Realtors in dilemma over new gas connection ban
Sunday, 10 April 2011
Shahiduzzaman Khan
In a sudden but all-important decision, the government has decided against providing fresh piped gas connections to households to make room for increased supply to industries and power plants in future. The households will be encouraged to use liquefied petroleum gas (LPG) to reduce dependence on pipe gas supply, which remained stalled across the country since July 2010 and to industries since July 2009, to cope with the short supply of natural gas. As there was no new gas connections since long, many have obtained these illegally which worsened the gas supply pressure situation, according to what petrobangla maintained. Many others have resorted to buying LPG containers for their kitchens. These containers are however much costlier compared to the piped gas supplies, and the demand is much higher than supply. Earlier, the government issued a directive to the citizens for mandatory use of solar power through installation of solar panels on top of their buildings. But the move has fallen flat and failed to generate favourable public response. High-rise apartment builders found it too expensive as devices for installation are costly. Then again, if a customer had booked a flat for Tk 3.0 million five years back, how can he again agree to pay another Tk 0.2 million after solar panels are installed in the apartment house? Recently, the Real Estate Housing Association of Bangladesh (REHAB) ran a media campaign about difficulties in solar panel installation and the reasons behind their inability to hand over the flats to the owners in time. Country's real estate sector is now facing a challenging situation. The developers are now failing to hand over the flats to their customers since the government had stopped giving new gas connections. As a result, scores of buyers have been denied entry into their new homes. Those who have given notices to their landlords for vacating their rented places in anticipation of living in their new homes are now in a deep dilemma. The knock-on effect of such a prolonged ban is huge. Housing companies are unable to hand over the readied flats to their customers. The developers are not being able to go for new ventures as they are not getting money from the sale proceeds of their readied apartments. House rents in the capital went up substantially due to scarcity of flats. Thousands of customers have been forced to pay more money as house rents as they are unable to live in their new apartments due to non-availability of gas and electricity. The government has not really explained as to what will happen to those apartments having built-in piped connections already and still waiting for gas supply. Some millions of such flat owners will be affected for the new decision. It will be proper if the authorities ensured fresh connections to these waiting applications and refuse connections top the under-construction buildings. How to set priority in giving new connections is obviously embarrassing for the government. If gas supply constraint is due to the shortage of adequate pipeline and not by gas crisis as a study suggested, the government must take necessary steps to speedily lay the required pipelines across the country for smooth transmission of the natural gas. The recent decision of the government to import liquefied petroleum gas (LPG) is also a welcome move. Both onshore and offshore exploration for hydrocarbon should be initiated in no time. Neighbouring countries scorecard in exploring oil and gas is better than that of Bangladesh. On what ground the country should lag behind is not understood. There is an abundant work force and adequate technological know how of the people concerned. Besides, international oil companies (IOCs) are ready to help in exploring new wells. Then why is the government still hesitant? According to a study, Bangladesh's energy crunch causes $16.6 billion yearly loss in the gross domestic product (GDP). If it is assumed that around 10 percent of the energy shortfall is in the export-oriented manufacturing sector, then the output is $1.33 billion less is in this sector due to the power and energy crisis. According to Petrobangla's projection, gas supply shortfall now is more than 500 million cubic feet per day (mmcfd). It is set to double by the end of this year. Petrobangla's gas supplies have remained stuck at a maximum of 2,000 mmcfd from December 2009 due to lack of pipeline infrastructure, compressor station and new sources of gas production. However, Petrobangla presented a gas production increase plan that shows a rise of the supplies by 1,785 mmcfd by mid- June 2013 and another 680 mmcfd by December 2015. This would mean the country's gas supplies would stand at around 4,500 mmcfd in 2015 as against the demand for 4,162 mmcfd. Of this increase, most would come from three gas fields of Chevron in Bibiyana, Moulavibazar and Jalalabad. And this would be made possible by installing a 190 km pipeline at a cost of 20.74 billion by December 2013. Another 500 mmcfd of this