Prospects bleak for manufacturing growth, export promotion
Abul Quasem Haider | Friday, 20 June 2008
A survey that was conducted in 2000 estimated the reserve of extractable gas from the 20 fields so far explored in Bangladesh at 13.8 trillion cft. From the reserve, 3.3 trillion cft has in the meantime been extracted. According to gas demand forecast of Petrobangla made in 2000, if any new field is not explored, the present reserve will be exhausted within 2015.
At present gas is a great problem for Bangladesh. A great setback, as it seems, is ahead of us in gas sector. The demand for gas is increasing every day but production is not increasing in commensurate with demand. And consequently, the deficit of demand is increasing. If the demand increases continuously and new fields are not explored, it is feared that the deficit will be manifold in the next year. According to the consumption report of Petrobangla, the daily demand of the country is 9.0 billion cft. As against this, the daily production capacity is 1.80 billion cft., leaving a deficit of 200 million cft every day.
Electricity is produced by gas. Production of electricity is being hampered owing to shortage of gas. The production of electricity in the country is less than the requirement by about 500MW per day on average. Meantime the government has imposed restriction on gas supply. In Narayanganj area, gas supply has, thus, been restricted. It has become too difficult to get new gas connection for the mills and factories. Businesses have been pointing out that the existing industries are also not getting uninterrupted gas supply. Due to shortage of gas, implementation of gas-based projects has been postponed. The government is not allowing any new gas-based industry in this area, As a result, establishment of new industries has become uncertain. Power Development Board (PDB) has a plan to build up a few gas-based power plants in Chittagong area. But Petrobangla has expressed its inability to supply gas for those plants.
Seventy per cent of the total production of gas is being used in power plants and fertiliser factories. As per report of Petro Bangla, demand for gas by the power plants was 852 million cft. on June 03, 2008 against which 672 million cft. was supplied, leaving a deficit of 180 million cft. The demand of fertiliser factories was 289 million cft. but the actual supply was 225 million cft., leaving a deficit of 84 million cft.
Although information regarding gas consumption of power plants and fertiliser factories was available in the website of Petrobangla but no information was there regarding gas-based mills and industries. But allegations are there to the effect that the pressure of gas goes down alarmingly during peak hours in the mills and industries and the problems are becoming acute gradually. Due to shortage of gas, the production in the mills and industries in Dhaka, Chittagong and also other places of the country is being hampered. The government, however, confirms that new gas connections to mills and industries have not been stopped but connections are being allowed on a priority basis to avoid any misuse. But in reality, it is seen that government is not allowing any gas connection to any new mills and industries.
In 2000, gas was extracted from 20 gas fields but at present extraction is being done from 18 gas fields by both Bangladeshi entities and foreigners. The existing production capacity of these fields can in no way be enhanced in accordance with demand. The rate of supply of gas from these fields is determined on the basis of reserve, pressure and other technical points. Any attempt to raise the rate of extraction of gas from the fields by force may result in fatal damage to the gas fields. So, there is no alternative to exploration of new gas fields.
During the last 10 years, the rate of exploration of new gas field is negligible. Only one gas field has been explored during the period at Bangura by a foreign company named Tullow. It is a very small field, having a reserve of only one third of one trillion cft. A survey report of Petro Bangla notes that the extractable reserve of gas in the country is about 9.0 to 10 trillion cft. Counting on present demand this reserve can meet the needs until the period between 2015 and 2020. If the growing needs are met, the reserve will not last until 2020. If we want to make Bangladesh a middle income country within 2021, extensive industrialisation will be required but we do not have that much reserve of gas to establish the needed number of gas based mills and industries to support the growth of the industrial sector at an accelerated pace. We also do not have the capability to produce electricity to that extent.
