WB for hike in domestic gas prices

The World Bank (WB) has recommended an increase in domestic natural gas prices in the country for its efficient use and for encouraging further exploration by international oil companies (IOCs).
"The administered price of domestically produced natural gas is fixed at a level considerably below that of the international market," said the Bank in its latest Bangladesh Development Update released recently.
The WB said: "Not only does this represent an opportunity cost for the government in lost revenues, but the lack of an appropriate price signal leads to inefficiencies in allocation and use and limited incentives for further exploration."
The WB came up with the suggestion against the backdrop of the country's non-increase in domestic natural gas prices over the past five years.
State-owned Petrobangla raised natural gas tariffs on August 1, 2009 when all types of domestic consumers excluding compressed natural gas (CNG) witnessed a hike of 11 per cent.
The Petrobangla in 2012 had moved for a fresh hike in domestic natural gas prices and submitted a proposal to the energy regulator-the Bangladesh Energy Regulatory Commission (BERC) -- to announce a hike in tariff.
In its proposal, the Petrobangla recommended for raising natural gas prices for its domestic consumers, excluding households, by up to 103 per cent to meet rising hydrocarbon exploration and gas purchasing costs.
The Petrobangla had then proposed more than doubling of gas prices for privately-owned small power plants to Tk 240 per Mcf (1,000 cubic feet) from Tk 118.26 per Mcf, a senior Petrobangla official said.
The corporation had also proposed to increase the CNG feed gas price by 39.1 per cent to Tk 905.92 per Mcf, natural gas prices for industrial users by 32.6 per cent to Tk 220 per Mcf, for commercial consumers by 30.6 per cent to Tk 350 per Mcf, for tea plantations by 20.6 per cent to Tk 200 per Mcf, for fertiliser factories by 9.7 per cent to Tk 80 per Mcf, and for power plants by 5.2 per cent to Tk 84 per Mcf.
The corporation had not asked for a hike in the gas price for households, which currently stands at Tk 400 per month for consumers with a single burner gas cooker and at Tk 450 per month for those with double burner gas cookers.
But instead of raising natural gas tariff, the BERC then asked the Petrobangla to submit tariff hike proposals afresh through its subsidiary natural gas marketing and distribution companies, which sell natural gas to the end-users.
The commission also then had asked to justify the increase in natural gas tariff.
But the Petrobangla is yet to submit any fresh natural gas tariff hike proposal through its subsidiary gas marketing and distribution companies, said a senior BERC official.
Non-raising of domestic natural gas tariff over the past half a decade might have discouraged potential investors from oil and gas exploration, a senior Petrobangla official said.
The country did not get satisfactory responses from the IOCs during the latest bidding round in 2012 as a consequence, he said.
The country could ink only three production- sharing contracts for shallow water blocks with two joint venture firms after receiving single bids for these three blocks.
It had invited tenders to get these single bids for three blocks out of nine shallow water blocks as offered during 2012 bidding round, said the official. Blocks SS-04 and SS-09 were awarded to a joint venture between India's ONGC Videsh Limited and Oil India Limited, and SS-11 to a joint venture between Australia's Santos and Singapore's KrisEnergy.
US-based ConocoPhillips has refused to ink a PSC with Bangladesh for oil and gas exploration in shallow water block SS-07, seven months after signing an initial PSC for the block.
ConocoPhillips said after further evaluation it found that block SS-07 located offshore Bangladesh in the Bay of Bengal was no longer competitive in the company's portfolio and hence notified the Petrobangla that it could not sign the PSC under the current terms.
Bangladesh also received single bids for three deep water blocks that were offered under the 2012 bidding round.
ConocoPhillips and Norwegian energy firm Statoil separately submitted a bid in January under a joint venture for hydrocarbon exploration in all three deep-water blocks offered by Bangladesh. Bids for those blocks are currently under evaluation by the Petrobangla.
Bangladesh is entirely dependent on domestic natural gas production, which currently hovers around 2,300 million cubic feet per day (mmcfd) of gas, compared with the demand of around 2,700-3,000 mmcfd.
Gas shortages have pushed the Petrobangla to ration new connections to industries, fertiliser factories and power plants regularly, hindering economic growth since June 2009.