Gas crisis halves output, no quick relief

In the daytime, gas pressure is good, but power outage keeps factories shut. At night, when electricity is back, then gas pressure goes down.

This is the scenario of the ceramic industry that needs both gas and electricity to run its production units and generate temperatures ranging between 500 and 1500 degrees Celsius (in some cases 2,200°C) for baking clay into bricks or tiles.

The situation is no better for other large scale gas-consuming industries like steel re-rolling mills, which are getting gas at 25-50% less pressure than required for furnaces to generate 900-2,000 degrees Celsius heat.

The industry has halved its production but must bear the expenditure for workers' wages.

The largest export sector apparel, which also needs gas for its captive power, boiler and washing plants, is struggling to meet their production deadlines owing to the twin crises of gas and electricity. They have no clue how long the crisis will persist.

In this situation, the sector has demanded about $2 billion a month to import about 300 million cubic feet (mmcf) of liquefied natural gas (LNG) from the spot market.

State Minister for Power, Energy and Mineral Resources Nasrul Hamid also sounded concerned about the gas crisis that has forced reduction in power generation. He said there is no hope of improvement in the ongoing power cuts before November until winter sets in, as gas could not be imported because of the ongoing dollar crisis.

Citing gas rationing for industries and power plants on Monday, he said, "No matter how optimistic we are, we are not in a comfort zone in terms of dollar exchange rate for energy supply." Costly dollars have made it difficult for state-owned Bangladesh Petroleum Corporation to open LCs and pay fuel import bills."

Gas is  available in the global spot market, but the price is still too high for Bangladesh to resume purchase to meet emergency needs.  

No respite in LNG crisis

As local gas fields were failing to meet rising gas demands from industries, Bangladesh started to import LNG to meet the gap. But Covid-induced supply crunch sent the global LNG price soaring and the Ukraine war worsened the crisis.  

Compared to last February, gas supply has fallen by around 200mmcf as the government suspended LNG imports from the spot market to reduce import expenditure, which has resulted in unbearable power outages across the country. 

Petrobangla's total spending for LNG was around Tk2,950 crore in July when it imported two cargoes from the spot LNG market besides the regular delivery from the long-term suppliers. 

At that time, the country imported nine cargoes from both long-term suppliers and the spot market to inject 550mmcf -- 600mmcf gas into the national grid. 

However, the number of monthly LNG cargoes decreased following the suspension of spot market imports but import bills did not go down much.

In August and September, the total monthly import spending was around Tk2,800 crore, while the country received only five-six cargoes under the long-term supply contracts.  

Sources at Petrobangla said despite the lower volume of LNG imports, the corporation is also facing a shortage of Tk1000 crore each month to pay the LNG import bills. 

At present, the country's maximum gas demand is around 3,600mmcf each day, while the supply is only 2,675mmcf. Therefore, all the consumers, including power plants and industries, suffer from lower pipeline pressure and under-supplies. 

Amid the volatile energy price in the global market, Petrobangla has taken up several plans including workover and deep drilling in the existing and suspended fields in order to boost the gas supply from domestic resources. 

However, the initiative seems unable to bring relief anytime soon.   

Ceramics industry in big trouble

Great Wall Ceramic Industries Ltd, the country's largest tiles manufacturer, has drastically reduced its per day production to 20,000 square feet (sq ft) from 42,000sq ft in the span of two months owing to low gas pressure and power outages. 

The Munshiganj-based factory is running on a single shift only owing to low gas pressure

Md Shamsul Huda, managing director of Great Wall Ceramic, told The Business Standard they need a gas pressure of 15 PSI, but it now comes down to 3-4 PSI or zero at times.

They get enough pressure for 10-12 hours from the morning but three to four power outages during the time hampers production, he noted.

According to Bangladesh Ceramic Manufacturers and Exporters Association, more than 25 large factories in the ceramic sector have been suffering from severe gas shortage for more than three months.  

Ceramic, tiles and sanitaryware factories in Dhaka's Savar and Dhamrai, Narayanganj, Gazipur, Narsingdi, Mymensingh, and Habiganj do not have enough gas pressure for 10-12 hours daily.

Md Shirajul Islam Mollah, president of Bangladesh Ceramic Manufacturers and Exporters Association, said gas bill accounts for 15% of their total production costs. They now cannot manufacture products according to foreign buyers' deadlines owing to gas supply disruptions, leading to cancellation of many work orders.

Their supplies to the local market are also getting hit, he also said.

There are 70 companies in the ceramic sector with a market size amounting to around Tk8,000 crore.  

