Building a strategic fuel oil reserve

Bangladesh’s vulnerability to any disruption in the global energy supply chain has been amply demonstrated during the US-Israel’s war on Iran. For, as soon as Iran, in retaliation for the attack, blocked the narrow maritime chokepoint, called the Strait of Hormuz through which ships carrying fuel oil, Liquefied Natural Gas (LNG) and fertilizers pass, Bangladesh felt the shock. That the shock has been severe could be observed from the panic buying by the public, hoarding of fuel oil by unscrupulous traders and the long, unending queues of private cars and motorbikes at the filling stations. This is the truth, despite the repeated reassurances from  the government that it has adequate stockpile of fuel oil. Even if the government’s present stock can meet, say, a month’s energy need, then what is going to happen if the present crisis in the Gulf becomes a prolonged one? The war has already crossed 40 days. In that case, it is bad news for the  oil-dependent industries, power plants, irrigation pumps, etc. There are also the land, water and air transports, to name but a few of the fuel oil hungry vehicles. 

So, the government’s first priority should have been to take into account the geopolitics of energy, especially in the Middle East, and orient its foreign policy accordingly. That is to ensure that the flow of energy from the Gulf nations is not interrupted under any circumstances. For, nearly 95 per cent of the country’s fuel oil requirement is met through imports mainly from the Middle East, while 30 per cent of gas (LNG) comes from the same source. Had the government been able to pursue a balanced foreign policy, the flow of fuel oil from the Strait of Hormuz would not have stopped.  The foreign policy of a sovereign nation cannot be beholden to any foreign countries no matter how friendly they are. Our response to emerging global crises, for instance, the ongoing war in the Gulf, should have been able to demonstrate that. But it couldn’t. Unsurprisingly, the Iranian authorities on April 10  denied permission to the Bangladesh-flagged vessel, MV Banglar Joyjatra, to pass through the Strait, despite a recent cessation of hostilities. As a result, the ship carrying 31 crew members has been forced to anchor near the UAE.  But it should not have been the case.  Notably, the ship has been remaining stuck in the Gulf for 40 days due to the war. This is unfortunate. Now, given the country’s overdependence on imported energy and the dwindling reserve of natural gas at home, there should have been an energy strategy in place. 

The core of that strategy should be to progressively increase the proportion of renewable energy, which at present is between 5.25 per cent and 5.40 per cent of the nation’s total power generation mix, which is well over 31, 000 MW. It is worthwhile to mention that the total installed renewable energy capacity is around 1690 MW. Of this amount, solar power contributes 80 per cent followed by  hydro and wind power. But of the renewable mix, hydro and wind are yet to contribute significantly so far as its present installed capacity is concerned.  In the revised renewable Energy Policy (2025), the government aims to produce 20 per cent of the toral power from the renewables by 2030 and 30 per cent by 2040. But to meet 2030’s target, Bangladesh must produce 760 MW of renewable power every year between 2026 and 2030. But given the current capacity, the target is too ambitious. So, what other options is  the government left with? In this connection, the government may take note of China’s policy. Fuel oil meets only 18 to 19 per  cent of the country’s energy need. The rest comes from the renewables. Even so, it has built a strategic reserve of 1.2 to 1.3 billion barrels of crude oil. Over time, we should also create a satisfactory strategic reserve of fuel oil to meet emergencies. Even so, our primary focus should be on gradually increasing renewable capacity, preferably based on solar power.  

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