Local gas, not LNG, is the solution

Bangladesh has taken initiative to resolve its gas crisis by importing liquefied natural gas of the Middle East from this July. The LNG is already waiting to be transformed into gas and be distributed through pipeline from the floating terminal off the coast near Maheshkhali. Initially it was said that 500 million cft of gas would be supplied daily, but from the beginning of next year the daily supply will be 1 billion cft.

Not only that, according to official estimates (PSMP2016), distribution of the imported LNG will gradually be increased, so by 2020 it will be 1.2 billion cft daily and by 2030 the daily supply will be 2.2 billion cft. By 2040 this will be 4.2 billion cft per day.

LNG is relatively environment friendly and is in ample supply in the global market. However, it is a costly fuel. Japan, Korea and other economically developed countries use imported LNG extensively in absence of their own fuel. Limited import of LNG by Bangladesh may be justified as a temporary measure to resolve the immediate gas crisis. However, if Bangladesh becomes dependent for long-term on the import of costly LNG, this will unquestionably have a negative impact on the economy. Bangladesh’s gas fields need to be explored to tap into the existing huge potential.

In consideration of the prevailing circumstances, it needs to be seen just how costly LNG is and how this will influence the country’s cost structure. According to Petrobangla, the average cost of gas produced in the country by foreign and local companies is Tk. 5.32 per cubic metre. If LNG is procured from the global market and supplied in the country, the cost will come to Tk. 33.44 per cubic metre. A mixture of the imported LNG and local gas supplied through Petrobangla’s distribution system will cost Tk 12.89 per cubic metre (public hearing 24 June 2018 Petrobangla). That means, due to the import of LNG, the price of local gas will go up by almost Tk 5 and will cost nearly Tk 13 per cubic metre, that is, over double the original cost. Bangladesh Energy Regulatory Commission determines the price of the gas for use in different sectors.

According to the calculations given above, the procurement cost of gas per thousand cft has been estimated at USD 8.5 which is not stable. When the price of oil goes up in the global market, the price of LNG also increases immediately. According to Petrobangla calculations, the indications are that LNG’s cost will go up from USD 8.5 per unit to USD 10 per unit, and so in Bangladesh its supply price will increase from around Tk 33 to around Tk 41 per unit. In that case, the mixture of local gas and LNG will cost Tk 15 per cubic metre, that is, three time the present cost.

Another factor is the ratio of local gas and LNG which will increase the price further. In the given calculations the ratio of the mixed gas is 270 units of local gas and 100 units of imported LNG. But the future plans are to increase the import of LNG from 1 billion cft to 4.2 billion cft by 2040. So the ratio of the costly LNG will increase, putting up prices further. Another overall estimate indicates that Bangladesh will spend USD 2.7 billion annually to import 500 units of LNG per day. That is about Tk 220 billion. The construction cost of Padma Bridge is Tk 280 billion.

There is a false perception based on incomplete data that Bangladesh’s gas resources will shortly be exhausted. At one time a certain quarter proclaimed that Bangladesh was floating on gas, in an attempt to create grounds for export. So now it is being questioned whether there are any motives behind certain quarters who are proclaiming that the gas resources are dwindling.

Neither the claim that the country is floating on gas nor the claim that that the gas resources are exhausted, are scientifically plausible. Even if the known discovered reserves are soon exhausted, there is strong scientific evidence of more than adequate undiscovered gas in reserve.

Given Bangladesh’s geological formation, geologists think that the potential of gas remains unrevealed as there has not been adequate exploration. Taking historic data (from pre-Pakistan times) into consideration, on average one or even less well has been explored for oil and gas per year, which is insignificant by any standards. Even so, with such relatively less and easy exploration, the amount of gas discovered in Bangladesh is significant. We can look into the possibilities that may open up with adequate exploration and development.

Firstly, till date the gas exploration in the country has been limited to the easily identified upper strata. While significant gas has been found in such strata in the eastern parts of the country, the relatively complicated and latent prospects haven’t been explored. Yet in a large delta like Bangladesh, such prospects are significant.

We are proud to have defined our maritime boundary, but offshore gas exploration work has been dismal. Bangladesh has 26 shallow water and deep sea blocks, but only four blocks have been explored, that too in a limited manner. The remaining 22 blocks are untouched. Yet in 2012 after the maritime boundary dispute with Myanmar was resolved through international arbitration, it was Myanmar who carried out extensive explorations off the Rakhine coast and have discovered a large number of gas fields there. In the meantime, it is incomprehensible why and under the influence of which quarters, the multi client survey taken up by Petrobangla after 2012, was shelved.

Secondly, much less gas is produced from the fields run by the national companies than from those run by foreign companies. One reason is that the rate of production per well in the fields under the foreign companies is much higher than that of the local companies. The technical reasons for this can be addressed technically and the resulting higher yield of gas can contribute to resolving the existing gas crisis.

Thirdly, in the past, after exploration of many of the wells, these were declared dry and abandoned, without any final testing. Geologists believe that if these wells are explored again with modern hi-tech methods, gas will be found.

Fourthly, it has been geologically determined that Bangladesh’s geology indicates a high non-traditional potential of gas outside of the traditional gas exploration and production methods. Technically speaking, the thin bed prospects, synclinal prospects, high pressure prospects, etc are significant, some of which have opened new horizons in the neighbouring Tripura state of India.

There is no justification for declaring Bangladesh’s gas resources to be exhausted while its gas exploration programme remains incomplete and immature. Yet this seems to be influencing the policymaking quarters of the country. That is why more interest is being displayed towards importing LNG at high costs rather than taking up gas exploration. The question remains as to whether this will have a long-term negative impact on the country’s economy. If the development drive of the present government is to be taken forward, this must be sustainable. The issue under discussion is extremely important in this regard.

* Dr Badrul Imam is a professor and energy expert. This piece has been translated into English by Ayesha Kabir