Can Bangladesh Afford to Export Gas ?

by 
Golam Mokarram

(Published in the "Daily Star" on May 10, 2000)

Bangladesh is a least developed country (LDC) with a per capita income of US $386. Its economy largely depends on the agricultural sector though employment in this sector has almost reached a saturation point. It is a riverine country and most of its land is plain. This, in turn, helps produce various types of crops. Farmers of this country mostly used biological fertiliser in the production process till the fifties. Then the situation started to change with revolution in the agricultural sector - per acre production of crops increased four/five times against previous level with the use of chemical fertiliser in the farmland.

But Bangladesh is still not self-sufficient in food production and every year it imports food spending hard earned foreign currency. The present foreign currency reserve of the country is less than three months' import bill. This in turn has created an undue pressure on the country's forex reserve. Pressure on the foreign currency reserve could only be eased if the country could become self-sufficient in food production. It can easily multiply its food production by increasing the use of chemical fertiliser and developing agro-based industries.

Gas, that was not discovered till 1950s, can now help to produce fertiliser. The country used to import fertiliser on a limited scale. Gas way first discovered in Sylhet district in mid 1950s. The Price of oil was six-seven times higher than that of gas the country, all power production centres used oil for generating power. Before discovering gas field in for generating power.

The only exception was Kaptai Hydel Power Plant that naturally, used water for power generation. Fenchuganj fertiliser factory was set up in the early 60s. It used natural gas as raw material supplied from Haripur gas field.
Moreover, a power plant was set up in Shahjibazar to sue gas as fuel. However, the country at a later stage had to set up some big power and fertiliser plants. The manifold use of chemical fertiliser helped increase food production. Besides, the country's power plants started to use gas instead of oil that in turn saved hard currency.

For over 40 years Bangladesh Petroleum Exporting Company (Bapex) has been involved in exploration of gas with local experts. It is learnt that most of the experienced engineers and geologists at Bapex have been transferred to different ministries. Petrobangla reportedly, does not even have the necessary resources to properly negotiate deals on oil and gas sectors with multinational companies. This also has hampered the process of exploration of new gas fields by Bapex.

Exploration of gas by foreign experts are three/four times more expensive than by local experts. According to contract with Sangu, the company will get 79.20 per cent of the explored gas and the government of Bangladesh will only get the remaining 20.8 per cent which is an obscenely uneven treaty.

Meanwhile, lack of government funding has stopped exploration activities of Bapex in Salda-2 gas field. Bapex struck a small gas field in Salda river area under Kosba thana near the Indian border in early 1996. The government gave it funds last year to drill the second well, and Bapex succeeded in striking gas also in the second well in November last. The government on a priority basis should explore gas fields near the Indian border.

US oil company Unocal has reportedly revealed its plan to lay an under-water natural gas pipeline from Bangladesh to Andra Pradesh in India and another surface pipeline to Delhi through Calcutta. Unocal is operating in blocks 12, 13 and 14 in the country and is negotiating for the controversial Western Region Integrated Project (WRIP) that seeks to set up a gas pipeline up to the Kushtia border. Unocal has proposed this US $700 million project to the government to set up gas pipelines in the western and southern parts of the country. It is learnt the project could be completed with $200 million engaging local energy experts.

The US company is planning to set up three power plants in India. The first one is a 200 MW liquid hydrocarbon/gas based power plant in Bidadi, Kartataka. The second one is a consortium selected by Tamil Nadu Industrial Development Corporation to develop a 1800 MW power plant and 2.5 million tonne LNG facility at Ennore. Lastly, Unocal is partnering Maytas and IJM of Malaysia to develop the Gautami 359 MW power project in Kakindada, Andhra Pradesh. The question remains that if Unocal can set up power plants in India why it cannot set up the same in Bangladesh.

Bruce Memullen a senior energy adviser to the US mission in Dhaka, reportedly said Bangladesh could gain more by exporting gas through pipeline to India. He however, regretted the 'over-politicisation' of the gas issue. "The gas issue should be dealt with economically, not politically", he maintained. On the petro-chemical option of gas use, Bruce Memullen said the development of petro-chemical complex involves a huge investment and at this stage no US company is likely to be interested in involvement in such a huge investment project.

