Govt gives foreign companies edge over Bapex

Bangladesh Petroleum Exploration and Production Company (Bapex) announced discovery of the country’s 28th gas field in Zakiganj of Sylhet in August, 2021.

The state-run energy exploration company spent a total of Tk 780 million for the discovery project, while the gas reserve in the field was valued at Tk 25 billion as per the average consumer price.

Later, the 29th gas field was discovered in Bhola in May this year, at a cost of Tk 1.9 billion. It has a gas reserve of Tk 60 billion.

Bapex drilled wells in the Zakiganj gas field under its own arrangements, where the drilling costs stood at Tk 750 million. But it employed a foreign company – Gazprom – to drill gas wells in the Bhola gas field and got the drilling cost multiplied to Tk 1.8 billion.

The country's lone gas exploration company discovered gas in three wells in the Bhola gas field in the last nine months. It has been consistently demonstrating success with small investments.

Recently, they succeeded in extracting gas from an abandoned well in the Titas gas field. The well has been supplying 8 million cubic feet of gas per day since 9 June.

Bapex outperformed its peers in any other countries in the world in terms of average success rate. Still, there has been a longstanding debate over its capacity in energy exploration and supply.

No governments here placed the Bapex on their priority list or focused on enhancing its capacity. There was no initiative to increase the number of drilling rigs and human resources of Bapex. It received no government funding over the past decade, resulting in a growing reliance on foreign companies for gas exploration.

Experts blamed dependency on imported fuel for the current scenario of Bapex. Rather than emphasising local gas exploration, the government has leaned towards foreign sources and started importing liquified natural gas (LNG) in 2018. Besides, some other plans are being executed in order to increase imports.

According to them, the process of local gas exploration would have been geared up had a stronger Bapex in place. It would eventually reduce dependency on foreign companies as well as imports.

Mohammad Tamim, special assistant on power and energy to chief advisor of a former caretaker government, said it is easy to say about enhancing capacity, but difficult to do. It requires large-scale investments, skilled manpower, and competitive salaries. Big investments would not give a good return merely by domestic operation.

He went on to say that the Bapex should have the capacity to operate in other countries too. But no governments had plans or made investments to make the state-run gas exploration company a highly capable one.

The Bapex also did not dare to approach the authorities with a visionary plan, he said, adding that the limitations of Bapex paves the way for roping in foreign companies.

PETRONAS of Malaysia and Oil and Natural Gas Corporation Limited (ONGC) of India have emerged as global companies over the past two decades. The Russian company Gazprom charges approximately three times more for drilling a gas well, compared to the Bapex.

Gazprom has been employed to drill some 20 wells so far and it may secure more drilling contracts in Bangladesh.

Bapex is also going to lose its outright dominance over onshore gas exploration. The government has initiated negotiations with various overseas companies to engage them in gas exploration in both sea and land areas.

The Bapex, a company under the energy and mineral resources division, is autonomous in making its own decisions. But it does not have any plans to become a big company.

Some 46 wells will be drilled within three years, to increase local gas production. The Bapex would take over a decade to carry out the drilling projects alone. As the need for gas is urgent, the authorities have hired foreign contractors to expedite the work.

Nasrul Hamid, state minister for power, energy and mineral resources, said a cost of Tk 2 billion yields at least Tk 60 billion worth gas. The government is interested in investing in such projects. The Bapex has to take the lead and make efforts to enhance its own capacity and professionalism.

“Now, we need gas on an emergency basis. This is why the work has been expedited by hiring foreign contractors. The Bapex was sluggish at times, but significant improvements have been made over the past three years,” he added.

However, the Bapex is concerned about their own investment limitations, shortage in essential equipment, and lack of skilled manpower.

In countries with gas fields, an average of five to seven wells are drilled annually to search for gas. Bapex has the capacity to drill at least three wells per year.

However, only one well has been drilled on average in Bangladesh. The Bapex spends a maximum of Tk 800 million for drilling a well on land, while the cost of drilling a well with a foreign company has now exceeded Tk 1.8 billion.

According to Bapex sources, when the Awami League government, after assuming the state power in 2009, purchased four drilling rigs – two for digging exploratory wells and two for workovers. The last drilling machine was purchased in 2012, which totaled the number at six.

Out of the six rigs, two are designated to exploratory drilling, with a maximum drilling capacity of three wells per year. But the capacity is not used fully due to the time-consuming process of land acquisition and development.

Among the remaining four rigs, two are lying damaged – one dates back to 1984 and no foreign contractor has agreed to repair it. The other one dates back to 1987, which the authorities are in efforts to repair. However, it can no longer be used for exploration. Rather, It will be used solely for renovating old wells.

The remaining two rigs are currently being used for drilling workover wells.

In contrast, the Indian company ONGC now has 150 drilling rigs. After successful operations in the country, they have commenced gas exploration activities in the water territory of Bangladesh.

According to three officials, Bapex operates without any foreign workers, while the number of skilled and experienced manpower is on decline. In absence of regular recruitment, a shortage of skilled workers arises whenever someone retires.

Currently, the total workforce in the company stands at 594, including 359 officers. Here, regular recruitment has not taken place since 2016. A new recruitment process has now been initiated.

BAPEX has been facing an investment crisis. The allocation from Gas Development Fund (GDF) created from money by consumers started in 2012. Since then the government did not finance any project of BAPEX. Alongside the fund, BAPEX got loans from GDF. However, the company could not undertake any project to enhance its capacity. Rather, they continued the work of exploration on a limited scale.

