Exploration of Begumganj gas field under joint venture project

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M Azizur Rahman
The Petrobangla has endorsed a Tk 3.0 billion development project proposal (DPP) to explore the Begumganj gas field by three state-owned gas companies under a joint venture.
In the DPP, the participating companies in the joint venture have proposed to sell Begumganj gas at Tk 109 per unit (1,000 million cubic feet per day), which is less than half of the rate of the international oil companies (IOCs) but 15-times higher than that of the state-owned BAPEX.
Currently, the IOCs sell gas at around Tk 250 per unit, while the Bangladesh Petroleum Exploration and Production Company Ltd (BAPEX) sells gas only at Tk 7.0 per unit.
"The special tariff structure has been proposed to ensure that the country's first-ever local joint venture project in the energy sector becomes financially viable," a senior BAPEX official told the FE.
A committee comprising representatives of the three stakeholders of the joint venture- Bangladesh Gas Fields Company Ltd (BGFCL), Sylhet Gas Fields Ltd (SGFCL) and Bangladesh Petroleum Exploration and Production Company Ltd. (BAPEX) - has proposed the gas tariff.
Refusal on the part of the National Board of Revenue (NBR) to accept a proposal to exempt supplementary duty (SD) and value added tax (VAT) for the Begumganj project has prompted the joint venture companies to fix the special tariff for its gas, said a top Petrobangla official.
The Petrobangla several months back sought SD and VAT exemption for the joint venture project in line with such facilities granted to the IOCs.
The provision for such exemption has been included in the production sharing contracts (PSC) signed between the Petrobangla and the IOCs, a senior NBR official said.
Unlike the tariff structure of other state-owned gas companies the joint venture project would enjoy reduced margin payable to Petrobangla for enhancing its profitability as per the DPP.
This special tariff structure to develop the Begumganj gas field will, however, not affect the gas tariff offered to the end users, he clarified.
Under the joint venture agreement (JVA) among the joint venture partners, the Begumganj gas-field's development will be in two phases, each requiring an investment of Tk 1.50 billion.
The joint venture will initially develop the field at an investment of Tk 1.50 billion for gas production.
It will then go for further exploration at an investment of Tk 1.50 billion.
Each of the three companies will have equal share in the venture, with the BGFCL and the SGFCL chipping in Tk 15.0 million each from their own coffers, while BAPEX will be the working partner.
The Begumganj gas field is the first among the gas fields discovered by the Petrobangla.
The Petrobangla discovered the gas field in 1977 with a proven gas reserve of 50 billion cubic feet (BCF), Petrobangla sources said.
But the energy officials are now optimistic that the reserve could be over 400 BCF.