Bangladesh's HSFO imports to rise 50% on month in Feb as importers' fiscal health improve

Bangladesh is set to import about 50% higher volumes of high sulfur fuel oil on the month in February due to the onset of summer and given the better financial health of importers, Faisal Khan, the president of Bangladesh Independent Power Producers' Association told S&P Global Commodity Insights Feb. 26.

Bangladesh would import around 150,000 mt of 180 CST high sulfur fuel oil with 3.5% sulfur in February, compared with 100,000 mt in January, Khan said, adding that HSFO demand from power generation plants has been on the rise as temperatures in the South Asian country have started ticking up from early February.

The financial condition of the country's independent power plant owners has gotten better as the government issued special bonds worth Taka 120 billion ($1.09 billion) for commercial banks in mid-January for partially settling the accumulated arrears over the last one-and-a-half years, Khan said. "These bonds are definitely very helpful," Khan added.

The accumulated dues of the independent power plant operators until end-September 2023, however, will be cleared by the state-run Bangladesh Power Development Board, the main buyer from the power plants, Khan said.

Bangladesh government is all set to raise the retail power tariff by up to 7% starting March 1 to help strengthen the fiscal condition of the BPDB, which in turn will be beneficial for the independent power producers too, a senior BPDB official said. A gazette notification on the power tariffs hike will be issued this week, the official added.

The private HSFO power plant owners were to receive around Taka 230 billion ($2.20 billion) as outstanding dues from the BPDB as of December 2023, BIPPA President Khan said.

The long-pending dues from the government since mid-2022 prompted some of the HSFO-fired power plant operators to squeeze or cease imports altogether for several months, but hopefully Bangladesh's HSFO imports would likely increase in the coming months as the fiscal burden of the power plants ease ahead of the peak summer demand.

The country's overall power generation is currently hovering around 9.89 GW during peak evening demand, which is around 29.35% lower than average peak evening generation of 14 GW during summer of 2023, according to BPDB data.

Electricity consumption during summer in Bangladesh remains high as air conditioners, air coolers and fans are widely used to beat the scorching heat.

Bangladesh could not increase its HSFO consumption substantially so far, despite reducing its dependence on natural gas for electricity generation since November 2023, when it halted operations on one of its two floating storage and re-gasification units, or FSRUs, for maintenance, Khan said.

Bangladesh's first FSRU Excellence, which is owned by US firm Excelerate Energy, restarted operations following an overhaul late-January, but the second FSRU, owned by Summit Group, is currently in dry dock for turnarounds, a senior official at the state-run national gas company PetroBangla said.

Bangladesh's total generation capacity from HSFO-fired power plants is around 6.441 GW. The country's private sector imports the major share of fuel oil to run their power plants, while the state-run Bangladesh Petroleum imports the remainder of the overall volume.

The wider Asian HSFO market continues to grapple with persistently abundant supplies amid steady inflows from Russia and the Middle East, trade sources said, adding that the market would likely remain under pressure until peak summer months, when seasonal power generation demand in South Asia typically offers some support.

The FOB Singapore cargo price for 180 CST HSFO has averaged $446.03/mt so far in February, compared with an average of $441.92/mt in January, S&P Global data showed.

Platts, part of S&P Global, assessed the benchmark Singapore 380 CST high sulfur fuel oil cargo's cash differential to the MOPS 380 CST HSFO assessment at a discount of $4.25/mt Feb. 26, while the Singapore 180 CST HSFO cash differential to the MOPS 380 CST HSFO assessment was at a discount of $3.48/mt.