Bangladesh Energy Regulatory Commission (BERC) has conducted five days of public hearing on gas price hike proposals by the gas companies, amid widespread concerns among the consumers. The hearing took place in two phases before and after Eid holidays. The companies argued that the cost of gas would be increased due to import of expensive liquefied natural gas (LNG) while industries apprehended that the price hike would make them uncompetitive in the global market.
The lively debate was going on against the backdrop of chronic gas crisis over the entire gas franchise. The gas famine in Chittagong region eclipsed all past records. The government assured mitigating the crisis gradually from early May with the commencement of LNG supply. But due to leakage of sub-sea pipeline and other issues, LNG could not be injected in the grid until last month. The floating storage regasification unit (FSRU) with a LNG vessel is waiting since end-April, anchoring at Maheskhali. Energy and Mineral Resources Division (EMRD)had announced to start supplying LNG from June 4. There is a doubt ifit would be possible at all.
Considering the import of expensive LNG, the public sector gas transmission, distribution and LNGsupply companies submitted proposals for fresh gas price hike to BERC. The regulator after scrutinizing the proposals also suggested increasing the price. But representatives of gas consumers during public hearing argued that the hike would not be required if wastage, theft and pilferages in the gas value chain can be addressed. Experts observed that due to rapid depletion of proven gas resources, there is no alternative now other than importing expensive LNG. The situation demands rational increase of gas price. But they suggested the government to announce a long-term gas-pricing strategy to facilitate investors in taking investment decisions. The EMRD believes that even the higher price of gas following RLNG introduction won’t harm domestic industries in retaining competitiveness. But many investors believe that it will not be possible for them to remain competitive after paying a higher gas price.
The government has a plan to inject 1,000 MMCFD of RLNG to the national grid by December 2018. The depleting proven reserve of own gas has triggered chronic crisis in the gas franchise areas. All end users -- power, fertilizer, industries, CNG and domestic -- are suffering from the gas shortage. Petrobangla estimated that the 1,000 MMCFD of LNG would be equivalent to Tk276,000 crore (around US$34 billion).The LNG would cost $43 billion. According to Petrobangla, the 1,000 MMCFD LNG by December 2018 would offset the gas deficit to a great extent.
Domestic and commercial consumers have been kept out of the gas price hike proposals. This would only be applicable for power, fertilizer, captive power generation, industries and CNG fuelling stations.
BERC Chairman Monowarul Islam presided over the public hearing sessions and was attended by all the members of the BERC. Representatives of gas users, Consumers Association of Bangladesh, trade body representatives, academic researchers and some political activists were, among others, present in the hearing. However, representatives of major political parties were not there. The hearings were held in the TCB auditorium at Karwanbazar, Dhaka.
GTCL Proposal for Adjusting Wheeling Charge
Gas Transmission Company Ltd (GTCL), the owner and operator of national gas grid, which would evacuate the RLNG through their recently constructed transmission pipelines and ancillary facilities, placed their wheeling charge adjustment proposal on the first day of the hearing. They proposed for 68.85% increase in wheeling charge (transmission fees) to Tk0.4476 per cubic meter from the existing Tk 0.2654 per cubic meter. The BERC technical committee after analyzing and examining the proposal suggested increasingit to Tk 0.3689 per cubic meter. GTCL requested the hike to recover the huge investment they made in constructing the long gas transmission pipelines, Custody Transfer Metering Stations and City Gate Stations.
The BERCevaluation committee assessed five reasons for the hike.These are: i) meeting the revenue demand in line with gas transmission tariff methodology, ii) considering the overall situation of the last fiscal year (FY), iii) fulfilling the revenue target considering the next fiscal year, iv) importing LNG and v) 0.25% of potential technical losses in the FY2018-19.
GTCL has already constructed a 90-Km 30 inches OD high pressuregas transmission pipeline from Maheshkhali to Anwara, custody transfer metering station at Maheshkhali, City Gate Station at Anwara to deliver RLNG to Chittagong City Ring Main. It is now constructing a42 inches OD 28-Km transmission pipeline from Anwara to Faujdarhat for evacuating RLNG to the gas grid.
Prof M Tamim, Head of the Department of Petroleum Engineering of BUET and former Special Assistant for Energy of the interim caretaker government, participating in the hearing said that there was no option for the government but to import LNG as the economy is gas-based. He said that the cost for energy-intensive industries would go up because of the blending of the $10 per thousand cubic meter of LNG with the $3 per thousand cubic meter of local natural gas.
