Bangladesh raises domestic natural gas prices amid surging LNG market

Bangladesh has raised its domestic weighted average natural gas tariff by 23% to Tk 11.91/cu m (13 cents/cu m), backdated to June 1, to offset losses incurred by national oil company Petrobangla on LNG imports, acting chairman of the Bangladesh Energy Regulatory Commission Mohammad Abu Faruque said at a virtual news conference.

The tariff set by BERC is the price at which state-run gas distribution companies sell gas to the end-consumer. The hike underscored rising energy costs among Asian economies struggling to keep fuel costs down and maintain profitability at state energy companies.

BERC held a four-day public hearing over the tariff hike proposals in March during which it took feedback from stakeholders before deciding on the price.

Petrobangla and its subsidiary state-run gas marketing and distribution companies had sought a rise of 110% to Tk 20.35/cu m for domestic consumers, saying it will require around Tk 443 billion ($5.15 billion) annually to import 850 MMcf/d of LNG, but the previous tariff structure only compensated it for Tk 297 billion.

BERC fixed the tariff much lower than Petrobangla's expectations, given Tk 118 billion of revenue from other sources, including Tk 33 billion from the gas development fund (GDF), Tk 25 billion from retained earnings of state-run gas transmission and distribution companies and Tk 60 billion as subsidy from the government.

GDF is a fund created following an order by the BERC when it hiked natural gas tariffs by around 11% in 2009, with the condition that additional revenue generated following the increase would be transferred to the fund. BERC last raised the natural gas tariff by 33%, on average, on July 1, 2019.

Under the new tariff structure the price of compressed natural gas was unchanged at Tk 43/cu m to insulate transportation fares, while the tariff for small and cottage industries was cut 37% to Tk 10.78/cu m.

Sectors like the fertilizer industry saw some of the highest tariff hike of 260% to Tk 16/cu m, while most other sectors like medium to big industries, hotels and restaurants, captive power plants and commercial power plants saw increases of 7%-16%.