In the national budget for 2007-2008, Petrobangla had 23 projects under the Annual Development Programme (ADP). Of them, only three projects were earmarked for evaluation of gas field at Shahbazpur of Bhola district, exploration of gas field and enhancement of production of gas. So, a power plant is being established at Bhola. Arrangement is being made for supply of gas to the power plant. There is still doubt whether it will be possible to supply the necessary quantity of gas in time. The second project is digging of well for exploration of gas and oil at Mubarakgonj. The well has not yet been dug. However, tremor survey work has been completed. It may, however, be possible to dig the well in the next fiscal year. The third project is digging of well at Kapashia for exploration of gas. But it is learnt from mineral and oil resource department that a revised decision has been taken to dig well at Shemutang, instead of at Kapashia. If gas reserve is found at Shemutang, it will help, to a great extent, solve the gas problem of Chittagong, the mineral and oil resource department thinks.
To overcome the acute gas deficit problem, Petrobangla did not take up any project worth mentioning during the last 10 years. The last two governments did also not take any effective steps to explore new gas field and to increase production of gas. On the other hand, Petrobangla is buying gas from foreign companies at a higher price and selling the same at a subsidised rate and, thereby, incurring huge financial loss. The foreign companies have in the meantime increased their production, al beit marginally, and the severe supply crisis pursuit. Financial solvency is required to explore gas field and increase production at the initiative of the government. Petrobangla has requested the Ministry of Finance to sanction Tk. 30 billion (3,000 crore) to overcome its acute financial crisis.
In reply to a query as to what action is being taken by Petrobangla to meet the future demand for gas, the chairman, Petrobangla was reported to have noted that necessary initiative is being taken to explore oil from the Bay of Bengal. After completion of evaluation process of the tenders, blocks will be allotted to the selected bidders. It is expected that the survey work at spot will start by October next. According to the Petrobangla chairman, if gas is found in the sea bed, it will take more or less seven years to supply it to the national grid. So, consequent upon time factor, we have to depend on the existing fields on land until extraction of gas starts from the sea bed. Necessary steps, as the Petrobangla chairman noted, have been taken to increase production by 60 million cft. within the next few months,
In this connection, Prof. M. Tamim, Special Assistant to the Chief Adviser, and in-charge of oil and mineral resource ministry, has said that there will be no shortage of gas until 2020. We have sufficient reserve to meet the demand for the period. Shortage of supply is, however, there which is the cumulative effect of negligence over long many years. Petro Bangla is trying to increase the production but it can not be done over night on demand.
In order to get rid of severe gas supply problem, a few steps, as mentioned below, may be taken as on an urgent basis:
1. To conduct an impartial and dependable survey on the actual reserve of our extractable gas resource and to make the report open to the public;
2. A 20-year term plan on the basis of our daily requirement should be taken up and accordingly steps should be taken for extraction of gas and exploration of new gas fields. Leasing of gas fields to the foreign companies in an easy manner without protecting national interest should be stopped and the executed agreements should be re-evaluated and necessary amendments should be made in the greater interest of the nation;
3. Gas-based industries already established in the country should be protected with 100% uninterrupted supply of gas to save them from being enlisted as loan defaulters;
4. Initiatives taken by the government at international level to establish nuclear-based power plant, instead of gas-based plant, should be expedited for implementation;
5. Petrobangla should be further modernised. Amount of gas extraction, through steps on this line, should be increased using local technology. It will then be possible to supply gas at a fair price and consequently government will not be required to pay a large mount of subsidy. Petrobangla will then be able to work as a sophisticated and self-sufficient organisation;
6. Government may take initiatives to establish a petrochemical complex. Every year Bangladesh imports petrochemicals worth about Tk. 12 billion (1200 crore). Subject to sufficient availability of gas, establishment of a petrochemical complex will cost between Tk 15 billion and 25 billion. It will create employment opportunities for more than 10 thousand people. The government of India established a petrochemical complex before 2000 at a cost of Tk. 4.82 billion (482 crore). Bangladesh could also establish a petrochemical complex much earlier. But to protect the vested interest group and the foreign exporters, the proposal for establishing such a complex was ignored. Investment, both local and foreign, will not increase if assurance about uninterrupted supply of gas and electricity is not given in clear and certain terms. Regular supply of gas and electricity will, thus, have to be ensured. Instead of preparing year-wise budget, plan for a five-yearly budget should be taken; otherwise, implementation of a long-term plan will be difficult.
