Bangladesh should prioritize renewable energy’ as US halts approval for major LNG project

Bangladesh’s LNG aspirations may face backlash as the White House pauses a decision on whether to approve what would be the largest natural gas export terminal in the United States.

Experts are worried that the recent decision by the US to halt LNG plans could have long-term implications for our country, given the 15-year agreement signed last year between the Bangladesh government and Excelerate Energy, a US-based company, to purchase LNG from 2026 to 2040.

In January, The New York Times reported that the Joe Biden administration is pausing a decision on approval of CP2 project, a delay that could stretch past the November election and spell trouble for that project and 16 other proposed terminals.

The $10bn project, known as Calcasieu Pass 2 (or CP2)

This project is being planned for Cameron parish, on Louisiana’s coast. It would ship up to 24m tons of liquified natural gas (LNG) each year once built. This project would cause 197m tons of planet-heating gases each year.

The White House is directing the Energy Department to expand its evaluation of the CP2 project to consider its impact on climate change, as well as the economy and national security.

Energy market analysts, European Parliament members, and civil society organizations have applauded the decision to postpone the approval. In letters addressed to President Biden and Secretary of Energy Jennifer Granholm, these groups express support for halting permitting to allow for a comprehensive assessment of the potential impacts on climate, environmental justice, and economics.

US LNG exports for European and global energy market while the European gas demand is projected to further decrease by 2030

Despite assertions from US gas lobbyists regarding the necessity of expanding LNG exports for European and global energy security, energy market analysts dispute this claim. Plans for new LNG projects are deemed incompatible with European gas trends and pose financial risks to investors, as highlighted by experts from the Institute for Energy Economics and Financial Analysis (IEEFA).

The gas demand, having declined since the surge following Russia’s invasion of Ukraine, is projected to further decrease by 2030. This trend aligns with the European Union’s target to reduce oil and gas demand by 15% from 2022 levels by 2030, with continued decline through 2050. The potential construction of all proposed US LNG terminals could surpass the entire gas demand of the EU by 2030, according to IEEFA, further highlighting the misalignment with European energy goals.

Additionally, the pursuit of new LNG projects conflicts with the objectives outlined in the Paris Agreement, and concerns are raised regarding the high risk of human rights abuses associated with LNG supply chains.

Members of the European Parliament and over 40 civil society organizations, organized by Food & Water Action Europe and Friends of the Earth Europe with support from activist Andy Gheorgiu, are urging the Biden administration to reconsider LNG export plant approvals. These January letters underscore the necessity for the US Administration to acknowledge the significant changes in the energy landscape since 2022, including the rise of renewable energy sources, efficiency measures, and declining gas demand in Europe.

The delay could bring ramifications for Bangladesh’s energy security

The delay in approving this decision also holds ramifications for Bangladesh over time, given the expensive nature of LNG as a resource and the US is an existing investor of LNG plant expansion in Bangladesh. The uncertainty arising from financial and investor apprehensions could influence the trajectory of our energy sector.

At this position our experts urge us to prioritise and shift our focus more to renewable energy.

If the US chooses to delay or suspend CP2 and other projects associated with LNG due to environmental and economic concerns, it indicates a setback for LNG expansion. This shift could prompt investors to reevaluate their interests, potentially leading them to reassess their participation in current projects.

Furthermore, this uncertainty could further strain the global LNG supply chain, potentially leading to higher prices.

Another price hike of electricity in Bangladesh

Importing LNG at higher prices will eventually increase electricity expenses, so it is advisable to move away from this path immediately, said Dr. Khondaker Golam Moazzem, the research director at Centre for Policy Dialogue (CPD).

“Right now, we are borrowing dollars to purchase LNG, that’s why the expenses are already high related to the market. However, the uncertainty surrounding the US’s decision about LNG-related projects could further increase the cost of our LNG imports for an extended period. Therefore, it would be best to shift our focus away from gas-based electricity production and towards renewable energy as much as possible,” he said.