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Floating on gas but flouting its growth!

Given our technological and management endowments, foreign investments should be welcomed without surrendering national interest. At the same time, national institutions should be strengthened or connected with foreign companies as joint ventures. Periodic rise in prices should reflect true opportunity costs, thus, siphoning back the surplus for new discovery and development of the energy sector.
WE drove to Birashar, Brahmanbaria, where Bangladesh Gas Company Limited (BGFCL) is located. BGFCL is the largest gas producing company in the country, and owns 6 gas fields with Titas topping the list. The other fields are: Habigonj, Bakhrabad, Narshingdi, Meghna and Kamta.
As I could glean, the fields have recoverable gas reserves of 10.4 TCF and the cumulative production stood roughly at 4.5 TCF (till 2005). The wells of the fields have an average depth of 10 thousand ft or so. They are called "sweet gas," with about 96% of methane in the wellhead.
But "sweet gas" can sometimes turn sour, other things not being equal. A natural gas expert told me that a total of 14 TCF of gas was discovered in the preindependence period and only 6 TCF could be added during the whole post-independence period. We have already consumed 7 TCF -- more than we ourselves produced. That means, taking facts at their face value, not much of a breakthrough could be in evidence in enlarging the size of the cake, although we have been swallowing the cake with comfort and carelessness.
In 2001, we were up on feet for exporting gas to neighbouring nations and in 2008; wc are des- • perate to import gas from others. During the last five years, more than one minister/advisor, and almost a similar number of secretaries, changed chairs dealing with gas related policies. But, as usual, gas seems to groan under grievous games.
As a student of economics, I find a serious flaw in our gas pricing. Gas is seriously under-priced in Bangladesh compared to its close substitutes. Our team in the gas fields sat with some local elites and asked them: "How much would you like to pay in the face of a disconnection due to unavoidable reasons, say gas shortage?" They unequivocally echoed: "A maximum of Tk.900/per month from the current level of Tk.400 per month." The next question was "why?" The answer revealed the basic economic principles: "Because we cannot go back to traditional fuels due to severe shortage of such fuels, and even if we do so, we shall have to incur a cost of Tk.1000 or so per month for cook-
ing with alternatives. Besides, economy of time, flexibility in food intake, cleanliness etc. are some of other factors fueling the maximum price."
In the neighbourhood village, a woman told us that she used to send her secondary school going daughters for cooking in a neighbour's burner, suffering social shame and stigma. But now that she has an access, she also allows her in-laws to use the burners.
In Dhaka city, car owners spend Tk.100 on gas for a drive that would have cost Tk.600 by alternative fuel. This causes distortions in demand and misallocation of resources. Only cultivators of paddy should be subsidised for the cost of die-sel/electricity and fertiliser, and the rest of the society should pay the actual price for gas. Otherwise, a day may soon arrive when the goose would not lay golden eggs any more!
It is being argued that Bangladesh is "floating" on gas, and that gas greases economic growth. Rhetoric aside, the reality is that, so far, only one-tenth of households have access to gas; another one-third has access to electricity -- mostly produced by
gas. At the moment, power and fertiliser claim roughly two-thirds of total gas supplied, industrial units about 1? percent, domestic about 11 percent and captive 9 percent. Region-wise, the whole of the North and the South remain outside the orbit of natural gas, and pervasive poverty prevails in those regions.
As we could gather, BGFCL paidTk.l,5670 million in 2004/05 to the government in the form of SD, VAT, dividend and income tax. Presumably, the gas sector was the largest tax- payer to the government till few years back The most pertinent question is: how much of that was poured back to the sector for exploration and development (including human resources development)? Can we not make a vibrant gas sector with our own resources? That would, of course, demand a cut on "unproductive" expenses of the government.
However, we were impressed by the hard work of the field level staff and, supposedly, they are no less efficient that those in lOCs. The recent seepage in a well of BGFCL gas field and the efficiency with which it was dealt with speaks of the quality of our
field level officials. The disturbing well was "killed" to keep four of the neighbouring wells alive. In monetary terms, Tk 2700 million was saved by forgoing Tk.900 million!
But how much are these blokes being paid compared to their counterparts elsewhere, and how many of them have been sent abroad for training or acquisition of skills? Sadly, we smell a rat in the whole process. For example, lOCs pay about $1.7 million each year for human resources devel-opment. If it had been properly administered, by now, Bangladesh should have been blessed with a basket of technical hands of international standard.
Unfortunately, like in other projects, unproductive sources seem to have stolen the cream to "enrich" themselves, thus, putting our gas sector in peril. Bapex is paralysed due to paucity of funds and trained manpower, some of whom have left the country for a better fortune.
On the other hand, there is, allegedly, a big difference in the prices that government pays for gas from lOCs and domestic companies. Although there has been some modest improvement in the downstream side of the channel in terms of transmission and distribution, almost nothing has emerged in the upstream side in terms of discovery of gas fields, inshore or offshore.
By and large, the government needs to build up strong and competitive indigenous institutions to deal with gas. Rice and gas cannot be left to the whims of
international companies or to the private sector alone. Both the government and the private sector should play on a level playing field. Neither "hands on" nor "hands off" policies, but an optimal mix of the two could possibly provide us with a winwinsituation.
Given our technological and management endowments, foreign investments should be welcomed without surrendering national interest At the same time, national institutions should be strengthened or connected with foreign companies as joint ventures. Periodic rise in prices should reflect true opportunity costs, thus, siphoning back the surplus for new discovery and development of the energy sector.
The bottom line of the message from available statistics is that Bangladesh will go out of gas within the next few years unless backed up new discoveries. Th^ demand for gas had been growing at a much faster rate on the heels of heightened oil prices now peaking at S130/barrel. Only proper policies pertaining to exploration, pricing, transmission and distribution could save us from upcoming problems. Bangladesh may float on gas at the moment, but lack of accurate vision and proper policies might flout our dream of a high growth and rapid poverty'reduction.
Abdul Bayes is a Professor of Economics at Jahangrimagar University