It was in Bangladesh half country last month without electricity. Operations had to be postponed in hospitals, traffic jams arose because traffic lights did not work. And candles were lit in shops to help customers anyway. As the outage lasted longer – up to eight hours in some cities – the emergency generators also went out. Burning so much diesel became too expensive. It was the Asian country’s worst blackout in nearly a decade. Nearly 100 million inhabitants were affected, numerous factories came to a standstill.
The outage was largely caused by a broken cable. The electricity network in Bangladesh is outdated. But there was also another cause. And remarkably enough, European countries thousands of miles away had an important hand in this.
Poor Bangladesh has not had enough gas for months to keep its power plants running, so there is too little electricity. And those gas shortages are again due to the fact that rich European countries buy up almost all available natural gas, says Bengali professor Mohammad Tamim by e-mail. Tamim is dean of the oil and gas faculty at the Technical University in the capital Dhaka. He is regarded as a leading energy expert in his country.
Europe’s shopping spree makes it extremely difficult for us to get gas
Mohammed Tamim Bangladeshi energy expert
Bangladesh has little natural gas of its own, he explains, so it normally buys large quantities on the world market – especially liquefied gas (LNG). It does this largely on the so-called spot market, where gas is purchased for direct delivery. But European countries are now also targeting the gas there. Because it is suddenly crucial for them to get through the winter, now that the Russian gas has disappeared. European countries have considerably deeper pockets than its own country, so Bangladesh keeps getting it wrong, says Tamim. “We cannot outbid these countries. Europe’s shopping spree makes it extremely difficult for us to get gas.”
One man’s salvation is another man’s misfortune, in other words. Bangladesh does not have many alternatives. It cannot just ‘catch’ gas-fired power stations into coal-fired power stations. And so power failures follow, which have already led to serious problems in the Bangladeshi clothing industry, among others. This sector is crucial for the national economy, a lot of clothing is exported to the West and many people work in it. But it is also a very energy-intensive industry. “We are now dealing with job losses, factory closures and high inflation,” Tamim sums up.
He says the price war has gone so far that some gas suppliers have torn up existing contracts with Bangladesh because they could make more profit if they resold the gas to European countries – even after deducting the penalties for breach of contract.
Many more problems
Other sources also confirm this painful, and in the West mostly unnoticed, downside of Europe’s attempts to stay warm this winter. The International Energy Agency (IEA) reports in its latest quarterly report that countries like Bangladesh are being ‘priced completely out of the market’ by European countries on the spot market. The IEA is an intergovernmental organization with mainly Western members, but which says it works for “a safe and sustainable” energy supply in countries worldwide. Bangladesh now has to make do with much less gas than it actually needs, the IEA writes.
Moreover, the problem is not limited to Bangladesh. Other poorer countries are also suffering (much) from it, according to the IEA. Pakistan, Thailand. And to a lesser extent India. Pakistan, which was hit by a severe flood last summer – which it blames on the West, which is the main contributor to climate change – is “in the middle of a deep energy crisis” due to European hoarding, the agency says. There, too, there are regular power outages in large parts of the country, “sometimes up to twelve hours a day.” Pakistan faced more than a dozen suppliers who breached their contract because they preferred to sell their gas to better paying European countries. Of course, there have been power cuts in those countries for some time, due to poor infrastructure, but the problems are now getting worse.
In recent years, countries such as the Philippines, Vietnam, Ghana and Ivory Coast have invested heavily in LNG as an energy source for the future
LNG expert Alex Munton, from Houston-based consultancy Rapidan Energy, points to a range of other countries that are being hit in less direct, but also painful, ways by Europe’s buying spree. In recent years, countries such as the Philippines, Vietnam, Ghana and Ivory Coast have invested heavily in LNG as an energy source for the future. It’s cleaner than coal and there wasn’t much interest in it from Europe anyway – after all, it had its own seemingly endless streams of dirt-cheap Russian gas. These countries started or had plans to build terminals, pipelines and warehouses. “They can now go into the refrigerator, because the price increases caused by Europe make them unprofitable,” says Munton.
