Bangladesh is suffering from a serious energy predicament. There is serious deficit in power and natural gas supplies. The present shortfall in power supply is about 2000 MW per day and the crisis is deepening. Power generation in Bangladesh is mainly based on one fuel and that is natural gas. About 88 percent of power generation depends on supply of local natural gas. Natural gas is also being used as feedstock for production of urea fertilizer. Most of the export oriented industries use natural gas as fuel. The present deficit of gas is about 400 million cubic feet per day (400 MMCFD). The democratic government's mega plan to confront and overcome this grave crisis includes generation of 8806 MW new power by 2014. Implementation of the plan is to be made by utilizing the loans from donor agencies and development partners. Many of the power plants are planned to be implemented under PPP and IPPS. The main challenge lies not only in sourcing finance for setting up the power plants but sourcing and arranging assured supply of fuel is also a major factor. The current state of power generation by fuel type is as follows:

Furnace Oil (F.O.)     3.91%

Diesel                     2.04%

Hydro                     1.62%

Coal                       4.04%

Natural Gas             88.39%

The government of Bangladesh is seriously considering fuel diversity and sustainable supply of fuels for power generation in the coming years. Till now natural gas is our main fuel for power generation but the proven gas reserve is fast depleting. It is apprehended that the existing gas reserve may be completely exhausted before 2015 if no significant new discovery is made soon or the existing gas reserve is not further professionally proven.

In the backdrop of the critical shortages of power and natural gas the government has decided to generate power by using coal, diesel and furnace oil side by side the natural gas. Bangladesh Power Development Board (BPDB) has signed Agreement with NTPC of India for producing 1300 MW power in the South West region of the country by using coal as fuel. The government has also undertaken necessary steps to set up 17 furnace oil and diesel run power plants having a generation capacity of 1330 MW. Of these plants eight will be on rental basis in the private sector and the rest nine will be in the public sector. These seventeen power plants will be installed in different places of the country. Hence there will be huge demand of furnace oil and diesel for power generation in the coming years and these petroleum run power plants will be producing power in the near future since the coal based power plants will take time to be on stream because of shortage of coal as fresh mining of coal is not at sight until the long awaited coal policy is approved by the government.

Bangladesh Petroleum Corporation (BPC) is supplying diesel to the communication sector, industries, Power & agriculture sectors and furnace oil to industries and power sectors. In the face of rising prices of fossil fuels and financial constraints BPC has managed the supply of fuels efficiently. There was no crisis of products in the country during sky high global prices of Crude oil and Petroleum products and economic meltdown. Now that the setting up of 1330 MW Oil based power plants is in the process there will be an extra demand of furnace oil and diesel over and above the normal demand of furnace oil and diesel. Since these oil based power plants will be scattered in 17 locations in the country BPC will have to cater to the needs of these power plants in time as per the requirements of the power plants. Hence it will be an additional responsibility of BPC to arrange supply of FO and Diesel for these power plants to augment the power supply in the country. BPC with its existing infrastructural facilities and addition of some small facilities will be able to meet this additional demand of furnace oil and diesel for power generation.

BPC in consultation with the BPDB should assess the requirement of furnace oil and diesel for these power plants and take proactive actions to build up stocks of this products so that no one of these power plants is shut down for shortage of fuel.