Natural Gas Crisis in Bangladesh
Event
Bangladesh is in desperate situation with its natural gas. All knew that such
situation may arrive by now. But none were serious for appropriate actions in time to
confront this. From a position of surplus in 2001 the national grid has now about 400
MMCFD deficits in 2009. This has happened although production increased by 600
MMCFD over this time mostly from Gas fields discovered in late 1990s. IOCs in
block 5, 7, & 10 were allowed to hibernate. PB or Government did not support Bapex
to explore effectively. But marketing companies allowed mushroom growth of
medium to large gas using industries without bothering for gas availability. Possibly
to justify its ill conceived perception that our gas reserve would run out by 2015 it did
not go for required development of own reserves. Very uncertain gas situation has
already become a pain the neck for the government.
Natural gas production, transmission in Bangladesh has turned into serious
worries as the deficit between demand and supply is steadily increasing with no
credible efforts for exploration for new reserves and expansion of existing reserves are
in view. Moreover, unregulated higher than permissible rate of production from some
major gas fields operated by International Oil Companies (IOC) are being viewed by
experts as serious threat to cause major gas structural damage. Gas shortage has
already impacted power generation, fertilizer production and operation of industrial
and commercial units. These will obviously impact on economic development and
governments efforts for achieving dreams of Digital Bangladesh.
Petrobangla website lets out unsigned Production, Transmission report
everyday .It shows alarming situation. Let us have a bird’s eye view. Bangladesh has
three national production companies. BGFCL, SGFL & Bapex from 48 producing
wells of 11 gas fields produce 891.8 MMCFD against the capacity of 927MMCFD.
Production of Petrobangla companies now has reduced to 47.6% which used to be
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76% in 2004. On the other hand 4 IOCs from 31 producing wells of 6 gas fields are
allowed to produce 981 MMCFD against their capacity of 943MMCFD .IOCs
produce 52.4% of our national production now which only four years before was
24%. IOCs as per PSC and GPSA are allowed to produce a maximum of 7 % of
agreed ultimate recoverable reserve. Until IOCs can prove higher recoverable reserve
they have no reason to increase production. But if we check the recent records
Bibiyana is allowed to deliver at much higher rates. Jalalabad is expected to go higher
soon after constructing a new spurlike. Did Chevron produce acceptable documents
evidencing increase of recoverable reserve?
In the total Bangladeshi energy picture, the country’s natural gas endowment
stands out as a bright spot. Exploration by Bangladesh’s public energy company,
Petrobangla, and more recently by international oil and gas companies (IOCs) has
established the existence of a significant energy source. In recent years, several trillion
cubic feet (TCF) have been added to the confirmed 10.5 TCF known as of 1996.
Because there has been comparatively little exploration to date, estimates of the total
extractable natural gas resource in Bangladesh are uncertain and range widely. An
estimate of 20 TCF is gaining acceptance among experts, but some argue that
experiences in comparable basins elsewhere in the world suggest that the ultimate
recoverable resource could be as high as 50 TCF or even 100 TCF. At the current rate
of natural gas use in Bangladesh (1000 mmcfd), today’s estimated proven reserves
would last 45 years.
Natural gas in Bangladesh is currently used for thermal power generation, as a
feedstock in fertilizer production, as a thermal source for other industrial applications,
and in commercial and household applications (primarily for cooking). (Refer back to
Figure 2.) There are currently no imports or exports of natural gas, so the growth of
domestic consumption tracks the growth of domestic production, a growth rate in the
range of 10 per cent per year over the last couple of decades. The initial level of
consumption was so low that even with this rapid rate of growth of demand, the total
cumulative consumption of natural gas has been only three TCF. And, as noted above,
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the current rate of consumption, if held constant, would not exhaust current reserves
for 45 years. If this rate continues to increase at 10 per cent per year, the current
supplies would still last 17 years. Forecasts of future natural gas use vary widely,
depending on the assumptions made.
Present Demand and Supply Balance (on a particular day in May 2009 (in MMSCFD)
Sector Customer Type Demand Supply Balance Shortfall
Power 926 770 226
Fertilizer 289 163 126
Bulk
Non-grid Power (SPP) 35 22 13
Sub-total 1,250 955 365
Captive 280 270 10
CNG 78 78 0
Industry 297 273 24
Non-bulk
Domestic 260 250 10
Commercial & others 26 22 4
Sub-total 941 893 48
Grand Total 2,191 1,848 413
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Key among these assumptions is:
• The rate of growth of electricity production,
• The rate of extension of the natural gas transmission and distribution network,
• The price of natural gas for domestic consumers,
• Industrial demands for natural gas,
• continued support for compressed natural gas for vehicles,
• Decision on natural gas exports, and
• Encouragement of domestic uses of natural gas, especially for cooking.
Results
Unless the government improves gas supply to the existing and emerging
power plants, load-shedding scenario will turn worse throughout this year, sources
say.
The country is walking the path of a perennial gas crisis where even the best
possible situation of striking gas in the off-shore blocks will not give it a respite till
2020. This means unless the government takes major policy decisions like
emphasizing coal or nuclear power production within a short time, the already
unbearable power load shedding that is hitting the economy and lifestyle very hard
will go beyond any solution. Most of the country's power plants run on gas. The gas
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situation is so bleak that Petrobangla has been declining confirmation of gas supply to
a number of upcoming large power projects. In a paper submitted to the prime
minister, Petrobangla even recommended discouraging use of gas for power
generation as it can be generated using alternative resources like coal.