He also says that Europe’s hunt for LNG is leading to ‘energy poverty’ in poorer countries. “It is a zero sum gameMunton said. “The amount of freely available gas on the world market is limited. So the more one part of the world buys, the less is left for the rest.” The situation has a high level of déjà vu, he says. During the pandemic, rich European countries also bought away essential products in front of poorer ones, such as corona vaccines. That led to great irritation in those countries at the time.
Qatar smiling third
It is even more bitter for the Asian countries that they are being displaced by Europe, including Qatar, the second largest LNG producer in the world after the US. Qatar has always been an important partner of those countries, partly because they were so close by. Geographically, there was a ‘perfect match’ with Bangladesh, Pakistan and India. But now that the emirate can earn more, it is dropping its old partners (as far as long-term contracts are not concerned). Countries from which Qatar has also brought in many guest workers in recent years who, under harrowing circumstances, helped build the stadiums for the World Cup football, with which Qatar is now trying to shine internationally.
Read also: Is Qatar really that important to the Netherlands? And 7 more questions about the World Cup
Qatar itself is the laughing third. Thanks to the new European clientele, it becomes wealthy. Those European customers are so dependent on the emirate that they only moderate their criticism of the regime for human rights violations, for example, so as not to endanger energy security. European government leaders were under great pressure not to add luster to the Qatari football party with their presence. But the Dutch Minister of Sports Conny Helder (VVD) went anyway. She indicated that she would cheer appropriately if the Dutch national team scored in its first match.
Hard political criticism from the Asian countries has not yet come. But the development is triggering important economic and geopolitical shifts. While Europe tries to weaken and isolate Russia because of its war against Ukraine, India and Pakistan are now turning to Russia to buy more (liquefied) gas from it. Pakistan is trying to buy extra coal from the Taliban in Afghanistan, a regime the West sees as a threat.
The Netherlands also buys gas
Dutch companies also bought large quantities of LNG, the Netherlands is a major gas importer in Europe. In July contracted gas company Gasunie the first suppliers to supply the LNG terminal in Eemshaven, including Shell and the Czech CES. These companies will supply 7 billion cubic meters of LNG annually.
Asked whether Gasunie is aware of the consequences of European purchases for other countries and what it thinks of this, a spokesperson refers to Shell. “We only do the transport. Where the contracted parties get the gas from is their responsibility”. Shell does not answer the same question, but does report that it has not diverted any shipments to better-paying countries. “We will continue to supply LNG as agreed.”
The situation for the affected countries will not change very soon, says analyst Munton. Europe will also try to buy as much LNG as possible on the spot market next year, he expects, and hardly any extra production capacity will be added worldwide. That won’t happen until 2025 at the earliest, he thinks. “So this is going to hurt for another two years in Bangladesh.”
Professor Tamim also realizes this. His country has tried to buy extra gas from Qatar, “but they have refused”. “They said we can’t get more until 2025.” He does not blame European countries, but calls on them to assist Bangladesh financially. “We have little hope. It will be difficult to recover from this without the help of Europe.”
Member of Parliament Henri Bontenbal, responsible for the energy dossier for coalition party CDA, speaks of a “diabolical dilemma”. If Europe buys no LNG, or significantly less, prices here will skyrocket, he says. Helping other countries is a “difficult” matter. “If you help one country, you have to help other countries as well. And who causes those shortages? China does that just as well as Europe, so that country should also contribute. The market is tight worldwide. I don’t know if direct compensation is feasible.”
“It is another sign that the energy crisis is hurting on all fronts,” concludes Bontenbal. “Poor countries cannot afford gas, and we have to import ‘dirty’ gas from the United States or from other not-so-nice countries.” The American LNG, which Europe also buys in large quantities, is extracted via a controversial method fracking hot and which is very harmful to the environment. “I still think it is justifiable that we have started to import more LNG, but it does not relieve us of the obligation to move more quickly to a more sustainable energy supply. That is the only way out of this crisis.”