Poor hydrocarbon exploration lingering gas supply shortage

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M Azizur Rahman
Insufficient hydrocarbon exploration by foreign firms and state-run gas entities over the years are lingering the country's natural gas supply shortage despite having sufficient reserves, industry insiders and experts said.
The country passed the leanest decade of gas discovery in its history as the consequence of the inadequate exploration, they said.
During 2001-2010, Bangladesh discovered only one new gas-field - the Tullow-operated Bangura in 2004, with reserves of only around 500 billion cubic feet (Bcf).
The Bangura discovery was made six years after the previous discovery of Chevron's Bibiyana gas-field in 1998.
But the country has a significant quantity of undiscovered gas, as the Hydrocarbon Unit (HCU), an entity under the energy ministry, has revealed in last November that the country now has an estimated 28.2 trillion cubic feet (Tcf) of recoverable gas reserves, a senior HCU official said.
The HCU's reserve estimation is 38 per cent up from a 2003 estimate of 20.5 Tcf. The US Geological Survey (USGS) estimated Bangladesh's total undiscovered resource potential to be about 33 Tcf over a decade ago in 2000, he added.
However, it has been alleged that the governments did little to turn this substantial gas reserves into resources.
Meanwhile, the country inked the latest production sharing contract (PSC) with the US-based ConocoPhillis on June 16, 2011, one decade after the previous PSC signing with British Shell Oil and Cairn Energy in July 2001.
"The country requires necessary exploration and drilling activities to increase its overall natural gas output," said Professor M Tamim, who was a special assistant to Chief Adviser of the previous caretaker government.
Tamim said there is no alternative but to offer more contracts to international oil companies (IOCs) to accelerate exploration and drilling activities to ensure the country's future energy security.
He noted that the state-run firms have financial and technological constraints, reflected in their poor performance in augmenting natural gas output during the past one decade.
According to the Petrobangla, gas production from the state-run fields increased only by around 20 per cent from 814 million cubic feet per day (mmcfd) to 975 mmcfd over the past decade since 2001.
On the other hand, the IOCs' share in the country's overall gas production has increased by over five times, from an average 214 mmcfd in 2001 to 1,087 mmcfd as on January 24, 2012.
The IOCs' gas was only 24 per cent of the total gas output in 2004, when their average output were 300 mmcfd, while the state-run companies' output were 939 mmcfd.
The IOCs' share increased to 36 per cent in 2007 with their output reaching 557 mmcfd in the countrywide total output of 1,530 mmcfd. Currently their overall gas output is 52 per cent of the total output of around 2,060 mmcfd.
"The government should offer competitive packages to woo the international oil companies and involve them increasingly in developing the country's gas sector," Tamim said.
"I do not know what the government is considering in terms of the fiscal structure for the future license rounds. But I believe that the PSC structure with gas prices set by the market is probably a good starting point," President of Santos Bangladesh John Chambers told the FE.
"I believe that if the fiscal terms are acceptable, the IOCs will invest here," he said.
No other country in Asia with petroleum potential is in the similar position to Bangladesh, as elsewhere the benefits of using private investment for the high-risk exploration sector have been understood and accepted, he said.
Santos is the operator of Bangladesh' sole offshore gas-field Sangu, which lies in block 16 of the Bay of Bengal.
Gas production at Sangu has seen a dramatic 94 per cent drop to a dismal 13 mmcfd during the last five years.
The IOCs are now operational in eight gas blocks - five onshore and three offshore.
The US-based Chevron has PSCs for onshore blocks 7, 12,13 and 14, Irish Tullow Oil has onshore gas block 9, ConocoPhillips has deepwater offshore blocks DS-08-10 and DS-08-11, and Santos has shallow water block 16.