NBR upsets Petrobangla's move to set up gas development fund
Wednesday, 3 June 2009
M Azizur Rahman
The creation of a gas development fund to boost hydrocarbon exploration and augment production by state-owned gas companies has faced a setback due to the apathy of the National Board of Revenue (NBR), officials said Tuesday.
The NBR has turned down the Petrobangla's proposal to exempt the proposed fund from taxes, frustrating the energy ministry's move to expedite oil and gas hunt to ensure the country's future energy security.
The state-owned Petrobangla would not be able to create the fund without getting it exempted from taxes as the concerned ruling from the Bangladesh Energy Regulatory Commission (BERC) has made it mandatory, a senior energy ministry official said.
The commission in November 2008 asked the Petrobangla to create the fund from gas sales as a pre-condition for raising gas tariff by 10 to 15 per cent.
It also set May 2009 as the deadline for Petrobangla to get the proposed fund tax-exempted by the NBR.
The commission also sought a detailed and strategic plan from the Petrobangla regarding how it would expedite oil and gas exploration and augment production utilising the proposed gas development fund.
Petrobangla in June 2008 applied to the commission for allowing it to increase gas prices by over 65 per cent for the consumers of different categories including household, power and fertiliser plants and industries.
On completion of a public hearing the commission imposed a condition for raising the gas tariff, which says that Petrobangla would be allowed to increase gas price by 10 to 15 per cent if it creates a fund with the money, which will come from the increased price of gas.
The fund - gas development fund - must be used exclusively for gas exploration and production, the commission stated.
"We have submitted a plan to the BERC detailing the future gas exploration and production targets with the proposed fund," Petrobangla Acting Chairman M Muqtadir Ali told the FE Tuesday.
As the NBR did not respond positively the Petrbangla failed to get the proposed fund exempted from taxes, the Petrobangla top brass said.
The NBR officials were, however, not available for comments.
Energy experts said the creation of the gas development fund was necessary to improve the country's ailing energy sector.
"The country could not carry out significant oil and gas exploration activities over the past decade only due to lack of sufficient funds," said Professor M Tamim of Bangladesh University of Engineering and Technology.
Though the state-owned Bangladesh Petroleum Exploration and Production Company Ltd (BAPEX) got an allocation of Tk 35 billion last year, it would not be enough to carry out sufficient exploration works, Tamim, who was a special aide to the Chief Adviser of the previous caretaker government, said.
Due to insufficient fund allocation to the local companies their shares in the country's total gas output fell drastically over the past years compared to those of the international oil companies (IOCs).
In 2004 local companies shared around 76 per cent of the total gas output, whereas the IOCs only 24 per cent.
Currently the IOC's gas output reached over 51 per cent of the country's total generation of around 1900 million cubic feet per day (mmcfd), while the state-owned companies are producing around 49 per cent of the total production.
The country is now reeling from an acute gas crisis as the demand is hovering around 2150mmcfd.
Scores of industries remained shut and several gas-fired power plants closed due to inadequate gas supplies.
The government had to cut gas supplies to three fertiliser factories to cope with the short supply of natural gas.
The creation of a gas development fund to boost hydrocarbon exploration and augment production by state-owned gas companies has faced a setback due to the apathy of the National Board of Revenue (NBR), officials said Tuesday.
The NBR has turned down the Petrobangla's proposal to exempt the proposed fund from taxes, frustrating the energy ministry's move to expedite oil and gas hunt to ensure the country's future energy security.
The state-owned Petrobangla would not be able to create the fund without getting it exempted from taxes as the concerned ruling from the Bangladesh Energy Regulatory Commission (BERC) has made it mandatory, a senior energy ministry official said.
The commission in November 2008 asked the Petrobangla to create the fund from gas sales as a pre-condition for raising gas tariff by 10 to 15 per cent.
It also set May 2009 as the deadline for Petrobangla to get the proposed fund tax-exempted by the NBR.
The commission also sought a detailed and strategic plan from the Petrobangla regarding how it would expedite oil and gas exploration and augment production utilising the proposed gas development fund.
Petrobangla in June 2008 applied to the commission for allowing it to increase gas prices by over 65 per cent for the consumers of different categories including household, power and fertiliser plants and industries.
On completion of a public hearing the commission imposed a condition for raising the gas tariff, which says that Petrobangla would be allowed to increase gas price by 10 to 15 per cent if it creates a fund with the money, which will come from the increased price of gas.
The fund - gas development fund - must be used exclusively for gas exploration and production, the commission stated.
"We have submitted a plan to the BERC detailing the future gas exploration and production targets with the proposed fund," Petrobangla Acting Chairman M Muqtadir Ali told the FE Tuesday.
As the NBR did not respond positively the Petrbangla failed to get the proposed fund exempted from taxes, the Petrobangla top brass said.
The NBR officials were, however, not available for comments.
Energy experts said the creation of the gas development fund was necessary to improve the country's ailing energy sector.
"The country could not carry out significant oil and gas exploration activities over the past decade only due to lack of sufficient funds," said Professor M Tamim of Bangladesh University of Engineering and Technology.
Though the state-owned Bangladesh Petroleum Exploration and Production Company Ltd (BAPEX) got an allocation of Tk 35 billion last year, it would not be enough to carry out sufficient exploration works, Tamim, who was a special aide to the Chief Adviser of the previous caretaker government, said.
Due to insufficient fund allocation to the local companies their shares in the country's total gas output fell drastically over the past years compared to those of the international oil companies (IOCs).
In 2004 local companies shared around 76 per cent of the total gas output, whereas the IOCs only 24 per cent.
Currently the IOC's gas output reached over 51 per cent of the country's total generation of around 1900 million cubic feet per day (mmcfd), while the state-owned companies are producing around 49 per cent of the total production.
The country is now reeling from an acute gas crisis as the demand is hovering around 2150mmcfd.
Scores of industries remained shut and several gas-fired power plants closed due to inadequate gas supplies.
The government had to cut gas supplies to three fertiliser factories to cope with the short supply of natural gas.