Advancing Energy Efficiency In Bangladesh-Singapore Energy Ventures – OpEd
On May 6, 2024, Bangladesh's Minister for Power, Energy, and Mineral Resources Nasrul Hamid highlighted Bangladesh's significant potential for investment in the power and energy sector. He emphasized the increasing utilization of technology and the ongoing shift towards automation, which, in turn, creates investment opportunities. He estimated that approximately $50-$60 billion would be required in the technology sector over the next five years.
These remarks were made during a courtesy call by Singapore's non-resident High Commissioner to Bangladesh, Derek Loh, at the State Minister's secretariat office. During their meeting, various issues of mutual interest were discussed. The conversation touched upon topics such as nuclear power, wind power, solar power, clean energy solutions, solar power pricing, smart grid development, data centers, LPG and LNG terminals, storage systems, refinery operations, automation, and electricity import-export dynamics. Derek Loh expressed a keen interest in Bangladesh's renewable energy sector and engaged in discussions about modern technology advancements. Among the attendees during the discussion was Sheela Pillai, Charge d'Affaires at the Singapore High Commission in Dhaka. The meeting served as a platform to explore potential collaborations and investments in Bangladesh's energy sector, emphasizing the importance of technology and innovation in driving sustainable development.
At their outset, Bangladesh and Singapore shared comparable narratives. In 1965, Singapore underwent expulsion from the Federation of Malaysia, resulting in an unforeseen independence met with skepticism from development experts. Nonetheless, under the dynamic leadership of Lee Kuan Yew, Singapore emerged as one of the globe's most progressive economies, overcoming constraints posed by limited space, resources, and population.
Similarly, Bangladesh achieved independence in 1971 under the visionary leadership of Bangabandhu Sheikh Mujibur Rahman, amidst doubts regarding its developmental prospects. Much like Singapore, Bangladesh surpassed expectations and embarked on a remarkable growth journey. Lee and Bangabandhu, the founding fathers of their nations, shared a common vision to emancipate their people from oppression and propel them towards development. Recognizing their shared aspirations, Singapore and Bangladesh formalized diplomatic ties on February 16, 1972. As the Singapore-Bangladesh relationship marks its half-century milestone, it's imperative to assess the strengths, challenges, and potential opportunities arising from this distinctive bilateral partnership.
In November 2021, the two nations initiated discussions for a free trade agreement (FTA) aimed at broadening trade horizons across the Southeast Asian and Asia-Pacific regions. Singapore ranks as the third-largest investor in Bangladesh, with investments predominantly concentrated in sectors such as power, energy, transport, logistics, and marine trade. However, with Bangladesh's transition from a supplier of low-skilled labor to a reservoir of skilled professionals, Singapore should explore potential investments in the nation's burgeoning human resource sector.
Both countries have undertaken similar initiatives—Singapore's "Smart Nation" and Bangladesh's "Digital Bangladesh"—to offer technology-driven solutions to their populations, integrating information technology, networks, and big data. Consequently, there is considerable potential for enhanced collaboration between the two nations in areas such as ICT, digitalization, and cybersecurity. In 2022, Singapore registered exports valued at $4.68 billion to Bangladesh. The primary commodities exported from Singapore to Bangladesh include Refined Petroleum ($2.45 billion), Gold ($214 million), and Jewelry ($204 million).
Over the past 27 years, Singapore's exports to Bangladesh have demonstrated a steady growth rate of 8.32% annually, escalating from $542 million in 1995 to $4.68 billion in 2022. Conversely, Bangladesh exported goods valued at $190 million to Singapore in 2022. The principal products exported from Bangladesh to Singapore were Non-Knit Men's Suits ($35.4 million), Knit T-shirts ($26.4 million), and Non-Knit Women's Suits ($24.3 million). Over the same period, Bangladesh's exports to Singapore have exhibited an average annual growth rate of 4.57%, ascending from $57 million in 1995 to $190 million in 2022.
However, in response to the escalating domestic demand for gas, the government has decided to secure 24 shipments of liquefied natural gas (LNG) from Gunvor Singapore Pvt Ltd under a short-term agreement, marking the first instance of such procurement. Each shipment will comprise 33.60 lakh mmbtu (million British thermal units) of LNG, with pricing determined based on the JKM (Japan Korea Marker) index. The initial approval for the procurement proposal was granted by the Cabinet Committee on Economic Affairs on March 27, following its submission by the Energy Division on March 13.
