A recent study from the Institute for Energy Economics and Financial Analysis (IEEFA) highlights a promising solution to improve energy efficiency in industrial operations. The study suggests that by replacing outdated captive power generators with more efficient models and implementing effective energy management tactics, significant reductions in liquefied natural gas (LNG) imports could be achieved, leading to annual savings of $460 million.
According to Shafiqul Alam, the study author and Lead Analyst for Bangladesh Energy at IEEFA, excessive dependence on gas could trap Bangladesh in a cycle of rising prices and supply challenges related to LNG, potentially hindering its economic progress.
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Bangladesh’s energy landscape has seen notable changes in recent times, largely due to a surge in demand for natural gas. However, difficulties in gas exploration and production have increased the country’s reliance on LNG imports to fulfill its energy requirements.
Revolutionizing Industrial Energy Infrastructure
The study, which analyzed data from 73 gas-fired captive generators across 51 industries with a combined capacity of approximately 250 megawatts (MW), revealed alarming inefficiencies in energy utilization. With an average efficiency rate of just 35.38% among these generators, there exists substantial room for improvement. By replacing these outdated models with more efficient alternatives, the study suggests that efficiency rates could soar to 45.2%, unlocking substantial energy savings.
Harnessing Waste Heat for Sustainable Solutions
Furthermore, the study advocates for the implementation of waste heat recovery systems and jacket cooling water utilization in industrial processes. By capturing and repurposing waste heat energy, industries could potentially save up to 50.18 billion cubic feet (BCF) of gas annually. Surprisingly, the study found that a significant portion of industries—44.22%—do not harness waste heat released by generators, while 79.6% fail to utilize jacket cooling water effectively. These untapped resources represent valuable opportunities for enhancing energy efficiency and reducing environmental impact.
What are Captive Power Plants?
A captive power plant is a facility that provides a localized source of power to an energy user like industries, large offices, or data centers. In Bangladesh, industrial units often produce electricity through captive power plants due to the lack of reliable and uninterrupted electricity supply from the national grid.
Currently, the capacity of captive power generators in Bangladesh is 4,723MW, of which 2,943MW is gas-fired. These captive power plants consumed 164.27 BCF or 17.6% of the total gas usage in the country in 2022-23.
Meanwhile, Bangladesh began importing liquefied natural gas (LNG) from the international market in 2018. In just five years, the country witnessed a seven-fold increase in imports, reaching 238.72 BCF of gas by 2023.
Shafiqul Alam, the lead analyst of the IEEFA Bangladesh and author of the recent study, stated, “The plan to import sufficient energy for development was not designed to cope with the high level of volatility in the international fuel market, depreciation of the local currency, and weak fiscal conditions.”
As the era of cheap energy comes to an end, improving energy efficiency will become more financially rewarding, as the government is likely to make energy pricing more competitive soon, according to Alam.
The study also noted that local gas production reduced to 2,201 million cubic feet (mcf) per day from 2,663 mmcfd in 2016.
How Global LNG Supply Tightness Expected Through 2025?
Global LNG supplies are expected to remain tight through 2025, limiting demand growth in Asian markets, according to the Institute for Energy Economics and Financial Analysis (IEEFA) which was published in 2023. European LNG demand may stay strong short term but decline by 2030 due to decarbonization and energy security policies.
The IEEFA report examines LNG supply and demand in Europe, Asia, Australia, the US, and Qatar. It notes that 2022’s market turmoil, with record-high prices and unreliable supplies, has weakened long-term LNG demand growth in Europe and Asia. In 2022, India, Bangladesh, and Pakistan reduced their LNG demand by 16% due to fuel security concerns, high costs, and low foreign currency reserves. These countries may rely on volatile spot markets as existing suppliers can’t increase short-term supplies. They are seeking new long-term contracts, but those starting before 2026 are scarce.
European countries increased LNG imports by 60% to offset declining Russian pipeline gas. China reduced LNG purchases by 20% due to high prices, COVID-19 shutdowns, and slower economic growth. In Japan and South Korea, high LNG prices have led to a resurgence in nuclear power, reducing gas demand in the power sector.
LNG imports in 2023
In 2023, Bangladesh resumed its liquefied natural gas (LNG) imports following a temporary halt during the Russia-Ukraine conflict. The Cabinet Committee on Government Purchase (CCGP) approved Petrobangla’s proposal to import one LNG cargo at a rate of $19.78 per million British thermal units (MMBtu), totaling Tk850 crore.
Led by Agriculture Minister Abdur Razzaque, the government aims to import 12 LNG cargoes to address the escalating demand for natural gas. In alignment with recommendations from the International Monetary Fund (IMF), adjustments were made to gas prices for industries and power plants to reduce subsidies and facilitate loan procurement. However, tariffs for households, fertilizer production, CNG-powered vehicles, and tea gardens remained unchanged.
Despite local gas production reaching 2,300 million cubic feet per day (MMCFD), Bangladesh continues to rely on LNG imports to bridge the 500 MMCFD demand gap. This includes 350 MMCFD sourced from long-term agreements with Qatar and Oman, along with an additional 150 MMCFD obtained from the international spot market.
In conclusion, the findings of the IEEFA study underscore the critical importance of enhancing energy efficiency in Bangladesh’s industrial sector. By embracing technological advancements and adopting a forward-looking policy framework, Bangladesh can chart a course toward energy independence, fiscal resilience, and sustainable growth.
