(WoodMac, 14.May.2020) — Bangladesh is expected to double its fossil fuel imports to 32 million tonnes of oil equivalent (Mtoe) between 2020 and 2030, says Wood Mackenzie.
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.
Total energy demand in Bangladesh is expected to rise 27% to 55 Mtoe in the 2020 – 2030 period.
Wood Mackenzie Asia Pacific Head of Markets and Transitions, Prakash Sharma, said: “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.”
Power demand has grown 6% annually in the last decade, higher than average GDP. The trend is likely to continue in the future due to low per capita electricity consumption.
Sharma said: “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.”
Consequently, gas prices in the country raised by 35-40% in 2019 year-on-year to reflect the cost of supply amid rising LNG demand. Wholesale power prices also hiked in Q1 this year. Hence, prospects of Bangladesh securing low-priced spot LNG in H2 2020 is good news for the gas and power sector.
Sharma said: “Still, the country’s gas demand is expected to peak this year to 27 Mtoe.”
Coal demand on the other hand is set to rise over fourfold to 12 Mtoe between 2020 and 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.
While the renewables target of 10% of total electricity generation by 2020 will not be met, Sharma acknowledges the country’s efforts in reducing air pollution and carbon emissions.
He said: “We expect renewables to make up about 2% of total electricity generation this year, 6% by 2030 and 16% by 2040.
“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.”