Between September 2021 and January 2024, the government imported 54 shipments of liquefied natural gas (LNG) from the spot market. According to reports from Petrobangla, the country's gas demand fluctuates between 3,800 and 4,000 million cubic feet per day (mmcfd). As of March 28, Petrobangla data indicates that the country sourced 2,030 mmcfd from domestic gas fields and 620 mmcfd from imported LNG, totaling 2,650 mmcfd. Throughout March, the supply of gas ranged from 2,600 mmcfd to 2,720 mmcfd.
To facilitate the regasification of imported LNG and its distribution through the national grid, two floating storage and regasification units (FSRUs) have been installed at Maheshkhali in Cox's Bazar, with a combined daily capacity of 1,000 mmcf. One FSRU is operated by Excelerate Energy Bangladesh Limited, while the other is owned by the Summit Group. Although the Summit Group's FSRU underwent temporary suspension for maintenance in mid-January, it is anticipated to resume gas supply in the first week of April. With both FSRUs in operation, a substantial enhancement in the country's gas supply is anticipated.
The evolving landscape of LNG procurement is witnessing a shift towards shorter-term contracts, influenced by heightened competition in mature ports and regions like the Amsterdam-Rotterdam-Antwerp (ARA) area and the Baltic. Despite most LNG bunker volume still being contracted on long-term agreements, there's a growing inclination towards spot bunkers traded just weeks or days before delivery. Pricing mechanisms typically follow gas or oil indexing, with gas-indexed prices tied to benchmarks like the Japan Korea Marker (JKM), offering transparency, while oil-indexed prices provide predictable returns but may entail additional logistics costs.
Zanendra Nath Sarker, chairman of Bangladesh Oil, Gas and Mineral Corporation (Petrobangla), announced the commencement of LNG imports under a short-term contract, marking a significant departure from previous procurement methods. This shift aligns with Bangladesh's strategy to adapt to fluctuating LNG prices in the international market. The recent meeting with Gunvor Singapore Pvt Ltd is poised to facilitate this transition, as the government looks to secure 24 LNG shipments under a two-year contract. The pricing structure will adhere to the JKM formula, ensuring transparency and favorability to Bangladesh.
The move towards short-term contracts reflects Bangladesh's growing gas demand from industrial and power generation sectors, necessitating a flexible procurement strategy to ensure uninterrupted energy supply. By diversifying procurement methods, Bangladesh aims to mitigate vulnerabilities to market fluctuations and supply disruptions, fostering economic resilience and sustainability. This balanced approach, combining long-term stability with short-term adaptability, not only enhances energy security but also advances sustainable development goals and environmental sustainability. Bangladesh's commitment to optimizing its LNG procurement strategy underscores its dedication to securing energy sovereignty, fostering economic prosperity, and advancing sustainability objectives. By embracing a diversified approach, Bangladesh aims to fortify its energy resilience and pave the way for a more sustainable and prosperous future.
The impacts of Nasrul Hamid's remarks and the subsequent meeting with Singapore's non-resident High Commissioner Derek Loh on May 6, 2024, are multifaceted. Firstly, Nasrul Hamid's highlighting of Bangladesh's significant potential for investment in the power and energy sector underscores the nation's strategic focus on infrastructure development and economic growth. Secondly, his emphasis on the increasing utilization of technology and the shift towards automation signals Bangladesh's proactive stance towards embracing innovation to enhance operational efficiency and productivity in the energy sector.
Thirdly, Nasrul Hamid's estimation of the substantial investment requirement of $50-$60 billion in the technology sector over the next five years underscores the vast opportunities for both domestic and international investors to participate in Bangladesh's burgeoning economy. Fourthly, the discussions during the meeting, covering a wide array of topics such as nuclear power, renewable energy solutions, smart grid development, and data centers, highlight the depth of collaboration and potential investment avenues in Bangladesh's energy sector.
Fifthly, Derek Loh's keen interest in Bangladesh's renewable energy sector signifies the potential for fostering mutually beneficial partnerships between Bangladesh and Singapore, particularly in the field of clean and sustainable energy. Lastly, the presence of Sheela Pillai, Charge d'Affaires at the Singapore High Commission in Dhaka, underscores the official nature of the meeting and the diplomatic significance attached to exploring collaborations and investments in Bangladesh's energy sector.
Overall, the meeting serves as a platform for exploring potential collaborations, investments, and technological advancements in Bangladesh's energy sector, underscoring the importance of innovation and sustainable development in driving economic growth and prosperity.