The writer is a columnist, former Vice President of the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI), Bangladesh Garments Manufacturers and Exporters Association (BGMEA), Bangladesh Textile Mills Association (BTMA). He is the Chairman of Eastern University
At present gas is a great problem for Bangladesh. A great setback, as it seems, is ahead of us in gas sector. The demand for gas is increasing every day but production is not increasing in commensurate with demand. And consequently, the deficit of demand is increasing. If the demand increases continuously and new fields are not explored, it is feared that the deficit will be manifold in the next year. According to the consumption report of Petrobangla, the daily demand of the country is 9.0 billion cft. As against this, the daily production capacity is 1.80 billion cft., leaving a deficit of 200 million cft every day.
Electricity is produced by gas. Production of electricity is being hampered owing to shortage of gas. The production of electricity in the country is less than the requirement by about 500MW per day on average. Meantime the government has imposed restriction on gas supply. In Narayanganj area, gas supply has, thus, been restricted. It has become too difficult to get new gas connection for the mills and factories. Businesses have been pointing out that the existing industries are also not getting uninterrupted gas supply. Due to shortage of gas, implementation of gas-based projects has been postponed. The government is not allowing any new gas-based industry in this area, As a result, establishment of new industries has become uncertain. Power Development Board (PDB) has a plan to build up a few gas-based power plants in Chittagong area. But Petrobangla has expressed its inability to supply gas for those plants.
Seventy per cent of the total production of gas is being used in power plants and fertiliser factories. As per report of Petro Bangla, demand for gas by the power plants was 852 million cft. on June 03, 2008 against which 672 million cft. was supplied, leaving a deficit of 180 million cft. The demand of fertiliser factories was 289 million cft. but the actual supply was 225 million cft., leaving a deficit of 84 million cft.
Although information regarding gas consumption of power plants and fertiliser factories was available in the website of Petrobangla but no information was there regarding gas-based mills and industries. But allegations are there to the effect that the pressure of gas goes down alarmingly during peak hours in the mills and industries and the problems are becoming acute gradually. Due to shortage of gas, the production in the mills and industries in Dhaka, Chittagong and also other places of the country is being hampered. The government, however, confirms that new gas connections to mills and industries have not been stopped but connections are being allowed on a priority basis to avoid any misuse. But in reality, it is seen that government is not allowing any gas connection to any new mills and industries.
In 2000, gas was extracted from 20 gas fields but at present extraction is being done from 18 gas fields by both Bangladeshi entities and foreigners. The existing production capacity of these fields can in no way be enhanced in accordance with demand. The rate of supply of gas from these fields is determined on the basis of reserve, pressure and other technical points. Any attempt to raise the rate of extraction of gas from the fields by force may result in fatal damage to the gas fields. So, there is no alternative to exploration of new gas fields.
During the last 10 years, the rate of exploration of new gas field is negligible. Only one gas field has been explored during the period at Bangura by a foreign company named Tullow. It is a very small field, having a reserve of only one third of one trillion cft. A survey report of Petro Bangla notes that the extractable reserve of gas in the country is about 9.0 to 10 trillion cft. Counting on present demand this reserve can meet the needs until the period between 2015 and 2020. If the growing needs are met, the reserve will not last until 2020. If we want to make Bangladesh a middle income country within 2021, extensive industrialisation will be required but we do not have that much reserve of gas to establish the needed number of gas based mills and industries to support the growth of the industrial sector at an accelerated pace. We also do not have the capability to produce electricity to that extent.
In the national budget for 2007-2008, Petrobangla had 23 projects under the Annual Development Programme (ADP). Of them, only three projects were earmarked for evaluation of gas field at Shahbazpur of Bhola district, exploration of gas field and enhancement of production of gas. So, a power plant is being established at Bhola. Arrangement is being made for supply of gas to the power plant. There is still doubt whether it will be possible to supply the necessary quantity of gas in time. The second project is digging of well for exploration of gas and oil at Mubarakgonj. The well has not yet been dug. However, tremor survey work has been completed. It may, however, be possible to dig the well in the next fiscal year. The third project is digging of well at Kapashia for exploration of gas. But it is learnt from mineral and oil resource department that a revised decision has been taken to dig well at Shemutang, instead of at Kapashia. If gas reserve is found at Shemutang, it will help, to a great extent, solve the gas problem of Chittagong, the mineral and oil resource department thinks.
