Reviving the prospect of energy sources

When things go awry at policy level, the state can choose from two courses of action. First it can begin to take proactive measures in an effort to rectify past mistakes, regardless of how much pain it causes to the economy in the short-term so that the medium- to long-term is smoother sailing; or, it can stick to its failed policy and hope that things will work out somehow in the long run. For Bangladesh, the state of energy planning has come to a crossroads. Things are not rosy anymore. Since sourcing energy over the last decade has increasingly become import-based, there is little the government can do except going along with foreign market dictates.

Unfortunately, the economy is no longer doing very well, because the global economy isn't doing particularly well either. Exports are down, imports are up, particularly energy-imports. These cost foreign currency, something that is in short supply these days. When the government's own experts working in the various public energy sectors as well as the nation's best known energy experts warned of the risk run by Bangladesh for its import dependence, they were ridiculed. These individuals were sidelined.

Their predictions have now become a reality. The continual upward revision of prices of energy (nearly 50 per cent is now imported) to benefit a handful of companies and their local Bangladeshi partners have now become an uneconomical proposition. This makes no financial sense. While retail consumers may reduce consumption, what does industry or agriculture do? Can they afford to reduce consumption of the basic driver for their economic activities? The answer is a resounding NO. Hence, prices of goods produced will continue to rise, inflation will keep going up, consumption will fall and "shrinkflation" will become the norm.

How does this benefit the economy? To be more specific, how does it benefit the government in power? Yet, energy planners are sticking to a failed regime of policies that is going to drive the economy to the ground. The pushback that was envisaged has arrived. The foreign producers of energy are not willing to take any more IOU(s) from state bodies. As reported in this newspaper on April 06, "American oil-major Chevron has deferred its $65-million Jalalabad compression project in northeastern Bangladesh following nonpayment of $220 million in overdue gas bills, market sources said. Chevron Bangladesh wrote to state-run Petrobangla on Thursday about its decision not to execute its natural-gas-compression station near Jalalabad gas field in time."

Much has been written about the state's inability to pay foreign companies that sell the country primary energy or electricity. Earlier, reports have been published about how another foreign company's bill for supplied electricity jumped 100 per cent in the span of six months. A short answer to a long question is quite simple: the country does not have requisite foreign exchange to meet all its obligations. There is no point assuring that things will improve soon when the situation points to the contrary.

Petrobangla hasn't been able to pay for gas produced by Chevron since September 2022. Reportedly, the gas purchase and sales agreement between the companies has the clause whereby Chevron is at liberty to "shut production if non-payment exceeds a five-month period." Furthermore: "According to article 14.3 of the agreement, the seller shall not be obligated to supply gas if the buyer defaults on payment for over five months from the date payment is due. In this event, the seller does have the right to defer delivery of gas without violating this agreement or the PSC until all unpaid payments for gas delivered to the buyer are three months' dues".

So contractually, this international oil company (IOC) has acted within its legal rights when it reduced production of gas or refused to engage in further activity.While this particular IOC is engaged in national gas production, what excuse is there for importing energy sources from abroad when it has ample studies pointing to existence of highly probable gas pockets and reserves on-shore? Why it continues to dilly-dally on the exploration of proven coal reserves? Why the foot dragging continues on the offshore bidding process? Let there be no confusion that the months ahead would see harsher measures from producers and suppliers of energy and electricity when debts continue to mount for "non-payment" of dues. There is no magic wand for solving the energy crisis the nation faces today. Unfortunately, the road to recovery isn't being expedited.

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