Bangladesh opens its gas fields to US company

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Saturday, 31 December 2011 09:45 David Bergman

New AgeThe United States multinational energy company ConocoPhillips will soon start looking for gas in a deep offshore area in the Bay of Bengal.

With a short fall in the supply of gas and with declining reserves, the Bangladeshi government is desperate to find new supplies of gas. It is the first time that the government has opened up its offshore territory to foreign exploration. However, some are criticizing the government for signing this new deal with an international oil company.

David Bergman hears from both sides.

Bangladesh not only uses gas to fire its power stations to produce electricity; gas has also become essential for many other parts of its economy.
Ijaz Hossain, is one of the country’s leading energy experts and a director of the country’s own gas exploration company, BAPEX.

“Because of our cheap and rather plentiful supply of gas for a long time, almost all the economy now relies on gas, and our food security is very much dependent on gas. We have built a huge network of pipelines in Bangladesh to supply domestic gas to various users in urban centres. So if you look at all these things, the economy and the country is very much gas dependent and gas reliant. So if we don’t have enough gas our economy would definitely suffer.”

However, with the country’s energy requirements increasing at the same time as its known reserves decreasing, Bangladesh will face a crisis unless it can discover some new large gas fields.

Ijaz explains why he thinks the government cannot simply rely on its own exploration company to find new gas fields.

“On shore, the government company called Bapex is quite capable of doing exploration, but right now to get the exploration going to the level required to hold our reserves at a healthy reserve production ratio would require about ten drillings a year and they do not have the manpower, even if you give them the money to buy things, they do not have the manpower to do more than three drillings per year, so we do need a considerable amount of Independent oil companies operating in Bangladesh.”

When it comes to offshore exploration of gas in the Bay of Bengal he is even more adamant that this is a job for foreign companies.

“Bangladesh simply does not have the capabilities to do exploration in deep offshore. Even in shallow offshore Bangladesh’s capabilities are far below what is required to do a good exploration.”

The government agrees and early this year signed a deal with the US company ConocoPhillips to undertake exploration in the Bay of Bengal.

This is the first contract a foreign company has been given regarding offshore gas exploration.

Dr Hossain Mansur is the head of the country’s oil and gas corporation, known as Petrobangla.

“If the field is small then Bangladesh will get 55% of gas and Connoco Philips will get 45% and if they discover a very big gas field Bangladesh will get 80% of gas and Conoco Philips will get 20 per cent. So we have protected our own interest.”

However a vocal and organised group of citizens called the Oil and Gas Committee is critical of the contract.

Their main concern is that the terms of the agreement will allow the company to export its share of gas rather than selling it to Bangladesh.

M. M. Akash, a professor of economics at Dhaka University, is a leading supporter of the group.

“There is a scope for export of the gas. It is subjected to certain conditions which seem apparently to make it impossible for them to export gas but with our previous examples of leniency on the part of Bapex and the managers, and the incentive for IOC to export, with these two different forces, which will come into operation when the actual gas will be explored and found. If we keep a clause which gives them an opportunity, they can somehow manage it in favour of them for export. And that should not be allowed.”
He thinks that any possibility of export threatens the country’s energy security.

“If the government passes a bill in the National Assembly that 50 years gas use should be stored first for energy security and only after that, if there is surplus, we can export, if that kind of bill or policy is approved in the parliament then we have nothing to be worried about the deal.”

However leading energy expert Ijaz, disagrees with the argument that exporting gas will harm Bangladesh.

“Export scenario will only come in if these companies are able to discover a whole lot of gas, and nobody actually believes that there is a possibility of finding that amount of gas. But if they do, if a lot of gas is discovered that is not a bad thing for Bangladesh, as it means we have enough for the country and excess to export. Lot of people argue that this is a short term surplus, because we will need it later. But this is a scenario for any country which is exporting. Indonesia has been exporting oil for a long time but now beginning to import. At the time they were exporting, they could supply cheap energy to the economy, and their economy grew. Now they are capable of absorbing imports. So I think this comes from a kind of resource nationalism of certain groups of people in the country who do not want in any circumstances any natural resource being exported.”

Professor MM Akash is happy to be termed a nationalist.

He thinks that when it comes to natural resources like gas, governments must be nationalistic.

“In case of renewable resources which can be reproduced again and again you can afford to be exporter, but which is non-renewable, the price of which will continuously increase, over the time and in the whole world everybody is protecting that for themselves because if they spend it lavishly now, in future they will have to buy it at at three times or four times more price. Even America is not exploring their own gas fields, they are buying it. India is not doing that. China is not doing that. They have enough gas. But still they are importing. Why are they doing it? Because it is a non-renewable resource. For the non-renewable resources, the nation must be nationalist.

It will be many years before the country finds out whether the US company has discovered gas in the Bay of Bengal, and if there is a discovery even longer before the country benefits from it.
With frequent power cuts, and an acute lack of fertilizer, for many in Bangladesh the discovery of a very large gas field could make a big difference to their lives.

It could however also mean the beginning of a big political fight in Bangladesh over what should happen to any surplus gas that the country can not use.

Page on Oil and Gas in ShahidulNews

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