TGTCL Price Increase Proposal
The Titas Gas Company Limited’s proposal encountered severe protests and opposition from different consumer groups at the hearing.
Titas proposed a 206 percent price hikefor power plants to Tk 10 per cubic meter (CM) in place of existing price of Tk3.16. The gas price for fertilizer factories was proposed to be raised by 372 percent to Tk12.80 per CM against the existing rate of Tk 2.71. The captive power plants’ gas price was proposed to be Tk16 per CM against existing Tk9.62 while the gas price for industries was proposed to be Tk15 per CM against the existing Tk7.76 per CM and CNG price proposed to be Tk40 per CM against existing Tk32.
The consumer groups raised concerns mentioning that if the gas price is increased, it will trigger negative impact on the people as the rise will lead to higher costs for transports, electricity and other consumer goods.
The technical evaluation committee of BERC analyzed the proposal. It did not recommend any raise. Instead, it forwarded a number of recommendations to bring structural changes in the mechanism of fixing the gas price.
Installing gas meters, fixing gas price based on actual consumption and incentives for regular payment of bills by consumers are among the recommendations.
CAB Advisor Prof M Shamsul Alam said Titas gas has over Tk 2,000 crore surplus funds which it lends to various organizations. Why should a profit making company propose for significant increase in gas price while there are also allegations for huge gas theft and pilferage in the system. There is no justification in raising the gas prices, he said, adding that the company realizes bills for 88 CM use of gas from a household consumer while such use would be about 20 CM.
Titas officials illegally provide gas connections to many consumers by taking bribes, he alleged, stating that the gas sector is facing same disaster like the banking sector.
Eminent energy expert Prof Nurul Islam said Titas Gas lacks transparency in fixing the gas price for different consumer groups.
Eminent geologist Prof Badrul Imam said an artificial gas crisis was created across the country by not conducting any exploration work in last 9-10 years to give the benefit to vested interest groups.“Now the country had to step into a planned trap of importing LNG to meet the domestic requirements,” he said.
He also observed that the government will gradually increase the gas import up to 4,000 million cubic feet per day (MMCFD) which will ultimately make the country an imported LNG-dependent country.
He said that at every stage of importing 1,000 MMCFD of LNG, Titas Gas had come to BERC to increase the gas price. “This is an absolutely a wrong policy and only to become dependent on imported gas instead of exploring the availability of local gas.”
Eminent architect and consumer rights group leader Mobasher Hossain alleged that the unscrupulous officials at Titas are forcing consumers to bribe them to get gas connections illegally.
Director of Bangladesh Textile Mills Association Shahed Alam said that if the gas price is raised, the textile sector will lose competitiveness in the international market as their production cost would increase by $0.40 per kg of spinning thread.
Finance Controller of Bangladesh Power Development Board (PDB) Mizanur Rahman said any rise in gas price substantially affects the cost of electricity generation and compel them to raise the power tariff.
Chief Coordinator of Gonosanghoti Andolon Zonayed Saki said the government is deliberately pursuing a wrong policy of import-oriented gas use.
Rupantarita Prakritik Gas Company Ltd(RPGCL), a Petrobangla company that has been assigned to import LNG, submitted its proposal on the last day of the hearing. Theysought Tk 0.40 per cubic meter for import of LNG and its regasification.
Managing Director of RPGCL Engr. Md. Quamruzzaman was present at the hearing. Participating in the hearing, CAB Adviser Prof M Shamsul Alam raised a host of questions, but most of which RPGCL and Petrobangla could not address. His questions were the background of gas crisis, extraordinary delay in LNG import that caused immense sufferings of the users, huge misuse, theft and pilferage that widenedthe deficit. He said that if the gas theft and pilferage could be eliminated,the gas price increase would not be required.
Prof Dr. Badrul Imam of Dhaka University questioned the government's plan of importing 4,000 MMCFD of LNG in next few years. "If import continues instead of gas exploration, gas price will go beyond affordability."
The government last increased the gas price on February 22 last year in two phases. The first phase came into effect in March 2017 when the charge for a single burner stove was increased to Tk 750 from Tk 600 and for double burner stove to Tk 800 from Tk 650.
The second phase was supposed to come into effect from June the same year and the monthly charge for a single burner stove was fixed at Tk 900 and double burner stove at Tk 950. The second phase hike could not be implemented because of a High Court order.