Uncertainty over gas supply dims prospect of Tata investment plan

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M Azizur Rahman
The country's mounting gas crisis has dimmed the prospect of Indian business conglomerate Tata's gas-based US$3.0 billion investment proposal getting a positive response from the government.
"The Energy and Mineral Resources Division (EMRD) is now not in a position to issue gas supply guarantee to Tata, which will require 2.14 trillion cubic feet (TCF) of gas to run its proposed projects in Bangladesh," a senior EMRD official told the FE Monday.
In its investment proposal, Tata sought gas supply guarantee for loan period, which would be between 10-14 years, especially to run its proposed steel and urea fertiliser projects at the rate of 200 million cubic feet per day (mmcfd).
Pointing to the gas crisis the EMRD official said though the country's gas supply capacity rose over 60 per in the last six years from 1,050 mmcfd in 2001 to 1700 mmcfd in 2007 the EMRD is now struggling to supply gas to the local consumers.
The looming uncertainty over future gas reserves has forced the incumbent government to consider gas import from neighbouring Myanmar, he said.
The Power Division could not sign initial agreements with three bidders for setting up three small power plants (SPPs) having the total electricity generation capacity of over 40 megawatts (MW) last week only due to gas supply constraint.
Despite completion of all necessary processes the power division could not sign the deals as the state-owned Petrobangla expressed its inability to supply gas to the power plants to generate electricity, a senior Power Division official said.
He said at least 250 MW of electricity generation is now being hampered across the country due to gas supply constraint.
Gas production from the country's lone offshore Sangu gas field has been declining at an alarming rate, resulting in huge gas scarcity in the Chittagong region.
Gas production from Sangu reached its lowest-ever 70 mmcfd, which is less than half of its last year's production of 159 mmcfd.
Sangu's operator the Scottish Cairn Energy has already cautioned the government about possible drying up of the reserve within next four years.
To feed the mounting gas demand in Chittagong the incumbent caretaker government is now weighing up the option of the country's first-ever attempt to import gas.
A high-powered Myanmar delegation is set to arrive next month to discuss the gas import issue from Myanmar.
If everything goes smoothly Bangladesh will import gas from Rakhine state of neighbouring Myanmar through pipeline initially for consumption of the Karnaphuli Fertilizer Company Limited (KAFCO), an export oriented international joint venture Fertiliser factory owned by Bangladesh, Japan, Denmark and the Netherlands.
The KAFCO, which has a capacity to produce 1,727 tonnes of urea and 1500 tonnes of ammonia fertilizer per day, has recently taken up plan for increasing its production capacity by 55,000 tonnes per year.
The fertilizer factory is located at Rangadia in Chittagong just alongside the Karnaphuli River, around 200 kilometres off the Myanmar border.
Gas to the tune of at least 100 mmcfd will be required for KAFCO to fuel its increased fertilizer production.