Dhaka:Bangladesh is grappling with an increasing subsidy burden due to its dependency on imported Liquefied Natural Gas (LNG), as the government must provide over Tk 60 in subsidy for each cubic metre of gas when the cost of imported LNG reaches US$20 per million British thermal units (MMBtu). This information is highlighted in a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).
According to United News of Bangladesh, the report underscores the challenges posed by high and volatile LNG prices, supply disruptions, and escalating project costs, which have undermined the financial viability of gas-fired power projects in Bangladesh and other emerging Asian economies. The report, titled "LNG-to-Power in Emerging Asia A Five-Year Review of Project Outcomes," reviews 92 proposed LNG-fired power projects and 44 LNG import terminals in Bangladesh, the Philippines, Vietnam, and Thailand, revealing a significant number of cancellations and stalled progress.
The report finds that only 11 percent of the proposed power generation capacity and 15 percent of the planned LNG import terminal capacity became operational across the four countries during the review period. It also highlights that completed LNG-fired power plants took, on average, more than seven years to begin commercial operation, as opposed to the three to four years generally projected by developers.
Shafiqul Alam, IEEFA's lead energy analyst for Bangladesh, expressed concerns about affordability and supply reliability, noting that Bangladesh's subsidies have increased due to high LNG and electricity costs, deepening reliance on external financing. Despite substantial spending, the country faces gas shortages because of unreliable LNG supplies. Alam suggests that Bangladesh should utilize untapped domestic gas resources, improve energy efficiency, and expand renewable energy rather than relying on imported LNG.
The report also identifies factors such as LNG price volatility, higher capital costs, and longer delivery times for gas turbines as major threats to the financial viability of LNG-to-power projects. Co-author Christopher Doleman points out that these risks could increase the lifetime levelised cost of electricity from LNG-fired power plants significantly.
The findings further reveal challenges in securing bankable power purchase agreements and highlight the impact of falling costs and shorter deployment times for renewable energy on the demand for LNG-fired plants. The report suggests that expectations of rapid LNG demand growth in the region may not align with actual project outcomes.