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Natural Gas Security in Bangladesh

Bangladesh is not well endowed with conventional sources of energy. The commercial source of energies is coal, peat, oil, hydropower and natural gas. The trend of commercial energy consumption over the last ten years suggests that 75 percent of Bangladesh’s total commercial energy was provided by natural gas, with the remainder almost entirely provided by imported oil, plus limited amounts of hydropower and coal. So, the national energy balance of Bangladesh clearly depicts that natural gas is Bangladesh’s only significant indigenous source of commercial energy. It is the principal source of energy for the country’s power, industry, commercial, and domestic sectors.

Natural-Gas
Natural-Gas

History of Natural Gas Consumption in Bangladesh

The production of natural gas began in 1957, after its initial discovery in 1955. From only 67 BCF (Billion Cubic Feet) in the first decade, the consumption of natural gas rose to 279 BCF in the following decade in 1971-1981 and thereafter to 1,067 BCF during 1981-90. 1991-2000 Bangladesh natural gas consumption reached 2490 BCF. During the last decade 2000-2010, the natural gas consumption of Bangladesh reached 5327.74. There are currently no exports or imports of natural gas so the growth of domestic consumption tracks the growth of domestic production, demonstrating an overall growth rate of 7 percent per year over the last several decades. Total production is 10.13 TCR.

Natural Gas Reserves and Future Consumption Projection in Bangladesh

The Committee for Gas Demand Projections and Determination of Recoverable Reserve and Gas Resource Potential in Bangladesh, appointed by the Ministry of Energy and Mineral Resources, undertook the difficult task of reviewing all the existing studies in order to quantify more accurately the country’s gas reserves.

The committee’s findings include an energy demand projection for the country, estimating the need for natural gas to the year 2050 as follows:

– In the event of low growth rate (3% GDP), the total gas requirement will be between 40 and 44 TCF

– If the economic performance continues at around a 4.55% GDP growth rate, according to historical trends, gas requirements will be between 64 and 69 TCF

– At a higher growth rate of 6% GDP, gas requirements will be between 101 and 110 TCF.

– Gas requirements are projected to be between 141 and 152 TCF, given a 7% GDP growth rate.

Gas Utilization Strategy Options for Bangladesh

Natural gas is a versatile product that can be used as a fuel or as a feedstock for conversion to higher-priced products. The gas utilization options are discussed below: – The use of CNG (Compressed Natural Gas) as a transport fuel holds great promise for Bangladesh. Vehicles fueled by CNG have a far lower rate of toxic emission than either gasoline or diesel-fueled vehicles. The direct and foreign exchange cost savings from making even a partial substitution of fuels would also be considerable. The cost for driving a gasoline-driven vehicle is TK. 245, compared to only TK. 42 for CNG over the same distance.

– GTL (Gas to Liquids) production is based on the Fischer–Tropsch process, which involves the conversion of natural gas to higher hydrocarbons like kerosene, gasoline, and naphtha, depending upon the operating conditions and catalysts used. Unfortunately, the production technology is not very selective so that during the process a wide variety of byproducts are created, which have very little market value in Bangladesh.

– For natural gas that is remote from its market, one of the most common forms of long-distance transportation is its movement in liquid form. For an LNG (Liquefied Natural Gas) project to be economically feasible, the plant production capacity should be at least 2000-3000 kilotons per year, requiring 0.11-0.16 TCF of gas.

The production of urea is one of the best ways of utilizing natural gas, not only because the production technology is standard and mature, but also due to Bangladesh’s extensive experience in operating urea fertilizer plants. Around 30 percent of the country’s natural gas is being used for fertilizer production.

Profitability for this resource option is dependent on several parameters, including power plant capacity in megawatts, transmission charges, the price of electricity and interest rates. Assuming the most optimistic values (high capacity, low transmission cost, high electricity price, and low-interest rates), profitability, as measured by the setback to the wellhead, appears extremely favorable.

The Debate over Natural Gas Export from Bangladesh

The debate on the gas export is the hot topic of nowadays policy concern. Disagreements over the issue of gas exportation differ on various levels. Both arguments in favor of and against of gas exportation are discussed below:

The arguments against exporter

The proven reserves of 16.5 TCF of gas, by no means a huge amount, is inadequate to meet the country’s mid-term domestic demand.

Regarding the economy of gas export, taking the Unocal proposal as an example, the country’s earnings are a projected US $3.7 billion but it will take twenty years to earn. When the country’s annual export income is over US$ 624287 million, an annual income of US$ 160-185 million from gas will not be very impressive.

Purchasing gas from the IOCs (International Oil Company’s) has become too much of a burden for Petro-Bangla, for which export could be a possible solution. However, some economists assert that gas purchase liability can be managed by the government. The amount of money payable to IOCs is 2.3% of the current export earnings and is likely to come down to only 0,64% in 2020.

Domestic use of natural gas is far more beneficial for the Bangladeshi people as consumers than exportation because this is the cheapest source of energy for the country.

The arguments in favor of exporter

– Immediate revenues, especially in foreign currency, are something the government needs urgently, as well as immediate investment for energy sector reform. The World Bank has estimated that Bangladesh loses around US$ 1 billion per year due to power outages and unreliable energy supplies. It also needs money to provide necessary funding for Petro-Bangla So it can stand again as a viable institution and take the responsibility of gas exploration and production. These much-needed dollars can come from gas export revenues.

– IOCs are still not receiving their full and timely payment from the government for the gas sold to Petro-Bangla due to the government’s financial constraints. Thus, export will be an incentive for the IOCs to invest more and accelerate the process of exploration and development.

– The government of Bangladesh at present does not have the funds to accelerate new exploration works to even keep pace with the country’s domestic demand.

It is clear that energy is a crucial national issue, and natural gas is an invaluable resource. The poverty-ridden Bangladesh which is still struggling hard with its development cannot afford to make mistakes regarding the utilization of natural gas. At present, the whole country is intensely focused on this debate but the solution to its long-term energy security does not depend only on the decision of whether or not to export. Whether it is exported or not, Bangladesh is going to run out of conventional natural gas anyway, either within twenty years or at best within fifty years. The country should focus more on its long-term energy security so that it can achieve the highest economic goals.

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