The operational losses of Petrobangla have increased substantially as the Bangladesh Energy Regulatory Commission (BERC) did not approve a gas price hike at the level sought by Petrobangla. In 2019, the average price of gas was Tk 9.69 per cubic meter. For phenomenal growth in the prices of LNG in the global market, we proposed to increase the price to Tk 20.35, but the BERC fixes it at Tk 11.91 per CM. The consequent deficit now stands at Tk 8.44 per CM. Absorbing this deficit has now become a major headache for Petrobangla. There is no other alternative to rely on subsidies.
Nazmul Ahsan, Chairman of Petrobangla, shared the picture of Petrobangla accounts in an exclusive interview with Energy & Power Editor Mollah Amzad Hossain.
What is the major challenge in the energy sector, particularly in the gas sector? How are you planning to overcome the challenge?
Importing LNG to make up the gas supply deficit is the main challenge now. A record spike in the price of LNG in the spot market has created the problem. Bangladesh had no other choice but to suspend LNG imports from the spot market. Till June 2022, about 200-250 MMCFD equivalent LNG is used to be imported from the spot market. Another 500 MMCFD comes from long-term contracts. The recent actions have made it possible to supply 2900 MMCFD gas to the national gas grid. Supply rationing and demand staggering are applied as contingency measures for managing the deficit. In the endeavor for increasing production from local fields, Chevron could add 50-60 MMCFD from Bibiyana. Efforts are ongoing too to increase production from other fields by 2025. Achieving the target is undoubtedly a big challenge.
Another challenge is to disconnect delinquent and illegal users. An all-out action is continuing. The success achieved so far is 507% of the API-set target.
The LNG import capacity now is 1000 MMCFD (7.2 million tonnes annually). By 2030, we have a target to import 3000 MMCFD (21.6 million tonnes annually). We are aware of the challenges but optimistic about achieving it.
Petrobangla reports 2252 MMCFD gas requirements for meeting the full demand of grid-connected power plants but only 900-1000 MMCFD is being supplied at present. Is it really necessary to supply such huge gas for generating only a little over 11,000MW power?
Please note that Bangladesh Power Development Board (BPDB), not Petrobangla, prepares and makes the gas demand projection for power generation. Petrobangla report reflects only the demand placed by 6 gas distribution utilities as per the advice of BPDB. From our experience, we can state that there remains no such stress when it is possible to supply around 1,200 MMCFD of gas. In the recent past, the supply came down to 1000 MMCFD. We are endeavoring to increase it. Petrobangla is continuously requesting the BPDB to bring in all their fuel-efficient combined cycle plants into operation. It cannot be claimed that this is being done now.
There is a plan to add another 11,282MW gas-based power generation capacity over the next 7 years – meaning up to 2030. What are the preparations of Petrobangla for ensuring the additional gas supply? Have you given any gas supply guarantee to BPDB?
There is a committee of officials from the energy and power divisions for scrutinizing and assessing gas supply to new plants. A Gas Supply Agreement (GSA) is concluded based on their recommendations. Pledges have been made for gas supply, but no GSA has been concluded yet. Efforts are ongoing to increase gas production and develop new infrastructure to import additional LNG. Supply to new gas-based power plants is contingent upon increased gas production and increased import of LNG. There is no other magic beyond that.
Petrobangla is working on developing new import infrastructures to increase LNG imports. How long would it take to conclude the agreement with Summit Group for 3rd FSRU? At what stage is the negotiation with Excelerate Energy for the floating LNG terminal at Payra?
Two committees are now negotiating with two project proponents for two LNG import infrastructures at Moheshkhali and Payra. The emerging global scenario has created a huge challenge in getting FSRUs now. But negotiation is continuing. After reaching some conclusive results at Petrobangla, the matters will be forwarded to the EMRD for further necessary actions. But no definite time frame can be given at this stage.
We have been told that the Land-Based LNG Terminal (LBT) at Matarbari will be available for operation by 2027. But it is also being heard that Chattogram Port Authority (CPA) is now interested in developing the LNG terminal instead of RPGCL. What is the actual status? Will LBT be set up on time?
CPA is not at all involved in LBT construction. RPGCL has been tasked with the responsibility to implement the project under Built, Own, Operate and Transfer (BOOT) mode. Petrobangla has been sanctioned 45.23 acres of land for LBT construction. Land acquisition is at the final stage now. Other ancillary works are also proceeding in parallel. RPGCL short-listed 8 companies for the work. A consultant-prepared Request for Proposals (RFP) has been given to them. The time for submitting the proposal has been extended till December 2022. We expect to conclude an agreement with the successful bidder by 2023.
