Bangladesh's high sulphur oil imports to plunge further in 2024 amid fund crunch: S&P

Bangladesh's imports of high sulphur fuel oil (HSFO) are likely to plunge in 2024, after dropping about 11.5% in 2023, pressured by a persistent scarcity of funds and substantial payments outstanding from the government to importers, S&P Global reports citing industry sources.

Bangladesh is likely to import around 3.5 million tonnes of 180 CST HSFO in 2024, down about 9% from 2023, when the country's private sector imported around 3.25 million tonnes of HSFO and the Bangladesh Petroleum Corporation (BPC) imported 6,00,000 tonnes, the immediate past president of Bangladesh Independent Power Producers' Association (BIPPA) Imran Karim told S&P.

The 180 CST HSFO stands for 180 centistokes high-sulphur fuel oil that is used for generating electricity in Bangladesh and the country's private sector imports the major share to run their power plants, while state-run Bangladesh Petroleum Corporation imports the remaining.

Of the total import estimates for 2024, the country's private sector is expected to import around 3 million tonnes, while the BPC is expected to import around 5,00,000 tonnes of HSFO, Karim, who owns Confidence Group in Bangladesh and is also a leading HSFO importer, added.

The 2024 projection is nearly 20% lesser compared with 2022, when Bangladesh had imported around 4.35 million tonnes, of which the BPC's share was around 3,50,000 tonnes, Karim said.

HSFO imports by the BPC, however, soared by around 71% in 2023 as many private HSFO-fired power plants relied on the state-run company, instead of importing themselves due to shortage of funds, a senior BPC official told S&P Global on 27 December.

The fund crunch was the main reason behind lesser HSFO imports by the private sector this year, compared with 2022, when the government had banked more on HSFO for power generation as it halted spot LNG imports for seven months between July 2022 and January 2023 due to higher prices.

"The private-sector power plant owners are also not getting sufficient US dollars from the central bank to import HSFO since September 2022," said Faisal Khan, the current BIPPA president, told S&P Global.

The state-run Bangladesh Power Development Board (BPDB) currently owes around Tk250 billion (around $2.27 billion) to private power plant owners, an amount equivalent to six months' dues, Khan added. 

The BPDB is the main buyer of electricity from privately owned HSFO-fired power plants in Bangladesh.

Meanwhile, the wider Asian HSFO market remains under pressure due to sluggish utility demand across South Asia and persistently more than adequate supplies from the Middle East and Russia.

The FOB Singapore cargo price for 180 CST HSFO, which has dropped nearly 17% in the last three months, have averaged $456.56/mt so far in 2023, down from an average of $521.63/mt in 2022, S&P Global data showed.

Alternate fuels squeeze HSFO imports

A number coal-fired power plants including Adani Power's 1,496MW coal-fired power plant of India, 612MW Unit-1 of SS Power coal-fired power plant, 1,320MW Rampal coal-fired power plant, and Barisal Electric's 307MW coal-fired power plant came into operations in 2023, which also helped reducing HSFO consumption for power generation, S&P said citing a senior BPDP official.

Another 1,320MW Matarbari coal-fired power plant is also set to start in 2024 which may further trim HSFO consumption, he added.

Bangladesh also plans to ramp up its LNG imports in 2024, while several new solar power plants were set to come on stream in the coming year, further dampening HSFO usage for utilities.

Bangladesh may import a total of 24 spot LNG cargoes in 2024, compared to 23 in 2023, said a senior official of state-run Petrobangla.

Bangladesh's total generation capacity from oil-fired power plants is around 7.482GW, of which 6.441GW is HSFO-fired and 1.041GW is diesel or 0.005% sulphur gasoil-fired plants. 

They account for around 31% of the aggregate installed capacity of 24.143GW, according to data from state-run BPDB.