$266m ADB loan approved to help fund gas supply project

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FE Report
Asian Development Bank (ADB) has approved a $266 million loan for Bangladesh to help finance a major gas supply network expansion project that aims to improve distribution of hydrocarbon in the country now reeling under energy crisis.
Officials said the ADB Board of Directors on Friday last approved the loan for Bangladesh Natural Gas Access Improvement Project to help build new gas transmission and distribution pipelines and expand supply to less developed areas in the southwest.
A $261 million equivalent loan will be provided from ADB's ordinary capital resources, and a further $5.0 million equivalent from its concessional Asian Development Fund, they added.
"The project is to establish a network with an improved pressure capacity as well as ensure supply in the underprivileged areas of the country to spur the country's economy," said an official of local ADB office.
He said the approval of the fund may not have any direct link to bring any change in the current gas crisis, but it is expected to provide support to the government's comprehensive gas sector reform road map to improve the country's gas exploration and development.
Bangladesh's reserves of natural gas provide about 70 percent of its total primary energy supply and fuel 85 percent of its power generation. But the existing gas transmission and distribution infrastructure have kept little pace with new investment in gas exploration and the development of new fields.
According to official website, the $542 million Bangladesh Natural Gas Access Improvement Project, the priority project of the government, envisages installation of compressors and metering systems to boost reliability, improve safety, and strengthen the management of gas supply and demand.
"This project will address priority supply and network constraints to ensure sustained growth in the gas sector that is critical to the country's economic development," said Priyantha Wijayatunga, Energy Specialist in ADB's South Asia Department in a statement posted on the ADB website.
The state-owned Petrobangla, Gas Transmission Company Ltd, Bangladesh Gas Fields Company Ltd, Sundarban Distribution Company Ltd, and Titas Gas Transmission and Distribution Company Ltd will act as the executing agencies for the project to be completed in March 2015.
About 200,000 new households in the southwest, along with 1,400 industrial and commercial establishments, will receive gas as a result of the expanded distribution network. An investment programme to promote energy-efficient gas use will be drawn up, and training and support will be given to sector agencies.
As part of the project, Sundarban Gas Co Ltd, a newly formed distribution affiliate of Petrobangla, will enter into contracts with private firms for the operation, maintenance, metering and billing of gas supplied to consumers in the southwest from 2012.

Korea Eximbank will provide a loan of $45 million for the transmission expansion phase, while the government of Bangladesh will provide $231 million equivalent in equity and loans.
ADB's loan, from its ordinary capital resources, has a 25-year term, including a grace period of five years, and interest determined in accordance with its LIBOR-based lending facility.
The Asian Development Fund loan has a 32-year tenor, including a grace period of 8 years, with interest set at 1.0 per cent during the grace period and 1.5 per cent for the rest of the term.