Another 6 KM channel will be added to the existing channel. The sand available in the process will be used in land development. Physical construction will start after land development. At this stage, completion of LBT is unlikely to happen by 2027. At least another year may be required. The first unit will have 1000 MMCFD capacity, subsequently up to 2000 MMCFD capacity will be added.
At what stage is now the LNG import initiative from India? Have you received any proposals for LNG import and marketing? Our knowledge is that a local company in association with Saudi Company has submitted a proposal for RLNG supply to the Western Region of Bangladesh by pipeline through importing LNG from India.
RPGCL formulated a draft Gas Purchase and Sales Agreement (GPSA) and sent it to H Energy India for their feedback. Efforts for importing about 200 MMCFD of RLNG are being made under this initiative. Taking note of the H Energy proposal, the GSPA will be updated and upon approval by the EMRD, the agreement may be signed. We had a meeting with a local company for LNG import and marketing. But no formal proposal has been submitted to Petrobangla. We are not aware whether any such proposal has been submitted to EMRD or the PMO. Petrobangla will encourage such a proposal, as it will relieve Petrobangla to some extent from LNG import obligations.
What initiative have you taken for increasing the volume of LNG imports under long-term contracts? Is there any good news? Petrobangla is now purchasing LNG from Qatar and Oman under long-term contracts. What are the terms (contract periods) of these contracts and how much LNG Petrobangla is purchasing annually from each of these? We heard you started negotiation with Qatar for expanding the volume of the contract. What is the status of the negotiation?
We are closely monitoring the global market situation of LNG and keeping an eye on the development. But nothing is under our control. Under long-term contracts, Qatar is supplying 2.5 million tonnes per year and 1.0 million tonnes per year coming from Oman. We gave a proposal to Qatar for increasing the volume. But no response has been given yet. Another team from Bangladesh will soon go to Qatar to discuss the matter.
An initiative has been taken to look for LNG from other possible sources. You are aware that RPGCL has MOU with several companies for supplying gas for supplying LNG. Each of them has been notified for supplying LNG under long-term contracts. Responses have started coming. But given the volatile nature of the global LNG market, we are not very optimistic about it.
You proposed to increase the gas price by 117%. But BERC raised it by 22.5%. How much subsidies Petrobangla will require for keeping gas production unaffected?
Petrobangla's system operation is now severely stressed for not getting the actual price of blended gas. You are aware that BERC determined the gas price in 2019 was Tk 9.89/cubic meter. We proposed to increase it to Tk 20.35/cubic meter. BERC did not accept our proposal. They increased the price by 22.8% against our proposal of 117%. The present price is Tk 11.91/cubic meter. Consequently, Ptrobangla is losing Tk 8.44 for every cubic meter of gas sold.
Own gas production depleted by 400-450 MMCFD over the last few years. It is now apprehended that it may deplete drastically in three years. You are working to increase production by 618 MMCFD during this time. Are you confident that the production at the present level can be maintained in 2025?
Please note that maintaining production at the present level is a great challenge. In our evaluation, we think production will deplete by about 200 MMCFD over the next three years. We are working with a vision of increasing production by 618 MMCFD through increasing production from existing fields and adding new discoveries through intensive exploration. We are optimistic that in 2025 our own production may stay at 2500 MMCFD. Besides, work has also started under long-term planning. That may yield some positive dividends between 2027 and 2030. We must bear in mind that domestic gas will not be available much longer. We have to keep our mission for gas import going.
There are many allegations against high system loss, theft and pilferage in the gas system. Petrobangla reports evidence of 93 BCF gas misused in the past financial year. What are you doing to get rid of the menace?
No time frame has been set to reduce or eliminate system loss. But a comprehensive disconnection drive has been launched. Some actions are taken not to reconnect the disconnected users. Punitive actions are being taken against company people and contractors found involved in the mischief. Dilapidated gas distribution lines are also being replaced in the companies’ franchises for reducing losses.
What are your preparations for oil and gas exploration in the Bay of Bengal? When can you invite a fresh bidding round? Can the company you engaged for Multi-client surveys complete its work before concluding the new PSCs?
For a host of reasons, no success has been achieved so far in offshore exploration. Companies like ConocoPhillips came and went back. Daewoo Posco has also relinquished its allotted blocks. ONGC is now working in two blocks. Petrobangla will announce fresh bidding round for offshore exploration in December. Wood McKenzie has been engaged in updating the PSC. Upon receipt of the final report, we will organize stakeholders’ consultations. Based on feedback, the model PSC document will be finalized. The multi-client survey contractor TGS-Schlumberger has been advised to commence work from February 2022.
We are optimistic about getting better responses from IOCs this time.
