Bangladesh will reduce imports of 0.005% sulfur gasoil by at least 20% within the next one year, as part of the country's austerity drive to trim fuel oil purchases and save foreign exchange reserves, said Khaled Ahmed, the director of operations and planning at Bangladesh Petroleum Corp., or BPC.
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The country's energy and mineral resources division under the Ministry of Power, Energy and Mineral Resources has already instructed BPC to reduce gasoil imports by at least 20% by June 2023, Ahmed told S&P Global Commodity Insights on Aug. 3.
Bangladesh imports about 5 million mt of 0.005% gasoil annually, which is nearly 77% of the country's total petroleum products requirement.
The decision to curb gasoil inflows comes as Bangladesh looks to prevent an economic fallout amid depleting foreign reserves.
According to data from the country's central bank, Bangladesh's foreign exchange reserves in the week ended July 22 declined to $39.77 billion, the lowest in two years, due to soaring energy costs stemming from the Russia-Ukraine war.
While policy developments by Bangladesh to reduce gasoil import volumes are still fresh and yet to impact the Asian gasoil market, they may eventually add downward pressure as fewer barrels will be absorbed by the South Asian nation.
"Could have some impact [by] putting more excess barrels in the market," said a middle distillate trader.
Still, other sources said they do not expect any immediate impact on the gasoil market from Bangladesh's plan to reduce imports.
"I don't see the real impact yet honestly...[as] I don't see them cutting [imports]," said a source with a trading house.
Platts FOB Singapore 50 ppm sulfur gasoil cargo price eased from an average of $175.86/b in June to average $144.43/b over July, but still remained at firm levels.
As part of the country's austerity drive, Bangladesh also halted imports of LNG from spot market since July to save foreign reserves.
Also in July, BPC shut the operations of gasoil-fired power plants -- which have a total electricity generation capacity of around 1,300 MW -- to reduce gasoil imports by about 10%, S&P Global reported earlier, leading to a countrywide electricity outages.
BPC also started allocating 20% less gasoil to retail gasoil sellers but weak gasoil consumption in the transportation sector and related industries are major challenges, Ahmed said.
Bangladesh has also asked all the commercial banks to reduce gasoil consumption, along with natural gas and lubricants, by 20% within next one year, and electricity by 25% in the next one year starting from July this year, the country's central bank said in a circular.
Term purchases to meet domestic needs
Despite the cuts in spot purchases of gasoil and LNG, BPC is still continuing regular imports of petroleum products under contractual obligations with the suppliers, despite the austerity measures taken by the government to reduce fuel consumption, said BPC's Ahmed.
BPC has contracts with suppliers to import up to 1.65 million mt of refined petroleum products during July-December 2022, which will be 34% higher compared to the corresponding period last year.
BPC has denied rumors of potential supply shortages amid cuts to spot procurement due to sufficient domestic stockpiles.
Bangladesh has 431,835 mt of 0.005% sulfur gasoil in storage, which is sufficient to meet demand for 32 days considering daily consumption of around 13,607 mt, according to BPC.
The country has A-1 jet fuel stocks to meet 44 days of demand and HSFO inventory for 32 days, the company added.
Bangladesh produces full quantities of 92 RON gasoline petrol to meet local demand, and imports 40% of its 95 RON gasoline demand from the international market, said a BPC statement.
BPC is monitoring fuel consumption patterns after the enforcement of austerity measures, which include shutting diesel-fired power plants, shops and shopping malls by 8 pm, restricting illuminations in social gatherings in community centers, shops and shopping malls.