Gas crisis worsens with payment delays to suppliers

Another gas crisis has hit industries and households as supply of liquefied natural gas (LNG) from the spot market sees a squeeze as a consequence of delays in import bill payments amid the current dollar crisis.

The crisis comes at a time when industries across the board, including cement, steel, and garment sectors, are already grappling with diminished demand due to soaring inflation and a volatile currency market.

The gas shortage looms as a formidable challenge for entrepreneurs serving local as well as global markets.

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The impact of this acute gas scarcity goes beyond business; home kitchens stay out of service as the stoves remain unlit, while CNG filling stations in Dhaka and Chattogram struggle to refuel the growing line of vehicles.

The situation is worsened by the impending maintenance work on one of the two LNG regasification units (Excelarate) set to commence on 1 November and continue for at least two months. The impact from this maintenance is expected to aggravate the shortage until January of the coming year.

However, authorities believe the situation can be handled with the existing supply if the demand for gas in the power plants decreases in the winter months. 

Engr Md Kamruzzaman Khan, director (operation and mines) of Petrobangla, said it was not possible to supply enough gas to everyone due to the restart of production at a new fertiliser factory and not getting enough imports from the spot market. 

"Besides, we are involved in maintenance work of a regasification unit. It will be difficult to normalise the situation before the end of the work," he added.

Disruption at industrial plants

The supply of gas in Chattogram has decreased by about 35mmcfd or about 12% over the last three days, resulting in disrupted production in industries, however, the ready-made garment sector is the worst-hit.

Many industries, both small and large, have switched to alternative fuels due to a significant rise in gas prices, resulting in a more than twofold increase in fuel costs. This, in turn, has led to a decline in the production of ready-made garments.

Rakibul Alam Chowdhury, vice chairman of Bangladesh Garments Manufacturers and Exporters Association, said garments orders for Christmas are nearing completion and are set to be shipped shortly. 

"However, a three-day factory shutdown, caused by a gas shortage, is a major concern. Any further interruptions in production will result in a severe crisis," he noted. 

Mohammed Shamsul Azam, director of BKMEA, highlighted the loss of colour quality in garment products during low gas pressure, necessitating the costly use of alternative fuels and risking significant financial losses if the gas crisis in Chattogram persists.

BSRM, the country's leading steel manufacturer, has a daily rod production capacity of 5,500 tonnes in its two factories. The production capacity of four billet factories is more than 6,000 tonnes per day.

According to the company, the production is already lower than the production capacity due to shortage of raw materials. There is a fear of further reduction in production due to gas shortage.

Tapan Sengupta, deputy managing director of BSRM Group, noted that production is being continued with furnace oil due to a gas shortage resulting in a nearly threefold cost increase compared to gas. If gas supply remains disrupted, the financial impact will continue to rise.

The ceramics industry also faces critical issues with gas pressure dropping from the required 12psi to 4-5psi during peak hours. 

Md Shirajul Islam Mollah, president of the Bangladesh Ceramic Manufacturers and Exporters Association, stated that 15% of ceramic production costs are the direct result of gas cost, and an uninterrupted 24-hour supply is essential for furnace operation. 

Gas pressure fluctuations lead to immediate product losses, he said.

"A 48-72 hour furnace restart time is resulting in production delays, order cancellations, and local market disruptions. Additionally, equipment damage is a growing concern," he added.

There are also fears of machinery faults due to gas pressure fluctuations and abrupt supply cuts without prior notice, said Mohammed Amirul Haque, managing director of Premier Cement Mills.

Low-flame stoves at homes 

Residential gas consumers in the capital and port city are grappling with diminishing gas supply, notably a decline in gas pressure after 5am.

This issue has led to low flame stoves making cooking difficult. Many households in the Secretariat and the Segunbagicha areas in Dhaka can not complete cooking meals.

Similar complaints poured in from areas like Mohammadpur, Panthapath, Kathalbagan, Kalabagan, Mirpur, Old Dhaka, Jatrabari, Mugda, Manda, and Badda, as reported by the Titas Gas Transmission and Distribution Company's emergency complaint centre. 

In Chattogram, residents are also facing trouble with cooking due to a continuous gas crisis over the past three days. 

Madhuri Mumtaz, a resident of Rangi Para in Chattogram, expressed extreme discontent as she has to spend more hours in the kitchen.

Aminur Rahman, general manager of Karnaphuli Gas Distribution Company Limited, said there is a daily demand of 325mmcfd of gas in Chattogram but only 290mmcfd is available since Saturday.

Import payment delay hits gas supply

Till the first half of this month, total gas supply in the national transmission grid was 2,900mmcfd, including around 800mmcfd imported LNG. 

However, total gas input in the transmission grid started to decline from last week as supply from spot cargo ran out. 

On 23 October, total gas supply dropped down to 2,663mmcfd where LNG input was only 600mmcfd. 

Md Rafiqul Islam, managing director at Rupantarita Prakritik Gas Company, a state-owned company that deals with LNG import, told The Business Standard that only one cargo of LNG was received early this month. 

However, he could not say whether they would import more cargo this month to meet the demand.  

Generally, the country imports two to three cargoes of LNG from the spot market in addition to regular supply from Oman and Qatar under long-term contracts. 

Through both sources — spot and long-term — Petrobangla used to inject around 800mmcf gas per day to the national grid to maintain a supply of around 3,000mmcf.  

The authorities, however, are now cutting the spot share due to the dollar crunch needed to make import payments. 

As of 23 October, Petrobangla owes its LNG suppliers $150 million, said officials of the state-owned oil, gas and mineral corporation.  

Additionally, its outstanding payments to international oil companies, particularly Chevron, engaged in gas production from local fields, have now reached $219 million.

When asked, Md Kamruzzaman Khan of Petrobangla said there is a significant amount owed to long-term and spot market LNG suppliers and international oil companies including Chevron and Tullow. 

"Some spot market LNG suppliers are now unwilling to supply further," he added