It is not possible to derive any benefit from the prevailing lower spot price of Liquefied Natural Gas (LNG) through following the Public Procurement Procedure (PPR). The sellers normally offer good price with the validity of 3-5 days only. The price gets higher in case of longer period of the validity. Petrobangla asking for 21 days of price validity. Luckily the first spot consignment received by RPGCL/Petrobangla got a good price but in most cases under Master Sales and Purchase Agreement (MSPA), the price validity having more than 5 days of validity will be costlier as compared to the long-term contract price. Hence, for deriving benefits from the spot quotations, the purchase committee should approve a block allocation for at least 6 months for RPGCL/Petrobangla.
Engr. Md. Quamruzzaman, former Director of Petrobangla, said this in an exclusive interview with Energy & Power Editor Mollah Amzad Hossain.
Supplying primary fuel especially natural gas is a major challenge for Bangladesh now. What should the energy companies do to achieve this?
The major consumer of natural gas in Bangladesh is power generation. There must be a proper coordination between the power and energy sector. A power plant can be built if you have money, but discovering new gas fields and increasing the production of gas is always uncertain. So, setting up targets for gas-based power plants in PSMP must be in consultation with Petrobangla. I suggest to have an integrated Energy and Power Sector Master Plan (E&PSMP) instead of two separate master plans – ESMP & PSMP. This will reduce the mismatch between target and achievement. Indigenous gas supply starts declining. If new discovery is not there, the supply from our own gas fields will be stopped in near future. So, we must expedite our exploration campaign in the pursuit of own petroleum resources for increasing own gas reserve. On the other hand, capacity of the alternative primary fuels like LNG, coal, liquid fuel will have to be increased. we must not rely on a single primary fuel.
We must develop enabling infrastructure for importing coal, LNG and other primary fuel. This will ensure flexible opportunity for switching to alternative fuel as and when required. At this moment the price of LNG is cheaper. To take the advantage we should import LNG as much as possible and start working on increasing the storage capacity.
Inefficiency, corruption and irregularities must also be removed from the gas sector. Efficient use of gas in the industrial and commercial sectors needs to be ensured. Gas leakage has to be stopped.
According to the GSMP and Petrobangla projection, own gas production will start depleting at a faster rate from 2025. Imported LNG contribution would continue to increase. If no large gas resource is discovered by 2041, reliance on imported fuel would become almost exclusive for meeting 6,000 MMCFD of projected gas demand in 2041. What should Bangladesh do to meet this challenge?
For mono fuel dependency over a long period of time, almost the entire economy became exclusively gas dependent. Now efforts are ongoing for meeting the deficits through LNG import. At this moment, LNG import capacity is 7.5 million tonnes (mTon) per year. The capacity would be 17.5 mTon by installation of the proposed land-based LNG terminal at Matarbari by 2026. One of the advantages of land-based LNG terminal is that if you start the terminal with 15 mTon, this capacity can be increased upto 30/35 mTon depending on the free space/land you have. RPGCL have a very good LNG team who have the ability to procure LNG in a week from the spot market if proper approval is in place. However, we must explore all alternatives alongside of the own gas and LNG, like own coal, imported coal, imported liquid fuel, and others. If we can build up enough capacity of primary fuel with a margin of 20%-25%, we will be able to optimize the energy mix considering the economics. This will ensure the targeted primary fuel supply upto 2041.
Now the entire import is being done through Chattogram port. We must set up import infrastructure along our coast in other feasible locations. This will ensure security of supply.
Onshore petroleum exploration under PSC is virtually remains standstill for almost two decades. BAPEX was given exclusive responsibility for that work. But they failed to live up to expectations. What policy the government should adopt for exploration in complex structures and high-pressure zones in the deeper prospects?
I have no issues with BAPEX carrying on onshore exploration in their assigned blocks and ring-fenced areas. BAPEX is competent for seismic surveys, explorations in simple structures, development wells and work over wells. But it is not competent for carrying out exploration in the tighter complex structures in the greater Chattogram region, deeper prospects and South Western regions of Bangladesh. The government may go for engaging IOCs through PSC for exploration in those regions.
Several years have whistled by since resolution of Maritime Boundary disputes with Myanmar and India in the Bay of Bengal. Bangladesh did practically no works of exploration at all. Why it happened? What are your suggestions now?
There is not enough quality seismic data in the Bay of Bengal. In absence of proper data, IOC’s will not be interested to offer attractive bids for exploration. In 2014, when I was Director (PSC) of Petrobangla, took an initiative for engaging contractor for multi-client survey in the offshore to conduct marine 2D seismic survey on Non-Exclusive Multi-Client basis. The objective of the survey was to provide the oil and gas industry with Non-Exclusive Multi-Client seismic data of the offshore areas in order to help basin evaluation, prospect generation and robust bid round participation. Petrobangla does not need any investment for this data acquisition. But it took long 5 years to finalize and select the contractor. Though a contract has been signed, work could not be started because of CAVID-19.
Most of the sector-related experts in Bangladesh are now aware of the bright prospects for discovering gas and oil in offshore blocks adjacent to Myanmar boundary. The Block SS-21 was awarded to POSCO DAEWOO in 2016 and they are working there. Recently, Petrobangla finalized new revised model PSC. Without waiting for multi-client surveys, Petrobangla should immediately announce PSC bidding round for blocks adjacent to Myanmar blocks. Of course, there is uncertainty to get bids because of the present oil price situation. But we can try.
