The Gas Transmission Company Limited (GTCL) has been compelled to make significant investment to expand its transmission pipeline without conducting proper network analysis, putting the state-owned company at high risk of getting insolvent. It has extended the national gas grid to Khulna but the supply could not be started even in 8 years of making the infrastructure ready. Some other pipelines are also being operated at well below their respective designed capacities. The situation created due to much delayed implementation of LNG import and failure in increasing own gas production through exploration.
Md. Muqtadir Ali, former Chairman of Petrobangla and BPC, made the observation in an exclusive interview with Energy & Power Editor Mollah Amzad Hossain.
What is your evaluation about the present state of Bangladesh gas sector?
Around 1,600 MMCFD out of the 2,750 MMCFD gas is now being supplied by the International Oil Companies (IOCs). The remaining 1,150 MMCFD is coming from Petrobangla companies operated by the National Oil Companies (NOCs). The production is depleting from all the gas fields. It is now being apprehended that within the next 2-3 years, the total production capacity may come down below 2,200 MMCFD. On the other hand, the gas demand may exceed 4,000 MMCFD by then. From the present scenario and preparedness, it appears that import of additional 2,000 MMCFD of LNG would not be possible. Required initiatives for increasing own production through expediting exploration campaign are also missing. Consequently, a chaotic situation is being apprehended.
It is being often told that there is a lack of coordination among gas production, transmission and distribution entities. How would you react if it is mentioned that the gas sector is going through troubled waters without a captain?
I would not disagree. There is no alternative according to the availability of gas resource and its optimum use. Some examples can be cited here as reference. GTCL has been asked to expand the transmission infrastructure for Khulna region in 2009 and it was completed by 2012. But till now gas could not be supplied and it is uncertain when it would start. But GTCL is paying the DSL as the project was implemented with a loan from Asian Development Bank. In such a dismal scenario, GTCL is working to expand the grid to Saidpur through Rangpur from Bogura. It also remains uncertain from where the additional gas would be made available for the customers of these regions. It appears that there is no coordinated action plan of Petrobangla for meeting these challenges. There is no other alternative to piloting the gas sector along the right route without positive action plan of Petrobangla.
It is being alleged that a huge investment has been made in expanding gas transmission infrastructure without detailed techno economic feasibility studies. Consequently, gas supply could not start in some areas and some other infrastructure are being operated at well below the designed capacities. These have put GTCL financial condition under huge stress. What are your views?
Yes, GTCL has already become sick and would become even more sick. Such situation has been created due to imposing decisions on GTCL from the top without conducting detail network analysis. The construction of 30 inch OD Maheshkhali - Anowara transmission pipeline hurriedly was a huge mistake. Within a year or two, another 42 inch OD pipeline was constructed. If the 42-inch OD pipeline was constructed at the first instance, it could have transported 1,500-1,600 MMCFD of gas and it was good enough to serve 10-12 years and thereafter a second pipeline could have been installed once the demand exceeded 1500 MMCFD. Now both the pipelines are remaining underutilized, resulting in financial stress on GTCL.
Moreover, without arranging gas for supplying to Kushtia, Jessore and Khulna region, the transmission pipeline is being built from Bogura to Saidpur through Rangpur. The result would be that all these pipelines would remain underutilized or not supplied with gas and this would throw GTCL into greater financial difficulties in future. In addition, the very purpose of extension of gas pipeline facilities would be frustrated.
The distribution companies have disconnected about 100,000 delinquent domestic consumers over the past few months. It is being told that around 300,000 more such illegal customers are still using gas. Experts blame that flawed policy and lack of supervision and monitoring let this to happen. Around 100-150 MMCFD of gas is being pilfered from the system. What is the remedy?
I strongly support the government’s decision not to give any new gas connection for domestic use as there is alternative to piped gas. Apart from continuing with the decision, even gas supply to all legal domestic users should have been stopped by giving a certain deadline. LPG should be the cooking fuel all over Bangladesh. People lean towards taking illegal gas connections in gas franchise area due to the present higher price of LPG. The price of pipeline gas should be increased in phases especially considering the higher import price of LNG as well as equivalent price of LPG and subsidy be given to the LPG users to match the piped gas and LPG prices.
Political and local muscle power participates in the illegal gas connection process. Titas Gas and other distribution companies can no longer completely eliminate this nuisance. Legal actions must be considered. Without exemplary punishment, such acts cannot be done away with. For such illegal acts, entire community around leaking gas distribution system are at greater risks of accidents apart from loss of revenues.
Do you think that failure in taking appropriate decision for oil and gas exploration hastened the LNG import?
