Higher domestic gas prices increase the prospects of Bangladesh to secure spot LNG cargoes in the second half of this year. Wood Mackenzie expects the gas demand to peak this year to 27 million tons of oil equivalent (mtoe).
Two thirds of power generation in Bangladesh currently comes from domestic gas supply, which is depleting. To meet this gap, additional volumes will be needed as early as 2022.
Growing working age population, urbanisation and rising income levels in Bangladesh have pushed up energy demand, with electricity consumption growing 6% annually in the last decade – higher than average GDP. This trend is likely to continue due to the current low per-capita electricity use.
LNG for baseload power
Bangladesh needs a reliable base load capacity for its electrification needs, given that the country’s overall energy demand is expected to rise 27% to reach 55 mtoe in the years through to 2030.
“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,” said Wood Mackenzie Asia Pacific Head of Markets and Transitions, Prakash Sharma.
“LNG and coal,” in his view, “account for most of the incremental fossil fuel imports between 2020 and 2030.”
Coal use to rise fourfold
Dirty king coal, meanwhile, will see demand rise fourfold to 12 mtoe between 2020 and 2030, according to Wood Mac estimates.
The Bangladeshi government is adding import-based coal capacity to lower power generation cost and increase reliability. The imported thermal coal will mostly originate from Indonesia and Australia.
While the renewables target of 10% of total electricity generation by 2020 “will not be met,” Sharma acknowledges the government’s recently launched Green Transmission Fund “should provide some upside to investments in the renewables sector.” Wind and solar power will make up just 2% of total electricity generation this year, growing to 6% by 2030 and 16% by 2040.