Energy Bangla - Anatomy of the Gas Crisis of Bangladesh

Bangladesh is floating on gas; this phrase had been notably pronounced by Unocal and other foreign oil companies as well as local experts including some BUET professors before seven years ago. Paradoxically, this predict has shaped in an abstract notion and domestic work to industry and agriculture are appearing on the crisis of gas. Aftermath, Petrobangla went against such pseudo statement and a national committee on gas utilization stated in 2002 a bleak future about gas crisis for Bangladesh from 2012.

Gas was first discovered in chattak. It used as a fuel in Chhatak cement factory in 1960 from the Chatak gas field marked its first commercial exploitation. It was fed to the first ammoniaunea grass-roots complex, NGFF at Fenchugonj in 1961.However natural gas was discovered in 1955 at Haripur (Sylhet gas field). M.Tamim remarks on his article “At the height of oil use, gas was not considered a valuable item at that time. It was treated as a by-product of oil production and was considered more as a nuisance than of any value. As a result, the best commercial use at that time was its household use.”

1960s was the remarkable landmark in the history of gas discovery. Shell Pakistan was pioneer on gas exploration of this region, discovered five major gas field including Titas and Habigonj. After independence, shell handed these fields to Bangladesh for mere 4 million pounds sterling. Gradually the commercial and domestic consumption of gas demanded rapidly instead of oil, most power plants, mills, factories and other industries were utilizing in this period. The exploration by international oil companies (IOCs) under production sharing contact was fashioned. The country was divided into 23 blocks . During the period of 1974-77, seven offshore exploratory wells were drilled with only one gas field discovery. In 1988, under new PSC 4 block were awarded to two IOCs who drilled 4 exploratory wells leading to the discovery of one gas field.

In the early 1990s the model PSC of 1988 was modified and 8 blocks have been awarded to four IOCs. During the 1990 exploratory drilling programme did not congregate the desired momentum in spite of the presence of IOCs. BAPEX the exploration company of PetroBangla has not undertaken any exploration drilling since 1997. IOCs have also slowed down their exploration drilling programme. Gas production has been increasing sharply over the last decades. While only 2.3 bcm of gas was produced in 1983−84, production grew to about 7.5 bcm (265 bcf) during1995−96. Gas production reached 9.4bcm (332 bcf) during 1999−2000 and 14bcm (500 bcf) in 2005.

The supply and demand gap of gas started in 1998 when Unocal discovered Bibiyana gas field. That period Bangladesh could not exploit gas because of less market demand. It was a short term excess on surplus. As a result, all IOCs in actual fact stopped exploration for any more gas expect the minimum work obligation of the contract to seize the most prospective acreage. According to PSC if a saleable discovery is made, petrobangla would have the first right of purchase and if they cannot purchase the gas, the IOCs can sell it to any local third party as the second alternative. In 2002 a gas utilization committee suggested that IOC should be allowed to export their share of gas from new discovery only. Separated from unrestrained and unplanned expansion of gas use, no other decision was taken in the ten years since 1998 to find new gas. The result is the leanest decade of gas discovery of Bangladesh.

Experts identified four major reasons for contemporary crisis: Choking bureaucracy, corruption culture, unequal deals and mismanagement are the major obstacles. They also put across the crisis over dependence on IOCs and negligence on modernization and capacity building the companies under Petrobangla and lack of coordination between Petrobangla and energy ministry. According to a report, the government's 'fast-track' gas exploration programme involving foreign companies drilling wells in state-owned onshore gas fields is walking lamely for bureaucratic mismanagement. State-owned Petrobangla sought EoI(expression of interest) from globally famed firms in September 2009 opening up for the first time the country's state-owned gas fields for exploration by foreign companies, although not having organizational cooperation between the energy ministry and Petrobangla is delaying the project from implementation.

Mohammad Zamir, Former Secretary and Ambassador expressed a pessimistic view about negligence of former govt. on development of energy sector. He comments “the focal problems of energy sector are confusion on statistics of proven gas and recoverable gas, system loss and corruption culture, lack of proper patronization , problem of traffic system, low price of utility elements , moreover not having political stabilization has complicated situation mostly devastating ,accordingly the foreign investors are feeling less interested to invest”. The question is emergence on financing and patronization of energy sector as exploration and operation of power plants are opting for huge amount money. A 1,000MW coal-fired power plant needs one billion dollar, a 1,500MW nuclear power plant requires 4 to 6 billion dollars, and one tcf of new gas will require a billion dollars for exploration and development. According to a report, the gas demand in 2012-13 would rise between 2,500 million cubic feet of gas a day and 2,873 million cubic feet of gas a day and in 2014-15 between 2,669 million cubic feet of gas a day and 3,087 million cubic feet of gas a day. In this circumstance, Dr. Khalequzzaman gives significance on exploration on Offshore and Onshore through IOCs and public companies, although assumes PSC should not contact in the contradicted attitude that might hold opposing views national welfare and interest .