We have to focus on three aspects here. Initiative for LNG import was taken in 2009 and in 2010, the Prime Minister had directed the Energy and Mineral Resources Division to explore import of LNG from Qatar. Initially it was planned that LNG import would be made effective through installation of FSRUs and at the same time land-based LNG facilities would be installed. But unfortunately, the actual import through FSRUs could be made in 2018. Such a long delay is completely unacceptable. It should have been started as early as 2012. Though the gas production could be increased from the already discovered reserve, not enough initiatives were taken to explore and discover new reserves. No initiative was taken to exploit coal reserve to relieve pressure on the gas. Rather very inappropriate and unacceptable action was taken for setting up of imported coal-fired power plants. The cost of coal import in Bangladesh is relatively higher due to shallow draft in the coast.
Works on setting up of land-based LNG infrastructure could not also be advanced at required pace for meeting the future needs.
There is hardly any option now but importing LNG to meet the deficit. Is Bangladesh proceeding with appropriate preparation?
Please note that imposed decisions always cause delays in project implementation. The reasons as to why implementation of the first FSRU took 9-year time should be identified. This will pave the way for timely implementation of the future projects. In the past, senior bureaucrats used to take opinion from the technical experts. But now the projects are imposed on the executing agencies without taking their opinion. That is why such projects are always getting delayed and sometimes it is failing to achieve the desired goals. Failure in drilling 108 wells is one such project.
We have already fallen behind setting up of required infrastructure for LNG import. The situation for LNG import using planned land-based LNG terminal at Matarbari by 2024 is not at all encouraging. The government could encounter serious gas crisis if it is delayed like the FSRU.
Two FSRUs are in operation at Maheshkhali, Cox’s Bazar. Works for selecting an EPC contractor for a land-based LNG terminal at Matarbari has started. In the meantime, NWPGCL has formed a joint venture company with Excelerate Energy. They are working on the prospect of LNG import for using in a 3,600 MW capacity power plant at Payra, Patuakhali. It is being said that Petrobangla would be able to supply gas to Khulna and Barisal region after purchasing RLNG. What are your views?
Look, interested expatriate business houses consider Bangladesh as a test case. You may remember that an idea was floated to import LNG through setting up small FSRUs at CUFL and KAFCO jetty. Lot of time and energy were wasted on technically unacceptable proposition. Such a project has been implemented successfully in Hong Kong as they have the advantages of draft. But at Payra, the coastal area has such a low draft that this initiative is highly likely to fail.
The initiative of importing RLNG through pipeline from India for Khulna has also not been successful till now. The initiative for constructing some pipelines in Khulna and Jessore regions has been taken. The proposal of Excelarate for importing LNG at Payra through setting up LNG infrastructure at deep sea may be exorbitantly expensive. Nothing can be concluded before conducting detail feasibility study. But we must guard against any efforts for making Bangladesh a Guinea Pig.
Two oil giants – Total France and ConocoPhillips USA – after finding prospects for oil and gas in the deep water of the Bay of Bengal proposed for higher gas price through renegotiating the PSC. But they relinquished their blocks when their proposal was not accepted. Some observers thought that Bangladesh lost an opportunity there. What are your views?
Yes, I think Bangladesh has lost the opportunity by not renegotiating the PSC with the two oil giants. Total and ConocoPhillips had proposed for revising the gas price. After thorough studies, they thought the resources identified could not be profitably exploited at the gas price included in the PSC. But their proposals were not accepted. Their proposed price was less than what Bangladesh is now paying for LNG. Even in the latest version of the updated Model PSC for deep water, higher gas price has been included. If their proposals were accepted at that time, may be by this time success would have been achieved and other IOCs would have been encouraged for risking investment in Bangladesh offshore.
It may be mentioned here that Chevron had proposed to amend the existing PSC for going into deeper zone and sought an additional fund of US$ 2.00 million from Petrobangla for exploring the deeper horizon at Bibiyana Gas Fields. But rejecting that proposal, Petrobangla insisted that they would carry out exploration activities at the deeper zone, and did not approve Chevron’s proposal. Had it agreed to Chevron’s proposal, a new era could have been ushered in specially whether hydrocarbon is available or not in the deeper zones.
What should Bangladesh do now for expediting exploration at onshore and offshore? Should it be done through negotiation with IOCs or trying to attract IOCs through open bidding?
Please note that oil and gas exploration is a risky venture. There is no option but to offer enough data package for attracting the IOCs. Bangladesh does not have enough data which can attract the IOCs or even a joint venture partner. We have to acquire data and it should be reliable quality data. BAPEX should be provided with minimum required finance for developing rich data bank through conducting 2D and 3D seismic surveys in the onshore areas. BAPEX can be a proud possessor of such data especially for Rajbari, Shariatpur, Madaripur and Faridpur districts. IOCs would also become interested if such reliable data can be made available.
Oil price in global market is still in the lower range. It will be extremely difficult to attract major IOCs for making risk investments in Bangladesh at this moment through PSC bidding. The decision making process in Bangladesh is complex and protracted. Efforts for engaging IOCs may be made through establishing contacts with IOCs and diplomatic maneuvering.