Natural gas is the prime mineral resource of Bangladesh. Power crisis has gripped the country. Most of the power plants under PDB in the country are old and dilapidated, and need major reforms. Industrial, production is being hampered by power crisis. Readymade garment (RMG) industry, the largest export earner of the country, is incurring losses to the tune of millions of Taka due to regular load shedding. But we can depend on gas at least.

To improve the power situation the government permitted some entrepreneurs to set up barge-mounted power plants to meet the growing demand in the country. However, Chairman of Khulna Power Company (KPCL), a private sector power development company, in an interview maintained that unless PDB can cut its existing 40 per cent system loss, the investment in the power sector will be limited as entrepreneurs are concerned about the Board's ability to pay the power companies. PDB is incurring huge losses every year as mismanagement, corruption and system loss have gripped the organisation. The cost of power production can be reduced if the power plants use gas instead of oil.
Foreign oil companies have been pursuing Bangladesh government to permit export of gas to India over the years. During the US President Bill Clinton's Bangladesh visit Prime Minister Sheikh Hasina said that he government would only consider the matter of exporting surplus gas after ensuring 50 years of reserve. For that purpose, the country needs to measure the total reserve of natural gas. Bill Clinton, however, reportedly proposed to send a team of energy experts to conduct a survey on gas reserve in the country.

New England Power Company (NEPC), a private sector power developer, has set up a barge-mounted power plant in Haripur under Narayanganj district. It has times urged the Titas Gas Transmission and Distribution Company to supply gas to its plant as that will help reduce the cost of power generation. It is learnt that its per unit generation cost of power is Taka 2.25 which can be reduced to Taka 1.75 per unit should gas be used in power generation.
The Haripur barge-mounted power plant was presumed to receive gas under a pressure of 375 PSIG (per square inch gas). Existing pipeline of Petrobangla has a gas pressure of 600 PSIG. Reportedly, a compressor worth 6.17 million US dollars is needed to convert 600 PSIG to 375 PSIG. This processing is a matter of three months. For mysterious reasons the energy ministry wants that the gas pressure be first reduced to 150 PSIG and then it should be raised to 375 PSIG. The NEPC could not understand the reasons behind the double exercise of the energy ministry which is not only time-consuming but also costly. Till date the power plant has not received the gas.

Foreign companies involved in gas exploration are propagating that Bangladesh has a huge reserve of gas and it can
improve its present economic status by exporting gas. Some politicians and bureaucrats are also advocating for export of gas to the neighbouring country without thinking about the interests of the country. They perhaps never thought that gas based industries and power plants are most likely to shut down should gas reserves exhaust. Though exact measuring the existing gas reserve is not possible right now according to some experts, it not wise to go by the speculated prospect of export earning only.

The United States exports oil, gas and coal after keeping reserve of oil for 30 years, gas for 65 years and coal for 250 years for its own use. According to a seminar report of the Bangladesh Engineer's Institute, with the existing reserve of gas, Bangladesh can only meet two decades' demand.

Nigerian politicians and bureaucrats leased out its oil and gas fields to multinational companies overlooking national
interests and allegedly siphoned off million of dollars to foreign banks in the process. The country is cited as one of the most corrupt nations and is at present plagued by poverty, hunger, famine, etc.

The present total gas consumption in Bangladesh stands at around 1,000 million cubic feet per day (mmcfd). It is expected that gas demand would rise up to around 1300 mmcfd in 2005 at the present rate of consumption. Though Bangladesh has a vast natural gas deposit, per capita consumption of energy is still one of the lowest in the world - only 65 kgms of oil equivalent (kgoe) compared to Pakistan's 243 kilo and India's 255 kilo. So the prudence is in the adage "Look before you leap".

The writer is former Chief Engineer of Bangladesh Chemical Industries Corporation (BCIC)