increase would be derived from imported liquefied natural gas (LNG) containers from late next year. Again, this will be made possible by setting up a 115 km pipeline to transmit the imported liquid gas from a future terminal in Maheshkhali to Fouzdarhat. Indeed, Bangladesh's development efforts are constrained by an energy crisis characterised by a growing deficit in power and gas supply. Unless addressed, this will slow down industrial operations, jeopardise trade and economic growth; trigger political instability and cause significant deterioration in citizens' quality of life. The electricity crisis is closely linked to a severe shortfall in gas, the most important source of commercial energy in the country. It is the lack of incentives for IOCs, bureaucratic planning failures and adoption of misguided policies and once again, the primacy of electoral considerations driven by a populist agenda that impedes efficient gas production and distribution. Although the current government inherited the energy crisis, its initiatives have not addressed the core problem of poor governance of the sector at all levels. While it may be still early to state whether or not the government will be successful in fulfilling its vision for making electricity available for all by 2021, there exist some serious concerns relating to the current state of the sector. The energy sector needs to adopt a comprehensive, coordinated, pragmatic and long-term master plan that articulates the national energy vision and implementation strategy, in line with resource availability and citizens' interests. The planning process should be inclusive of all stakeholders, so as to maintain political continuity as the timeline for dealing with the crisis, and will span several electoral cycles. The government's best option in the short-term is to enhance Petrobangla's gas production by improving technical efficiency and investment, and strengthen efficiency in existing plants. In the long-term, new gas fields should be explored and the coal sector developed. Removing vested interests from energy sector operations and regulation would allow faster policy implementation, better institutional coordination, and ultimately more citizen-focused service delivery. Removing governance bottlenecks is essential in providing the right market signals to stakeholders in both the private and the public domain. This will not only allow the market structure to attain greater efficiency and transparency, but will also help the reform agenda by promoting greater commercialisation of state entities. szkhan@dhaka.net
In a sudden but all-important decision, the government has decided against providing fresh piped gas connections to households to make room for increased supply to industries and power plants in future. The households will be encouraged to use liquefied petroleum gas (LPG) to reduce dependence on pipe gas supply, which remained stalled across the country since July 2010 and to industries since July 2009, to cope with the short supply of natural gas. As there was no new gas connections since long, many have obtained these illegally which worsened the gas supply pressure situation, according to what petrobangla maintained. Many others have resorted to buying LPG containers for their kitchens. These containers are however much costlier compared to the piped gas supplies, and the demand is much higher than supply. Earlier, the government issued a directive to the citizens for mandatory use of solar power through installation of solar panels on top of their buildings. But the move has fallen flat and failed to generate favourable public response. High-rise apartment builders found it too expensive as devices for installation are costly. Then again, if a customer had booked a flat for Tk 3.0 million five years back, how can he again agree to pay another Tk 0.2 million after solar panels are installed in the apartment house? Recently, the Real Estate Housing Association of Bangladesh (REHAB) ran a media campaign about difficulties in solar panel installation and the reasons behind their inability to hand over the flats to the owners in time. Country's real estate sector is now facing a challenging situation. The developers are now failing to hand over the flats to their customers since the government had stopped giving new gas connections. As a result, scores of buyers have been denied entry into their new homes. Those who have given notices to their landlords for vacating their rented places in anticipation of living in their new homes are now in a deep dilemma. The knock-on effect of such a prolonged ban is huge. Housing companies are unable to hand over the readied flats to their customers. The developers are not being able to go for new ventures as they are not getting money from the sale proceeds of their readied apartments. House rents in the capital went up substantially due to scarcity of flats. Thousands of customers have been forced to pay more money as house rents as they are unable to live in their new apartments due to non-availability of gas and electricity. The