To overcome the acute gas deficit problem, Petrobangla did not take up any project worth mentioning during the last 10 years. The last two governments did also not take any effective steps to explore new gas field and to increase production of gas. On the other hand, Petrobangla is buying gas from foreign companies at a higher price and selling the same at a subsidised rate and, thereby, incurring huge financial loss. The foreign companies have in the meantime increased their production, al beit marginally, and the severe supply crisis pursuit. Financial solvency is required to explore gas field and increase production at the initiative of the government. Petrobangla has requested the Ministry of Finance to sanction Tk. 30 billion (3,000 crore) to overcome its acute financial crisis.
In reply to a query as to what action is being taken by Petrobangla to meet the future demand for gas, the chairman, Petrobangla was reported to have noted that necessary initiative is being taken to explore oil from the Bay of Bengal. After completion of evaluation process of the tenders, blocks will be allotted to the selected bidders. It is expected that the survey work at spot will start by October next. According to the Petrobangla chairman, if gas is found in the sea bed, it will take more or less seven years to supply it to the national grid. So, consequent upon time factor, we have to depend on the existing fields on land until extraction of gas starts from the sea bed. Necessary steps, as the Petrobangla chairman noted, have been taken to increase production by 60 million cft. within the next few months,
In this connection, Prof. M. Tamim, Special Assistant to the Chief Adviser, and in-charge of oil and mineral resource ministry, has said that there will be no shortage of gas until 2020. We have sufficient reserve to meet the demand for the period. Shortage of supply is, however, there which is the cumulative effect of negligence over long many years. Petro Bangla is trying to increase the production but it can not be done over night on demand.
In order to get rid of severe gas supply problem, a few steps, as mentioned below, may be taken as on an urgent basis:
1. To conduct an impartial and dependable survey on the actual reserve of our extractable gas resource and to make the report open to the public;
2. A 20-year term plan on the basis of our daily requirement should be taken up and accordingly steps should be taken for extraction of gas and exploration of new gas fields. Leasing of gas fields to the foreign companies in an easy manner without protecting national interest should be stopped and the executed agreements should be re-evaluated and necessary amendments should be made in the greater interest of the nation;
3. Gas-based industries already established in the country should be protected with 100% uninterrupted supply of gas to save them from being enlisted as loan defaulters;
4. Initiatives taken by the government at international level to establish nuclear-based power plant, instead of gas-based plant, should be expedited for implementation;
5. Petrobangla should be further modernised. Amount of gas extraction, through steps on this line, should be increased using local technology. It will then be possible to supply gas at a fair price and consequently government will not be required to pay a large mount of subsidy. Petrobangla will then be able to work as a sophisticated and self-sufficient organisation;
6. Government may take initiatives to establish a petrochemical complex. Every year Bangladesh imports petrochemicals worth about Tk. 12 billion (1200 crore). Subject to sufficient availability of gas, establishment of a petrochemical complex will cost between Tk 15 billion and 25 billion. It will create employment opportunities for more than 10 thousand people. The government of India established a petrochemical complex before 2000 at a cost of Tk. 4.82 billion (482 crore). Bangladesh could also establish a petrochemical complex much earlier. But to protect the vested interest group and the foreign exporters, the proposal for establishing such a complex was ignored. Investment, both local and foreign, will not increase if assurance about uninterrupted supply of gas and electricity is not given in clear and certain terms. Regular supply of gas and electricity will, thus, have to be ensured. Instead of preparing year-wise budget, plan for a five-yearly budget should be taken; otherwise, implementation of a long-term plan will be difficult.
The writer is a columnist, former Vice President of the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI), Bangladesh Garments Manufacturers and Exporters Association (BGMEA), Bangladesh Textile Mills Association (BTMA). He is the Chairman of Eastern University