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Bangladesh needs $1 B to import fuel oil and avert an energy crises

Bangladesh's private power producers will need $1 B in foreign currency to import fuel oil and avert an energy crisis this summer, their industry association said in a letter to the central bank seen by Reuters.

Analysts expect power cuts in Bangladesh to worsen this year, as a rapid decline in the value of its currency and foreign exchange reserves have limited its ability to import power generation fuels, whose prices have surged following Western sanctions on major energy exporter Russia.

Outages have already hampered commercial operations in Bangladesh, hitting lucrative garment industry supplies to clients such as Walmart, Gap Inc, H&M and Inditex's Zara.

The Bangladesh Independent Power Producers' Association (BIPPA) flagged a shortage of U.S. dollars to pay for crucial energy imports, and said private generators would need over $250 million a month until June to pay for fuel shipments.

"We humbly urge Bangladesh Bank to enable local commercial banks to establish letter of credit for critical imports such as fuel oil... by providing U.S. dollars to local commercial banks," BIPPA told the central bank in a letter on Monday.

Private power producers, including small private producers and public/private partnerships and led by Summit Power International, provide more than half of the country's electricity.

Mezbaul Haque, a spokesperson for the central bank, said the bank would "look into the matter," without elaborating.

"Measures have been taken to ease the dollar crisis and the trend is stable now," Haque said, adding that dollar holdings at commercial banks were on the rise.

Bangladesh imports the bulk of the fuel it needs for electricity.

BIPPA said irrigation during the annual harvest season, festivities during the holy month of Ramadan and hot weather would drive a sharp rise in electricity demand this summer, adding that lack of support from the central bank could force utilities to resort to widespread power cuts.

Temperatures typically start increasing from the end of March, and BIPPA estimates power producers to require 2.12 MMt of fuel oil in the four months to June 2023.

Dwindling local gas reserves and a lack of sufficient coal-fired capacity have forced the country to depend on liquefied natural gas (LNG) imports and polluting fuels such as fuel oil for power generation over the years.

High global prices forced Bangladesh to slash its imports in 2022 despite a rise in power demand, resulting in a fuel shortage that forced millions of citizens into hours of darkness every week during the second half of last year.

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