Muhammad Shahidul Islam, company secretary of RAK Ceramics, said their production costs surged 30%.

Gazipur-based Farr Ceramics Ltd, which exports tablewares to various countries, including Europe, has reduced its daily production by 35%-40% because of the gas crisis while its capacity stands at 32,000 tableware. 

Irfan Uddin Rifat, director of Farr Ceramics Ltd, said, "Production costs have gone up but product prices have not. But we cannot go for head reduction as our industry has a lack of skilled workers."

"We have demanded the government to ensure supplies of gas and electricity for the ceramic industry under a special arrangement. But that is not possible as the factories are scattered in different areas," he noted.

The government can go for area-wise electricity and gas supplies. "We know that the government is working it out," he added.

Steel plants halve production

Chattogram-based GPH Ispat, which has a capacity of producing about 3,000 tonnes of steel bars per day, has witnessed a gradual fall in production to 1,500-2,000 tonnes a day over the last one and a half months because of the gas crisis. 

With the fall in production and sales, the steel manufacturer is now incurring a loss of approximately Tk1,000-1,500 per tonne of bars, as it has to pay around 4,500 workers while keeping many of them idle, officials said.

"We are now failing to operate half of our plant due to the severe gas crisis. Even two engines out of three cannot be run together," a senior official of GPH Ispat, wishing to remain unnamed, told TBS.  

"The disruption is causing huge losses for us. We fear we will fail to repay our loans, which will hurt our name and fame as well."

In the KSRM factory, another steel bar manufacturer, the production fell to 800-1,000 tonnes per day, which was over 2,000 tonnes earlier.

"Gas supply has fallen by 75% in the morning, which causes a delay in starting production as steel production needs a particular level of heat," said Shahadat Hossain, general manager of KSRM Steel Plant.

"We use oil when the gas supply is not adequate, which also increases our production costs by 30%. Overall, we are stressed," BSRM Deputy Managing Director Tapan Sengupta said while adding that their production also decreased by 30%.

All the 1,200 factories – from readymade garment producers to ship breakers – in the port city Chattogram see disruption in production owing to the gas crunch. They receive less than half of their needed gas.

Factory owners say the gas crisis-induced losses are putting them on a battle for survival as they are already hit hard by the Covid-19 pandemic and subsequent increase in dollar prices.

Rois Uddin Ahmed, division general manager of Karnaphuli Gas Distribution Company Engineering Services, said the port city has a demand for 450 million cubic feet of gas every day, while they can now supply only 250 million cubic feet – 44% of the demand.

Gas shortage hits urea production

Urea fertiliser manufacturing plants are totally dependent on gas. The Jamuna Fertiliser Factory has remained closed since last June due to non-availability of gas supply. Two other factories, which were shut down in July due to gas shortages, reopened within a month.

Currently, the gas distribution company has stopped the gas supply to the two thirstiest gas-consuming industries in Chattogram – Karnaphuli Fertiliser Company Limited and Chittagong Urea Fertiliser Limited – as they are now under maintenance.

These two factories need 80 million cubic feet of gas per day.  The gas crisis is feared to worsen further in Chattogram if the two factories return to production.

Apparel sector demand fund for LNG import

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, also said knitwear exporters have been facing the gas shortage since 18 August this year in Narayanganj area.

He further explained that generally they have gas pressure of 9-10 PSI, but it has now come down to 1-1.1 PSI.

Noting that factory production in September fell by at least 45% due to gas shortages, Mohammad Hatem said, "If the government allocates monthly about $2 billion to import about 300mmcf of LNG from the spot market, the apparel industry will be able to pay back double in export earnings."

He further said such support will be needed for up to the next six months to maintain the export industry's production demand.

Shahidullah Azim, vice-president of Bangladesh Garment Manufacturers and Exporters Association, said the apparel sector production dropped 30%-50% depending on areas due to shortages of gas and electricity.

The industry has made investments amounting to about $20 billion and employs about 4.4 million.

Monsoor Ahmed, additional director and CEO (in Charge) of Bangladesh Textile Mills Association, said the textile industry production has almost been halted or at zero level due to the gas supply crisis in Gazipur, Sreepur, Bhaluka and Narayanganj area.

In Chattogram apparel industries, the gas crisis increased production costs by 20%, entrepreneurs say.

"The production of garments in Chattogram is hampered greatly due to the gas crisis. As the gas pressure remains low, we have no alternative than using cylinder gas, which is costlier," Rakibul Alam Chowdhury, vice-president of the Bangladesh Garment Manufacturers and Exporters Association, told TBS.