***Natural gas reserves in Bangladesh offer the country a rare opportunity for unprecedented economic growth and prosperity. However, unless this resource is utilized with care, the danger of squandering the opportunity is real***

A large number of foreign companies, including some of the largest oil companies tn the world. have bid lor exploration/production opportunities tn Bangladesh Estimates of gas reserves range from 30 to 80 trillion cubic feet (tcf). At two US dollars per cubic feet it is worth 60 to 160 trillion US dollars. If proven, these reserves will be larger than those of either India or Pakistan.

This article briefly discusses several issues that appear relevant to the present situation. The authors hope that it will contribute to a dialogue that is absolutely essential to help the country choose a prudent course of action. The stakes are high and the gas reserves offer Bangladesh the opportunity to surmount the enormous economic hurdles she faces.

Key Exploration and Production Issues

Negotiations on a Block with Multiple Companies : This is likely to increase the competitiveness of the offers by . the bidders and help the government evaluators to judge the reasonableness of the estimates. for example, of potential reserves. However, the process can be time-consuming and lead to fragmentation. The following considers an alternative which may be better in the context of the present situation.

Consolidated Partnerships The current block by block

bidding and proposal process appears to have generated considerable controversy and confusion. However, the alternative proposed by some to award them multiple blocks may create monopolies that are not beneficial to the country. Consequently. oil companies who perhaps are currently competing against one another should be asked to form partnerships encompassing a number of blocks in each partnership. Several benefits will accrue :

• It will help provide a committed and sustained investment.

• It will reduce/eliminate the current spectacle of propaganda, intimidation, conspiracy theories, allegation of influencebuying. etc.

• This will result in fewer production sharing contracts (PSCs) for the government to manage, thereby minimizing the strain on regulatory and oversight bodies.

• The companies also benefit from such a partnership. It makes a project large enough to allow them to commit substantial resources while spreading the risk.

Partnerships suggested here have existed elsewhere in the world for quite some time. One example is WAPET (Western Australia Properties) between Shell. Chevron. Texaco, and Mobil. Similar partnerships exist on North Sea exploration and production where not only

several companies out several countries are involved.

A Systematic Oil Exploration and Production Schedule: An exploration and production (E&P) schedule for the whole country should be established. E&P should be planned, systematic, regulated, and phased in with the country’s economic development and resource utilization plans. The Issue of exporting the gas should be considered very carefully.

A Complete Plan: Each partnership should provide an agreement that clearly delineates plans for exploration. development. production, and abandonment of a lease. The associated safety issues, environmental impact, and remedy measures must be clearly defined in sufficient detail. These are discussed next.

SAFETY ISSUES

Gas production can be risky undertaking as evidenced by the recent accident In northeast Bangladesh. Procedures must be put in place to prevent such accidents and mechanisms must be defined to mitigate their effects if accidents do happen.

ENVIRONMENTAL IMPACT

Environmental contamination may occur in activities ranging from disposal of drilling fluids to disposal of well hardware upon abandonment of a lease. A simple example of a serious environmental impact would be the disposal of produced water that may contain radioactivity in harmful quantities. The radioactivity can contaminate the ground water and enter the food chain leading to human consumption and remain a threat for centuries.

These issues are particularly important in Bangladesh since much of the oil/gas exploration and production will take place on agricultural land or near densely populated areas.

In addition to disposing the water containing radioactivity, the borehole hardware must be disposed of in a safe manner to protect the workers.

All major oil companies have programmes to address safety ana environment Issues and Bangladesh can benefit from their experience. In addition, regulatory framework is either in place or is being developed In Western countries to address environmental issues on a continual basis. For example, the US Environmental Protection

Agency (EPA established effluent limitations guidelines on discharging produced water almost twenty years back. Bangladesh can adopt similar regulations.

ABANDONMENT

All wells and the associated structures such as platforms will have to be ultimately abandoned as their economic life ends. Companies must have a plan to address this issue and share the cost. The sea could be littered with abandoned platforms. The cost of platform disposal could run into hundreds of millions to billions of dollars. Many Asian governments that did not foresee this problem are grappling with it now.

Minimization of Land Use : Much of the onshore exploration will take place on fertile agricultural land or near densely populated areas. Land is scarce in Bangladesh and drilling a large number or wells will take away valuable land from other usage, such as food production. However, technology now exists to significantly reduce the number of wells by drilling extended-reach wells.

Extended-reach wells can also be valuable for accessing offshore reserves from onshore or with fewer offshore structures and with a reduced environmental impact. In California extended-reach wells are used to explore ecologically sensitive

tideland areas with strict controls exercised by the State Land Commission.

Social Impact: A large E&P activity can have a serious social Impact as well. Influx of a large seismic and production crew and of foreign workers can cause social tensions. Transportation and construction activities can disrupt rural life. Social diseases such as AIDS and VD’s can be Introduced. Companies and the government should include social impact assessment in their project planning.

Stakeholder Involvement: Since oil/gas E&P on the scale being proposed in Bangladesh can have a major environmental. land use, and social impact, stakeholders at different levels, including local governments and NOG’S, should be included in project planning and should be kept informed at various stages as the project develops. Failure to do so forced a major oil company to abandon a large petroleum exploration project in the rain forest in Ecuador In 1991. The company had discovered 200 million barrels of oil and proposed to build a pipeline thorough virgin rain forest.

Although the issues can be complex, they can be addressed adequately with appropriate planning. This will allow the country to derive enormous

benefits from the socioeconomic and infrastructure investments that many oil companies make in schools, hospitals, water purification systems, etc., in addition to the benefits that arise directly from the exploration and production.

Appropriate Regulatory Bodies : In order to get the maximum economic benefit, monitor compliance with the terms of the PSCs safeguard the public, protect the environment, and minimize use of scarce land resources,’ appropriate regulatory bodies, such as the US EPA or the California Land Commission may need to be established. In some cases a legal framework and an enforcement mechanism may have to be created to deal with these issues.

Since enforcement and possible litigation can be very complex, Bangladesh will need to develop a cadre of legal and technical experts to safeguard her interests.

Technology Transfer Plan : Technology transfer plans should be geared to : 1) in crease local participation in operations and management. 2) enhance local E&P capabilities, and 3) lead to growth of advanced research and development (R&D) in the country.

A petroleum industry project, from exploration to abandonment. uses a vast array of technical and scientific disciplines. Growth of advanced R&D in these areas will be very beneficial to the country. Tills can perhaps be best achieved by strengthening the Bangladesh Petroleum Institute.

possibly with industry partnership. and with participation from local universities and research institutions.

Choice of Operators : From news reports it appears that several major oil companies and small/medium independents have made bids for different blocks. While independents can provide certain advantages, the majors bring enormous resources in terms of funds, advanced technology, expertise, training of host country personnel. and R &D that others are unlikely to match. Also, large companies are in a much better position to handle the issues discussed above, with their associated complex safety, environment, and social aspects. Thus it will be preferable to have major companies lead consolidated partnerships.

Conclusions

Natural gas reserves in Bangladesh offer the country a rare opportunity for unprecedented economic growth and prosperity. However, unless this resource is utilized with care, the danger of squandering the opportunity is real. The present discussion points to the need to address a number of Issues to harness this resource beneficially. A national dialogue on and discussion of these and other issues, free from foreign interference, inducements and intimidation. Is essential to choose the best course.

The authors are oil and energy experts, with more than two decades of experience working in the industry and are now living abroad.