Two contradictory reports appeared in the FE the same day this week. One of the reports says the country will not afford to have any more gas-fired power plants due to dwindling supply of the natural gas. The other report states the state-owned gas exploration company BAPEX is failing to utilise its nearly one trillion cubic feet of gas reserve from the Shahbazpur field in Bhola due to lack of consumers. Two wells are ready to go into commercial operation there, but there are no consumers! It is really hard to believe.
Special Assistant to the Chief Adviser, Professor M Tamim, said sometime ago that no new gas-fired power projects would be considered for implementation due to short supply of gas. With such a stand, uncertainty shrouds over the government's plan for promoting speedy industrialisation. Mr Tamim is now blaming lack of skilled manpower both in gas and power sector as the main reason for years of failure in augmentation of electricity generation and gas production. But is he on the right track?
During the past 10 years, the country could discover only one gas field at Bangura with reserves of only 500 billion cubic feet. As such, the present government is now thinking about gas import. In order to boost gas production by state-owned companies, the government recently allocated Tk 350 billion to Bangladesh Petroleum Exploration and Production Company Ltd (BAPEX) to help expedite its operation.
Very recently, Petrobangla developed two wells at Shahbazpur field for gas production. But astonishingly, there is no consumer for the gas. About eight years ago, the Power Development Board (PDB) sought gas from the Shahbazpur gas field for their proposed 150-megawatt (MW) gas-fired power plant in Bhola. But the power plant is yet to be set up and as such, there is no consumer. Petrobangla did not install gas transmission lines from the gas field to areas outside Bhola as it is not viable for pipelines to be set up across a number of rivers encircling the island.
The country has a shortage of about 100mmcfd as Petrobangla supplies about 1730 mmcf of gas to the consumers against the demand for over 1800 mmcfd. The present proven reserve of natural gas is about 8.40 tcf. This is likely to be exhausted by 2011 at current rates of consumption. If proven and probable reserves of around 14.4 tcf is taken into consideration, the country's gas stock will then exhaust by 2015.
Meantime, experts have also pointed out that the equation of demand and supply regarding gas has worsened and will continue to deteriorate further due to the alarming decline in gas production in a number of gas fields. The supply shortfall scenario has also assumed a greater seriousness in view of the fact that the country will need a further 24 tcf of gas worth US$ 7.7 billion over the next 18 years to achieve a moderate annual growth at 7.0 per cent.
Based on Petrobangla statistics, Bangladesh discovered about 21 tcf of natural gas so far, of which roughly 12.6 tcf can be produced and used for the country's benefit. So far, the ongoing exploration has discovered at least five to six tcf in new recoverable reserves. As such, total recoverable reserves at this point are over 15 tcf. If 10 per cent annual growth in domestic consumption is assumed, the reserves should last for 17 years.
These figures and calculations of Bangladesh's reserve to production ratio are on the conservative side. They do not take into account any of the reserves that might be discovered in the blocks included in the second and third gas bid rounds. In addition, industry experts believe that Petrobangla's estimates of recoverable reserves may be low and that an evaluation using the newest technology would reveal that these reserves might be largest than what is now stated about it. They suggest that Petrobangla should commission an independent study of existing drilling data, and production and depletion rates to determine a new estimate of recoverable reserves.
Given the uncertainty about the quantum of the gas resource base, a major issue of public policy is whether a nation as poor as Bangladesh should take the risks necessary to significantly enhance gas production. Gas underneath the ground is not wealth; it is only a potential asset that must be converted into an economic good that can be bought and sold. For it to become a marketable good, someone must risk the capital to discover the gas, develop the field, and put in place the associated infrastructure. These are highly capital-intensive endeavours.
The bottom line is that for Bangladesh's gas reserves to be developed and contribute to the country's growth, they must have a market either domestic or foreign that will generate foreign exchange to pay private investors. There are still other issues to be addressed in developing Bangladesh's gas sector. One very pertinent issue here is the role of government. The attention is focused on private investment in this connection since that is the only realistic source of the capital and technology needed to develop Bangladesh's gas industry. But the country must compete with other nations for investment and, to succeed, must establish a constructive business environment.
So far, the government could not rid the gas distribution companies of corruption and other irregularities and hence wastage of gas in domestic and industrial uses is a perennial problem. Mismanagement has also slowed the launching of the proposed metering system. The government must ensure proper distribution of the country's precious resources such as gas and facilitate its further exploration in order to find new reserves.
szkhan@thefinancialexpress-bd.com