Power Development Board (PDB) sources say while Petrobangla Okayed gas supply
to Bibiyana 450 megawatt power project, it cannot confirm gas supply to the much
older 450 MW Sirajganj power project till 2012.
The total gas shortfall in the power sector will be 340 million cubic feet per day
(mmcfd) this year. If this gas could be ensured, the Power Development Board (PDB)
would be able to generate and supply around 4,900 megawatt (mw) power and keep
another 600MW under maintenance, enough to make the country happy. But that is
not happening. Availability of natural gas remains a major issue also for the
developing 700MW new gas-fired power plants to be launched by this July.
But Petrobangla sources say they are not sure if enough gas is ready for this 700MW
new power. Right now, different power plants are unable to produce as much as
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559MW power due to gas supply problem, which was created due to lack of initiatives
by the past four-party alliance government. Even the caretaker government could not
take speedy decisions to address this problem. Besides, water crisis at the Kaptai dam
is also a headache for PDB that operates the Karnaphuli hydropower plant with five
50MW hydropower units. The water level at the dam should be at least 92 feet, but it
is now 80 feet. As a result, this plant is now producing 80-85MW during peak hours.
"The PDB's present requirement of gas is 850 million cubic feet of gas per day to
generate around 4,000MW power, but it is getting 685 million cubic feet, leaving a
shortfall of 165 million cubic feet," says a PDB source.
The next gas-based power plants will need another 175 mmcfd gas by June-July.
Already unable to supply more than 1850-1900 mmcfd gas due to inadequate pipeline,
gas supply compressor and other infrastructure support, Petrobangla does not have
much to promise for this year. "This year, the only possibility of increasing power
supply would be maximum 70 mmcfd," says a competent Petrobangla source.
"Of this, around 15-20 mmcfd may come from drilling a new development well in
Titas Gas field and another 50 mmcfd from Chevron's Jalalabad field," he adds.
This shortfall is adding to non-production of 634MW power by different power plants
which are undergoing routine or sudden maintenance and rehabilitation program.
The PDB officially puts the present demand at 4,400MW, while it could supply
maximum 3,600MW yesterday. If there was no gas supply problem, PDB could have
ensured up to 4,200MW power and minimize the crisis by handling only 200MW
load-shedding. "There will always be a percentage of power plants which will undergo
maintenance," says a PDB official ruling out the possibility of turning on all the
plants, including those under maintenance, all the time. Then again, the "official"
load-shedding claim does not even match power demand forecast by the power
distributing bodies. Desa and Desco demand more than 1,800MW, while the Rural
Electrification Board (REB) seeks 2,200MW and PDB itself needs another 1,500MW.
This means that the real load-shedding is around 2,200MW. Against such a demand,
PDB gives REB around 800MW, making it look like the official demand. But during
the irrigation season, the government would increase this supply to REB. Many of the
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power projects under maintenance program are expected to begin operation within this
month. However, when these would come online, some other plants will go for
maintenance. Sources say the government is trying to fine-tune the maintenance
schedule to increase the generation capacity during the irrigation season and take up
other measures to lower the power demand. One of the measures that the government
undertook is to close marketplaces after 8:00pm. But this is not reducing the load-
shedding. "The peak hour for power consumption is 7:00pm to 8:00pm. If the market
places should be closed to save energy, it should be done before 7:00pm," observes a
PDB source. Another measure undertaken by the government is asking irrigation
related power consumers to operate their pumps between 11:00pm and 5:00am so that
the irrigation can be carried out unhindered. The PDB would divert power from the
cities to ensure power supply for irrigation. Besides, as per a schedule set by the past
caretaker governments, industrial holidays are being staggered in a way so that the
demand load is spread throughout the week.
Possible Remedy
Continue to use competitive bidding for Production Sharing Contracts as the
means of attracting IOCs to natural gas exploration and development.
Set a five year moratorium on natural gas exports and use this time to develop a
surplus test mechanism and domestic priorities for use of gas.
Corporatize and vertically de-integrate state owned natural gas and electricity
providers.
Make the natural gas and electricity delivery networks into common carriers
with predictable, independently set tariffs, allowing natural gas producers and
independent power producers to negotiate directly with customers.
Create an arms-length regulatory agency responsible for both natural gas and
electricity.
At a high level, government should conduct integrated resource planning for
the energy sector, including environmental and social objectives.
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Do not provide capital subsidies to investments for special end-uses of natural
gas like fertilizer plants, domestic cooking, compressed natural gas (CNG)
vehicles, etc.
Eliminate commodity subsidies for natural gas, electricity and all forms of
energy accept perhaps renewable.
Encourage direct sales by IPPs to any potential customer – including industrial
firms, municipal utilities, PBSs, and perhaps even households.
"The authorities might go for more such rental powers from various power
companies, based on petroleum, as a short term solution," quips a PDB official.
The major new discovery of gas may come from offshore. But Government
remains hesitant still to commence offshore exploration. With our present inept
management of IOCs can nation rely on incompetent Petrobangla to effectively
manage IOCs in offshore drilling? We need a fully functional reservoir management
division manned by reservoir engineers /petroleum engineers; we need efficient
professionals who can effectively handle major IOCs in offshore exploration.
Petrobangla failed to handle Cairn properly in Shangu operation or Magnama and
Hatiya exploration. Now Conoco Philips and others in deep sea may create
unsurmountable human resource crisis for Petrobangla .The only senior line
professional in Petrobangla Engr Shahiul Abedin is handling Administration in
Petrobangla.
Reference
http://gurumia.com/
http://www.energybangla.com/
http://www.thedailystar.net
Centre for Policy Research of IUBAT
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