GDF is almost exhausted due toimport of liquefied natural gas (LNG). A total of Tk 20 billion has been given as loans for LNG subsidies. The finance ministry has taken Tk 30 billion from GDF as additional money from the bank account of Petrobangla. Petrobangla has not returned the money despite a request from Bangladesh Energy Regulatory Commission (BERC). As a result, BAPEX is not getting allocation from GDF. Now suggestions are being given to undertake projects financed by the government.

A portion of gas price paid by the consumers is deposited in GDF. Around Tk 1 billion to 1-2 billion is deposited in this fund every month. A total of Tk 40 billion has been allocated from GDF for gas exploration and production.

BAPEX has taken over Tk 30 billion while Sylhet Gas Fields Company and Bangladesh Gas Field Company took the remaining portion. There is no money in GDF for allocating new projects.

Speaking to Prothom Alo, BAPEX two officials said the entire money is a loss if gas is not found after drilling. The money is not returned to GDF if gas is not found.

The money is to return to the fund if gas is found. But the government will finance it as a loan at 4 per cent interest rate. The money has to be returned if gas is not found. Gazprom couldn't continue gas production in five wells for overflowing sand and water after drilling at high cost. Gazprom will not return that money. BAPEX has started production in these wells after repair.

BAPEX started its journey as a company in 1989 to smooth the exploration and production of oil and gas after dissolving the exploration department of Petrobangla. At the beginning the department would run on the finance of Petrobangla as the only exploration company. Later, BAPEX started its journey as the exploration and production company in 2002.

They have so far conducted three-dimensional seismic surveys in 4072 kilometers area and two-dimensional seismic surveys in 17,721 kilometers line meters area. The agency has drilled 18 wells for the possibility of discovering gas. They have discovered 10 new gas wells. BAPEX is supplying gas to the national grid regularly producing gas from seven gas fields.

BAPEX outgoing managing director Mohammad Ali from his 39-year experience of working said the capacity of BAPEX will increase if new manpower is recruited. BAPEX will be a world standard gas exploration company if ultramodern equipment and investment are added. If five grilling machines are given, this agency will drill 15 wells.

Globally, gas is found in one well against five wells. BAPEX has found gas in one well by drilling less than two wells. In the last nine months, BAPEX has discovered gas worth Tk 210 billion. If the current price of LNG imported from abroad is estimated, the amount would stand at over Tk 600 billion. BAPEX has earned Tk 6.70 billion in the financial year of 2021-22. The profit is Tk 1.23 billion.

BAPEX has been working on short, mid and long term plans. This planned work started in 2019, and will continue till 2041. But most of the time this target has not been fulfilled. The plan has been changed repeatedly at the advice of the energy division. The survey for gas exploration across the country should have been expedited further. Urbanisation is taking place fast and industries are being established. So the conduct of the survey would be difficult. If the survey is carried out earlier, the information can be utilised later.

BAPEX said it has found gas in five wells by drilling six wells. Gas from one of these wells did not seem to be profitable commercially.  Gas can be extracted from the remaining four wells. Drilling of wells could not be increased despite such success. BAPEX cannot run on its own decision.

BAPEX is to take approval from the energy division through Petrobangla for taking any project.

BAPEX is run by a board of seven members. Energy and mineral division secretary is chairman of the board. It includes chairman of Petrobangla, PMO DG-3, PM personal secretary-2 and BAPEX managing director. There are two members outside the government. One of them is a geologist, a teacher of the geology department of Dhaka University. Another is an expert from the technology sector.

BAPEX board member geologist Md Anwar Hossain Bhuiyan said it is not a failure if gas is not found in any well. It cannot be said the wastage of money. If gas is not found in any well, information at least can be found. If it is ascertained there is no gas, the area can be utilised for another purpose. So the explored wells are useful. It needs to come out of the mindset to drill a small number of wells out of risk. The government should not be reluctant in such an investment. BAPEX has to undertake projects.

Md Anwar Hossain Bhuiyan, who worked in different countries over a decade, said it would require Tk 50 billion to drill 20 wells each Tk 2.50 billion.

If only 200 billion cubic feet of gas is found in one well, the price fixed by the government at the production level is Tk 650 billion. The price is Tk 260 billion at the current rate in the global market. If one trillion cubic meters of gas is found, the price will stand at Tk 1000 billion.

Experts said administrative and financial issues are two impediments for the progress of BAPEX. BAPEX does not run on its own decision. It depends on the energy division. It is not possible to grow as a big company in this way.

And not having a funds to implement projects is a financial hindrance. The wages of Indian gas company ONGC is twice that of national pay scale. But in Bangladesh the BAPEX officials receive a lesser salary than the national pay scale. So, the people with merit do not remain here and join multinational oil-gas companies with high salaries.

BAPEX officials said TK 3500 million to 4000 million may be required to buy a state of the art excavation machine. They are saying, such a machine can be used for at least 20 years. The machine that was bought in 2012 cost TK 2500 million.

There are enough experts in BAPEX. The organisation cannot work independently. The gas fields they have discovered are being drilled by Gazprom at higher costs. The progress of the company is being blocked. The company that brings in gas worth billions of dollars does not get investment. A vested circle probably does not want to see the BAPEX achieve its capacity. In this way it cannot become PETRONAS or NGC.