek withdrawal of the existing 7% tax at source on LNG imports and 15% value-added tax (VAT) to reduce subsidy requirements from the finance ministry.
To bring down subsidy requirements the energy regulatory commission, however, raised natural gas tariffs by 22.78% on average from June 1, 2022 to offset the loss Petrobangla counts on LNG imports.
It has increased the weighted average natural gas tariff to Tk11.91 per cubic meter from previous Tk9.70 per cubic meter.
Petrobangla and its subsidiary state-run gas-marketing and- distribution companies had sought a hike of weighted average natural gas tariff by 109.80% to Tk20.35 per cubic meter for domestic consumers to avert government subsidy.
It had argued that they would require around Tk44,265 crore annually to import LNG to the tune of around 850 million cubic feet per day (mmcfd) due to increased cost in line with current price trend of LNG on the international market.
As per the country’s previous tariff structure, Petrobangla would get around Tk29,658 crore to import around 850 mmcf LNG, sources pointed out.
Bangladesh Energy Regulatory Commission (BERC), however, fixed the tariff much lower than the demand considering that Petrobangla will get a total of Tk11,800 crore from various sources that will help import the ‘expensive’ LNG.
The corporation will get around Tk3,300 crore from gas development fund, or GDF, Tk2,500 crore from retained earnings of state-run gas-transmission-and-distribution companies and Tk6,000 crore as subsidy from the Ministry of Finance.
Bangladesh in its current budget for the financial year 2022-23 (July-June) allocated around Tk82,745 crore as subsidies for fuel and fertilizer, including LNG, which accounts for 1.9% of the country’s gross domestic product (GDP).
Bangladesh purchased its latest LNG cargo at S$24.75 per million British thermal units (MMBTU) from international spot markets for June 22-23 delivery.
The country’s current buying prices of LNG from its two long- term suppliers — Qatargas and Oman Trading International, recently renamed OQ — hover around $14 per MMBTU, considering the Brent crude price at around $110 per barrel.
It imports five to six LNG cargoes, each having around 138,000 cubic meter capacity, every month from long-term suppliers and up to three cargoes a month from spot market to re-gasify in its two operational floating terminals having 3.75 million-mt-per- annum (MPTPA) capacity.