Two years from now, it was thought that Bangladesh would import LNG using 5/6 Floating Storage and Regasification Units (FSRUs), but later changed the strategy to restrict it to 2 only. These are in operation now. Land-based LNG terminal is planned for Matarbari. Can this alone meet the future requirement of LNG? Is there any possibility of setting up land-based LNG at any other location than Matarbari?
Please note that right from the outset, Petrobangla was interested for only one FSRU. Later it had decided for two. But, suddenly pre-MOU/MOUs were signed for more FSRUs one after another. Huge financial stress could be created if these were implemented. But for appropriate decision of the Prime Minister at the right moment, these were all cancelled.
It has now become imperative for setting up land-based terminal on priority basis. A piece of land was allotted to RPGCL for land-based LNG terminal at Matarbari. For a start, 15 million tonnes annual capacity terminal would be set up there. It is expected to start commercial operation by 2026. Eventually, the capacity can be increased to 2 /30 million tonnes. Two FSRUs together now have a capacity of 7.5 million tonnes.
Petrobangla targets to creating LNG import capacity of 4,500 mmcfd by 2041. Matarbari has enough space. But all import must not be made through one location. For long term fuel supply security, there should be one more land-based terminal at Payra. Tokyo Gas in its report considered Payra is not suitable for land-based terminal. In 20 years of time, nobody knows new technologies and changed scenario of ocean will not alter cases.
Qatar Gas and Excelerate Energy have given a proposal for a terminal and regasification unit 40 kilometers away from the coast in the deep water. The government has not taken it up for consideration as yet.
How optimistic are you about the selection of land-based terminal construction contractor at Matarbari? Will it be possible to conclude contract in 2021?
I find no reasons why contract cannot be concluded in 2021. Some 12 companies have responded to the Expression of Interest. Lists have been evaluated. The RFP has been prepared by Tokyo Gas which might be required slight modification. Maximum 6 months will require for site-based feasibility study. If no further disruption due to COVID-19, RFP can be issued early next year. I think, it will be possible to start physical works of Matarbari LNG terminal early 2022 after concluding contract with selected contractor.
Bangladesh is importing LNG under both long-term contract and spot market agreements? For getting LNG at competitive price and ensuring security of supply, what Bangladesh needs to do?
Bangladesh has signed two long term contracts with Qatar and OTI for importing total 3.5 mTon of LNG. There is a scope for renegotiation of terms including price in both the contracts. This provision may help keep the price under affordable limit. In 2015 when Indian economy came under serious stress for not getting the low LNG price for global oil market crash, India took this opportunity to renegotiate their contracts for LNG purchase with Qatar and save the huge cost. However, for importing LNG at competitive price, the government must have long term, short term and spot price contracts. Recently Petrobangla/RPGCL starts procuring LNG through spot quotations, which is a very good step. Normally around 20% of total LNG import should come from spot.
However, it may not be possible to derive any benefit from the prevailing lower spot price of Liquefied Natural Gas (LNG) through following the Public Procurement Procedure (PPR). The sellers normally offer good price with the validity of 3-5 days only. The price gets higher in case of longer validity period. Petrobangla is asking for 21 days of price validity. Luckily the first spot consignment received by RPGCL/Petrobangla had a good price but in most of the cases under MSPA with price validity, more than 5 days will be costlier as compared to the long-term contract price. Hence, for deriving benefits from the spot quotations, the purchase committee might approve a block allocation for at least 6 months for RPGCL/Petrobangla.
To reduce the price volatility, Petrobangla may also go for hybrid pricing. The price of 60%-70% of the contract quantity could be fixed on the basis of Brent price and the rest 30%-40% on the Henry Hub price.
In the recent times, there are some suggestions for going big for LNG-based power generation by reducing dependence on coal. That will make Bangladesh mono fuel gas dependent once again. What are your views?
The PSMP’16 prescribed a fuel mix. But there is a scope of reviewing it under the changed circumstances of fuel price movement in the global market as well as for other reasons. LNG option now appears attractive in view of low price in the global market. But the fuel mix plan must not be changed now. Before considering any change, comparative price advantage of fuel must be weighed.
It is being told that Petrobangla and the companies now have acute shortage of competent manpower. Hence they cannot provide expected services. What are your views? What are your suggestions for coming out of this?
The energy sector was way ahead of power sector in 1980’s. Now the situation has completely reversed. Failure in providing proper atmosphere in the organization and non-recognition of hard works, professional achievements, proper compensation package for the newly recruited employees, has led to frustration and massive brain drain from the energy sector. Can you imagine persons having degrees from well recognized universities, serving in Petrobangla with good reputation for more than 30/40 years, contributing in energy sector achievements, even then they are not so-called qualified for the top policymaking position of Petrobangla. This has reduced the capacity of the energy sector.
Regular recruitment of engineers, geologists, geophysicist and other professionals and keep them in this sector to build up their professional career is very important. In 2018, I recruited more than 34 different professions including engineers from BUET in RPGCL. But within the first year of recruitment, 8 left the company and still the leaving process is going on. Most of them are settled in BCS and power sector companies. Energy and power both are in the same ministry, but still the pay structure of power sector companies are much more attractive than that of the energy sector. Upon assurance from higher authorities, I tried to revise the pay restructure of RPGCL in line with the power companies and placed my proposal to the authority. But still it is pending. BAPEX also tried, but failed. Why? We have to find out the answer. How can you expect that Petrobangla and its companies would grow in competence if the quality manpower cannot be retained and properly manned.
