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Since last year, the international fuel market has become increasingly volatile, particularly as a result of the Russia-Ukraine war. Consequently, import-relying Bangladesh also faces the same experience as the rest of the world. The Bangladesh government has been forced to implement the highest increase in fuel prices in 20 years as a move to recover the losses by balancing subsidies.

In February 2022, since the beginning of the Russia-Ukraine war, the global fuel market became unstable, caused by supply shortages. This is because Russia, one of the major exporters of diesel and gas, cut off its gas supply to Europe, which is dependent on Russia for a large portion of its gas demand. At that point, the government was forced to shut down several power plants in Bangladesh due to increasing fuel prices and declining forex reserves. Since then, Bangladesh has taken various initiatives to get rid of the crisis by keeping its energy supply uninterrupted.

Recently, India’s H-Energy, a subsidiary of Hiranandani Group, has intended to supply re-gasified liquefied natural gas (RLNG) from Digha in West Bengal to Khulna in Bangladesh after laying a 275-kilometre cross-border pipeline from Kanai Chatta in East Midnapore district to Shrirampur in Khulna. In 2021, Bangladesh’s state-run energy corporation Petrobangla signed a memorandum of understanding (MoU) with H-Energy in this regard.

State-run Petrobangla is expected to secure approximately 300 million cubic feet per day (mmcfd) from India’s H-Energy by 2025, according to an initial bid. They would get an additional 200 mmcfd gas from private company Dipon Gas, which would also import 500 mmcfd from India.

This is going to be the second cross-country pipeline between India and Bangladesh for carrying energy. The initial target is to import RLNG equivalent to around 1.0 million- tonnes per annum (MTPA) from H-Energy through this pipeline. This RLNG will be utilized to supply the 800MW Rupsha combined-cycle power plant, operated by the state-owned North West Power Generation Company Ltd (NWPGCL), for a duration of 22 years. After supplying the power plant with the requisite 130mmcfd of RLNG, the remaining gas could be supplied to the national grid.

Meanwhile, the first cross-border pipeline has been carrying diesel from India since its inauguration on March 18. In March 2023, the 132 km-long First India-Bangladesh friendship pipeline was inaugurated to enhance diesel transportation for the Northern part of Bangladesh. After the inauguration of the pipeline, the Bangladesh Petroleum Corporation (BPC) got a boost in its ability to supply uninterrupted fuel in the region.

The initiative to build a pipeline to transport diesel was taken in 2017. It has been built at an estimated cost of ₹377 crore, of which the Bangladesh portion of the pipeline was built at a cost of approximately ₹285 crore, which the government of India has born under grant assistance. The pipeline can transport one million metric tonnes per annum (MMTPA) of high-speed diesel. It’s a remarkable relief for the people of the seven districts in northern Bangladesh, primarily dependent on agriculture.

Another notable development was witnessed in July this year since Bangladesh started importing Methanol produced at a petrochemical plant in Assam. Methanol is an achromatic liquid primarily produced from natural gas, coal, organic waste, or carbon dioxide and is used as an alternative fuel to gasoline. As an alternative fuel, Methanol is effective in cutting the cost and carbon emission rate. The 15% methyl blended petroleum is called M15, which would work in both ways—cost-effective and less emissive.

Being one of the fastest-growing countries in the world, India will be a $5 trillion economy soon. With a 6% share in global consumption of primary energy, the power generation capacity and fuel usage have been an upward trend along with the country’s economic growth. At the moment, India imports LNG via seven facilities with a combined capacity of about 47.7 million tonnes. India is expected to gain its regasification capacity of 3.4 tcf (trillion cubic feet) between 2022 and 2026. While global oil prices were on the rise, India has imported diesel from Russia at 40 percent lower prices. Consequently, Bangladesh has also been able to import diesel from India at a lower-than-usual price through the Maitree pipeline.

The energy-importing countries of the world are facing severe crises, while India has shown remarkable strength in energy management. It has taken several mature steps to diversify the energy sector. Hence, long-term energy cooperation with India can pave the way for a sustainable solution for its neighbors.

As the closest neighbor, Bangladesh has the potential to reap the benefits from India’s fuel availability. Considering the rapid growth of the economy, Bangladesh’s energy demand will increase in the coming years. Thus, relying only on short-term solutions may create long-term strains on the country’s energy independence. Along with reducing dependency on fossil fuels, Bangladesh should look forward to diversifying the fuels and its import sources

Finally, both Bangladesh and India should enhance the ongoing cooperation in the energy sector, which is a major precondition for economic growth. As a time-tested friend, India-Bangladesh cooperation goes beyond energy and transportation. Trade between the countries reached $20 billion last year. Both countries are heavily dependent on each other for their security and stability. In this regard, prosperous and connected neighbors are crucial in maintaining their stability. Thus, Bangladesh FM Abdul Momen recently reiterated that Bangladesh should take full advantage of the high growth of the Indian economy to further its own economic development. Therefore, uninterrupted and enhanced cooperation between Bangladesh and India could help open new horizons in regional cooperation.

Abdullah Sadi is a researcher on South Asia’s political economy and international politics.

 

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