The energy ministry has started gas holiday staggering for solving this uncertain condition, while representatives of Bangladesh Ceramic Ware Manufacturers Association (BCWMA) is opposing this. According to industry people and stake holders of ceramic industry, garments & knitwear manufacturers & exporters, textile mills, rationing will close down all ceramic factories as the manufacturing sector needs gas 365 days a year to keep production continuing and later ones enforced some units to close down their operations and many units remained virtually idle in the last few days due to low pressure in gas pipelines. According to BCWMA so far a total of 32 ceramic factories have been established with an estimated investment of Tk 2,500 crore. Sector leaders said Bangladesh is exporting handsome volume of ceramic products to Europe and American market. Ensuring adequate supply of gas instantaneously to their industries on a priority basis through signing a statement in January 19 was urged by Presidents of the Bangladesh Knitwear Manufacturers and Exporters Association, president of the Garment Manufacturers and Exporters Association and President of the Textile Mills Association to the government. Garment industry zones in Dhaka, Narayanganj, Chittagong, Ashulia and Savar had been affected rigorously by the inconsistent gas supply that stated in the statement. Supply of gas to labour-intensive export industries on a priority basis is the most realistic decision at this period, experts suggested. Industry people said gas supply was greatly hampering production in knitwear and denim sub-sector as those depend on gas-fuelled equipments for washing and dying. Gas shortage in dying and spinning units make their captive power generator idle, they said.

Current gas shortage in the capital and adjoining districts is around 150-200mmcfd as Titas supplies around 1,450mmcfd of gas against the demand for 1,600mmcfd. According to a report of the Independent the total gas shortage in the country is around 3000mmcfd as Petrobangla supplies around 1,980mmcfd of gas against the demand for 2,000mmcfd. The demand in the country is projected to reach a level of an average 2200 mmcfd in the 2009-2010. According to the Petrobangla, statistics of December 2009 show 91.55 MMCM gas was used in 500 CNG filling stations on an average while the total number of CNG-driven vehicles was estimated at 177555. Sources in the Petrobangla said they had been continuously making efforts locate new gas reserves to meet the growing energy demand of the country. Leaders of the CNG filling stations claimed business will be seriously hampered if this situation continues.

Chittagong region will come into a disastrous downturn if the Sangu Gas field is closed down in 2012. Gas production from sangu had slumped as low as around 35 mmcfd production from it’s average production from of 180 mmcfd during 2006, gravely affecting the supply situation across Chittagong. Despite setting up of the compressor of Sangu production from the country’s solo offshore field would not increase gas production; nevertheless the present production level can be continued. The Sangu field in the Bay of Bengal has produced in excess of 450 billion cubic feet while production started in 1998. Sangu was one of the largest discoveries in the 1990s while cairn was one of the first international companies start operating in Bangladesh. Apart from Cairn, the joint partners in the sangu field are Australian Santos and US based HBR energy. While the field started production in 1998, Petrobanla allowed Carin to maximize production as at that time the country was passing under gas shortage. If petrobangla was careful, it would not have allowed 160 mmcfd productions and would have settled for a conservative rate that would have given the field longer life experts opined. According to a report of The Financial Express, Cairn has already informed the government about the grim prospect of the offshore Sangu field following a lackluster months-long drilling in 2007.Cairn had informed the state-owned Petrobangla that the per day gas production from Sangu gas field would decline by 20 mmcf every year. Sources said Cairn Energy suffered a net loss of $82 million in fiscal 2006-07, after writing down the value of its Sangu field operations in Bangladesh.

The present power crisis is very closely linked with gas crisis, while 85% power generation is power based. Recently government has increased power tariffs by 6-7 percent on an average, trade & business bodies already expressed their dissatisfaction over the latest price hike of electricity will obviously hike the price of industrial as well as essential products. But BERC (Bangladesh Energy Regulatory Commission) Chairman Syed Yussuf Hossain said, “The new power tariffs have been fixed at rates much below the expectations of the state owned power entities”. Additional tariffs should be properly used for improvement of old power stations & new production of power, said Professor Anu Mohammad member secretary, National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports, Bangladesh and professor of economics from the Jahangirnagar University. The government is yet to take an initiative to solve the current crisis, however, we urgently need to make our manpower & technology efficient in considering initiatives for getting long term benefit from power sector rather excessive rely on IOC’s he added. Prof. Anu also urged for establishes a Power & Energy Research Institute for our scientists which will have a positive impact in the long run. Few years ago media ,stakeholders and general public demanded generation. Ironically, today there 600 MW generation that can not produce demandable power due to lack of gas supply.