government has not really explained as to what will happen to those apartments having built-in piped connections already and still waiting for gas supply. Some millions of such flat owners will be affected for the new decision. It will be proper if the authorities ensured fresh connections to these waiting applications and refuse connections top the under-construction buildings. How to set priority in giving new connections is obviously embarrassing for the government. If gas supply constraint is due to the shortage of adequate pipeline and not by gas crisis as a study suggested, the government must take necessary steps to speedily lay the required pipelines across the country for smooth transmission of the natural gas. The recent decision of the government to import liquefied petroleum gas (LPG) is also a welcome move. Both onshore and offshore exploration for hydrocarbon should be initiated in no time. Neighbouring countries scorecard in exploring oil and gas is better than that of Bangladesh. On what ground the country should lag behind is not understood. There is an abundant work force and adequate technological know how of the people concerned. Besides, international oil companies (IOCs) are ready to help in exploring new wells. Then why is the government still hesitant? According to a study, Bangladesh's energy crunch causes $16.6 billion yearly loss in the gross domestic product (GDP). If it is assumed that around 10 percent of the energy shortfall is in the export-oriented manufacturing sector, then the output is $1.33 billion less is in this sector due to the power and energy crisis. According to Petrobangla's projection, gas supply shortfall now is more than 500 million cubic feet per day (mmcfd). It is set to double by the end of this year. Petrobangla's gas supplies have remained stuck at a maximum of 2,000 mmcfd from December 2009 due to lack of pipeline infrastructure, compressor station and new sources of gas production. However, Petrobangla presented a gas production increase plan that shows a rise of the supplies by 1,785 mmcfd by mid- June 2013 and another 680 mmcfd by December 2015. This would mean the country's gas supplies would stand at around 4,500 mmcfd in 2015 as against the demand for 4,162 mmcfd. Of this increase, most would come from three gas fields of Chevron in Bibiyana, Moulavibazar and Jalalabad. And this would be made possible by installing a 190 km pipeline at a cost of 20.74 billion by December 2013. Another 500 mmcfd of this increase would be derived from imported liquefied natural gas (LNG) containers from late next year. Again, this will be made possible by setting up a 115 km pipeline to transmit the imported liquid gas from a future terminal in Maheshkhali to Fouzdarhat. Indeed, Bangladesh's development efforts are constrained by an energy crisis characterised by a growing deficit in power and gas supply. Unless addressed, this will slow down industrial operations, jeopardise trade and economic growth; trigger political instability and cause significant deterioration in citizens' quality of life. The electricity crisis is closely linked to a severe shortfall in gas, the most important source of commercial energy in the country. It is the lack of incentives for IOCs, bureaucratic planning failures and adoption of misguided policies and once again, the primacy of electoral considerations driven by a populist agenda that impedes efficient gas production and distribution. Although the current government inherited the energy crisis, its initiatives have not addressed the core problem of poor governance of the sector at all levels. While it may be still early to state whether or not the government will be successful in fulfilling its vision for making electricity available for all by 2021, there exist some serious concerns relating to the current state of the sector. The energy sector needs to adopt a comprehensive, coordinated, pragmatic and long-term master plan that articulates the national energy vision and implementation strategy, in line with resource availability and citizens' interests. The planning process should be inclusive of all stakeholders, so as to maintain political continuity as the timeline for dealing with the crisis, and will span several electoral cycles. The government's best option in the short-term is to enhance Petrobangla's gas production by improving technical efficiency and investment, and strengthen efficiency in existing plants. In the long-term, new gas fields should be explored and the coal sector developed. Removing vested interests from energy sector operations and regulation would allow faster policy implementation, better institutional coordination, and ultimately more citizen-focused service delivery. Removing governance bottlenecks is essential in providing the right market signals to stakeholders in both the private and the public domain. This will not only allow the market structure to attain greater efficiency and transparency, but will also help the reform agenda by promoting greater commercialisation of state entities. szkhan@dhaka.net