Bangladesh to Double Fossil Fuel Imports by 2030: WoodMac
Bangladesh is expected to double its fossil fuel imports to 32mn tons of oil equivalent between 2020 and 2030, with LNG and coal accounting for most of the growth, Wood Mackenzie wrote in a note on May 14.
While growing working age population, urbanisation and rising income levels continue to spur domestic demand, it is electrification needs in the power, export-driven textile and jute, and fertiliser industries that will drive the country's energy demand growth this decade, WoodMac said. Total energy demand in Bangladesh is expected to rise 27% to 55mn toe by 2030.
"Bangladesh needs a reliable base load capacity for its electrification needs. Coal and LNG imports are thus important to support this as domestic coal struggles with the economics of quality production, while domestic gas is on a steep decline. LNG and coal account for most of the incremental fossil fuel imports between 2020 and 2030," WoodMac's Asia-Pacific head of markets and transitions, Prakash Sharma, said.
Power demand has grown 6% yr/yr in the last decade, outpacing average gross domestic product growth, WoodMac said, adding the trend is likely to continue in the future due to low per capita electricity consumption.
"At the moment, about 60% of power generation in Bangladesh comes from domestic gas supply, which is depleting. To meet this gap, additional capacity will be required as early as 2022," Sharma said.
Consequently, gas prices in the country raised by 35-40% in 2019 yr/yr to reflect the cost of supply amid rising LNG demand. Wholesale power prices also rose in Q1 this year. Hence, the prospects of Bangladesh securing low-priced spot LNG in the second half of 2020 is good news for the gas and power sector. "Still, the country's gas demand is expected to peak this year to 27mn toe," Sharma added.
Coal demand, on the other hand, is set to rise over fourfold to 12mn toe by 2030. The government is adding import-based coal capacity to lower power generation cost and increase reliability. Indonesia and Australia will be key suppliers of thermal coal to power projects in Bangladesh, WoodMac said.
While the renewables target of 10% of total electricity generation by 2020 will not be met, Sharma said. "We expect renewables to make up about 2% of total electricity generation this year, 6% by 2030 and 16% by 2040,” he said. "It has recently launched the Green Transmission Fund which aims to finance green businesses including renewable energy. This should provide upside to investments in the renewables sector."