Conversely, South Korean Oil Company GS Caltex is going to explore gas in Patuakhali that purchased 45 % interest of oil and gas block 7 from US oil giant ChevronChevron (previously Unocal and Occidental) has been the most successful foreign oil company in Bangladesh that is producing around 900 million cubic feet of gas from three gas fields Moulvibazar, Jalabad and Bibiyana (biggest discovery of chevron).In these three fields, Chevron has advanced around $ 920 million, which has already been recovered from gas sales. In 2006 chevron conducted a 1,000 kilometer line seismic survey in Moulvibazar and found at least three potential hydrocarbon zones. It embarked on further studies in 2008 for better understanding of the potentials.

The Titas gas company has started working on introducing prepaid meters for all consumers to systematize on utility and wastage energy. Even if, it has started inquiring industries using gas-fired old boilers and furnace to restore them with more energy efficient boilers and furnaces. Titas has made a technical committee that will consult the cost advantages of introducing prepaid meters. The country’s biggest gas distributor company has 14.58 lakh domestic consumers and 4443 industrial customers. Presently, domestic consumers daily use 150 million cubic feet (mmcfd) gas, while the country’s total gas consumption is around 2,000. The prepaid meters might not prevent domestic consummation from wasting gas as the price of gas is still low, but it might have significant outcome with commercial and industry users, thinks authority of titas

Bangladesh Development Forum -2010 paid attention mostly on country’s power and energy sector. Chris Austin, Country Director of Uk Department for International Development (DFID) and co- chair of Local Consultative Group told that Bangladesh Energy Regulatory Commission should be strengthened. He also said the World Bank, Asian Development Bank, Islamic Development Bank and Japan would invest in power and energy sector. The development partners suggested the government conduct a detailed audit to detect the huge wasted of power, energy and gas. Khurshid Alam, Secretary of Bangladesh energy regulatory commission is also thinking similar. He comments “although the power of commission has been strengthen, the action should more specific and empowered which are suggested by Donors in Bangladesh Development Forum -2010”.

Md. Mosharraf Hossain, Former Chairman of Petrobangla & Ex-acting Chairman of Bangladesh Energy Regulatory Commission (BERC) suggested in his writing utilizing the marginal gas fields which would have some possibilities. The concept of utilization of marginal gas fields have remarked as perfect instrument for satisfying consumers all over the world. The concept of marginal gas was started in Bangladesh late 1990s, unfortunately it did not formulate .BAPEX is prepared to start for the first time 3D dimensional survey in large national gas fields with in a couple of months which will provide a new dimension. Like Bapex, other seismic company should be followed the benefits of existing and marginalized gas fields. Indian experience can be mentioned here. Indian govt. took a number of financial incentives to operate marginal oil and gas fields. Indian govt. has proposed a pragmatic evaluation of the reserves in the marginal fields and transparent evaluation criteria with simple contractual terms. As per estimates, there are 165 marginal fields. Of this 39 have been monetized in domestic and 25 have been monetized in industry and commercial.

Mohammad Zamir considers that Private public partnership can play a significant role on development in energy sector and introducing of renewable energy would have solved the ongoing crisis. PPP projects and it’s implementation on energy and power sectors have been discussed in Bangladesh Development Forum -2010 and development partners have expressed their interest in this context. Renowned Economist and President of Bangladesh Economic Association Dr. Khalequzzaman do the focus on implementation of PPP in advantage of economic and infrastructural development. “PPP is new method of infrastructure financing which has been emphasized by both govt. and donors; nevertheless this is not practiced so vastly which might be possible. Consequently, it is very urgent to formulate policy and schemes for significant out come of PPP in energy, power and other sectors that would have reinforced awareness about it’s concepts and role among different government departments , corporate sectors , non-government organizations and above all public”, he adds.

Mohammad Zamir and Dr. Khalequzzaman express using renewable like solar power and biogas. Solar power is still globally the most costly solution but definitely a practical project. Dr. Khalequzzaman remarks “solar power is perfect for Bangladesh for it’s availability of power in rural areas”. Presently over 3, 00,000 household are using solar energy equivalent to 15 magewatts. Solar power have used in costal areas and hilly regions which have solved energy crisis. Coal is another important resource that remains unexploited. Mohammad Zamir thinks govt. needs to take proper steps on coal and adapt a policy. But Dr. Khalequzzaman emphasizes on implementation of comprehensive energy policy and development of PetroBangla and BAPEX structurally and technologically. Prof. Anu Mohammad concerns about national interest, he suggests “we will have to safe our national interest first, whether we take initiatives for exploration & production through PPP or PSC with IOC’s”. We will have to more cautious when we will take decisions for exploration and production of power to uphold national interest and safeguarding our future needs.