Gas exploration in Bangladesh has seen many ups and downs. There are several reasons behind this. Some of it is our own making while others are world issues beyond our control. In the earlier days, no international oil company (IOC) was interested in gas. The development of liquefied natural gas (LNG) and pipelines around the world started to increase the commodity value of gas. For a long time gas was considered to be only a domestic commodity. At best, it was a commodity that could be sold through pipelines to neighbouring countries. This view has not changed altogether. We see that gas prices in the USA (Henry Hub) even when LNG prices skyrocketed to $70/MMBtu in August 2022 were below $10/MMBtu (Metric Million British Thermal Unit). Today it is around $2.5/MMBtu while the spot prices in Europe and Asia are around $20/MMBtu. The stranded nature of gas makes it very hard to be transported and consumed like oil, or even coal. Thus gas prices can be extremely variable depending on where the market is and who the buyers are. For example at $40/MMBtu, Europe was able to buy gas, but countries like Bangladesh and Pakistan could not.
With such high prices of LNG, one would assume there would be a lot of interest in gas exploration. Unfortunately, there isn't. The principal reason for this is the phase-out of fossil fuels being negotiated at the climate summits. Large companies are apprehensive about the future of fossil fuel markets and therefore do not want to invest in it. The other reason is that as countries concentrate upon renewable energy and the enhanced post-Covid-19 demand slackens, prices are bound to crash. In a supply glut situation selling gas will be difficult.
With regards to gas production from existing reserves, once the R/P (Reserve/Production) ratio becomes small, a country needs to find as much gas as it consumes, otherwise R/P ratio will keep on sliding to the point that production has to be curtailed. Bangladesh has been fortunate that by drilling less than 100 exploratory wells, we have found our gas and success ratio is close to 1:3. It is unrealistic to expect that success ratio of 1:3 will still prevail. Therefore, we must be prepared to drill more than 3 wells to get 1 strike. All recent discoveries have been less than 1 trillion cubic feet (Tcf). In future drillings, both the success ratio and the sizes of the discovered fields will decrease. We have to be prepared to drill 8-10 exploratory wells per year to maintain a healthy R/P ratio.
Exploring our natural gas resource will progressively become an expensive affair as the success ratio drops. Two shallow offshore drilling by Santos have been dry; Chevron has not had much success in their own drillings; most importantly, BAPEX has not been able to add very much to our reserves in the last 15 years. These conclusively prove that finding gas is becoming harder and harder. The success ratio in Bangladesh is approaching 1:5. Success ratio falling means more and more drillings are needed to find gas. How many drillings are needed to sustain the present 2,300 million cubic feet per day (MMcfd) of gas consumption? This number will certainly be more than 8, and 10 is probably more realistic. In the last 5 years we have drilled less than 10 exploratory well, whereas we should be drilling that number of wells per year.
Additionally, the chances of finding a giant field like Titas or Bibiyana is remote. But we have huge prospect of finding smaller fields. The North-Eastern part of Bangladesh is so rich in gas that there exists huge potential of finding hundreds of gas pockets of 100 to 300 billion cubic feet (Bcf) size. Now that gas price has increased it is feasible to produce these small reserves.
According to the Hydrocarbon Unit under the Ministry of Power, Energy and Mineral Resources (MoPEMR), Government of Bangladesh (GoB), the estimates of the natural gas resource potential is around 28 Tcf. An earlier study by USGS and Petrobangla estimated a mean potential of 32 Tcf, while a Norwegian study put the potential at 42 Tcf. In 2006, the GoB constituted a committee to review reserves and resources. That committee after careful consideration endorsed the USGS study's figure of 32 Tcf.
At present, the annual demand is more than 1.3 Tcf, while the supply is at least 20 per cent lower; if recent growth trends are sustained, it will reach more than 1.7 Tcf by 2030. This certainly implies a robust demand, and vigorous exploration activities should commence, but unfortunately this isn't happening. GoB is failing to set deep sea explorations contract terms that are attractive enough, thus failing to incentivise the process. The gains in sea boundary have become meaningless with deep sea exploration at a standstill. In fact no exploration is ongoing, and the new bidding round is yet to be finalised.
If gas exploration is not strengthened, and no gas is found, then dependence on LNG will grow, thus deepening the energy security crisis in the country. Can Bangladeshi industries afford such expensive gas? Maybe, the low energy consuming industries can bear the shock, but what about the energy-intensive industries? Can industries such as steel re-rolling, cement, and ceramic survive? Are we going to see the decline and eventual death of energy intensive industries in Bangladesh?
Dr Ijaz Hossain is a retired professor of the Bangladesh University of Engineering
and Technology (BUET).
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