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Bapex revved up

Govt hikes gas sale rate to Tk 25 from Tk 7/mcf

Sharier Khan
For the first time the government has increased gas sale tariff for Bangladesh Petroleum Exploration Company (Bapex) to Tk 25 per thousand cubic metre (mcf) from a miserly Tk 7 to help the company financially grow, sources said
The government has also approved four drilling projects for Bapex in Semutang, Kapasia, Sundalpur and Srikail. "We also have allocation in the Annual Development Programme (ADP) for these projects," said a Petrobangla high official.
This is viewed as a major development since Bapex was given only a handful of projects since its inception 19 years ago.
The finance ministry took the decision on gas tariff increase following recommendations from Bapex submitted to the chief adviser in April.
Thi^ increase will not affect retail gas sale rate as it applies only to Bapex's earning from gas sale to the government.
Till date the government paid Bapex only Tk 7 per mcf and sold the same at Tk 93, thus financially depriving the national oil and gas exploration company since it came into being in 1989. In contrast, international oil companies get close to S3 (aroundTk200) per mcf.
Bapex's gas production cost is between Tk 25 and Tk 50 per mcf.
"This means if our gas production remains at the level of last year.
Bapex will earn Tk 37 crore this year. Last year Bapex earned justTk 13 crore by selling 536 million cubic feet of gas,” said a top official of Bapex.
Bapex last year earned Tk 89 crore mostly by providing services to oil and gas companies, while its expenditure was Tk 53 crore. This year's expenditure however is set to rise due to pay increase, and this will be met from the increased gas sale rate.
So far, Bapex was hardly given any project to help it grow. Due to sparse and irregular approval of exploration and development projects, Bapex only has a couple of producing gas wells, which supply only 31 million cubic feet (of gas) perday(mmcfd).
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Meanwhile, as the finance adviser has announced a seven-year special budget for Bapex, the company is taking preparations for some serious exploration ventures.
"It will take at least three years before Bapex can show some good results. We have financially starved for long. You cannot expect immediate results after announcing a big budget We need time to prepare ourselves," noted a high official.
Accordingly, Bapex is procuring some equipment for seismic survey and a rig for work-over of hydrocarbon wells.
Back in April, the managing director of Bapex in a presentation on his company to the chief adviser suggested increasing gas tariff to Tk 25 per mcf for the next two years, and then to Tk 50. With gradual rationalisation of gas tariff, by 2014-15 Bapex will not need any government support for any of its activities, it said.
His presentation focussed on Bapex's financial problems and how Bapex can become a self-reliant exploration and production company through immediate and midterm support from the government
Bapex also presented its plans to explore various hydrocarbon zones and undertake other work. These will require Tk 3,200 crore investment in the next seven years. The schemes include workover of Fenchugonj Well-3 and drilling a new well, procuring one workover rig, undertaking appraisal drilling of well in Srikail hydrocarbon structure, development drilling in Saldanadi gas field, Begumgonj Gas Field Development Project, drilling four exploratory wells in Block-8 and Block-11, Shailokupa Exploratory Well Drilling Project, Jaldi Exploratory Well Drilling Project and Sitakund Exploratory Well Drilling Project.
The chief adviser took the Bapex recommendations seriously, and actions followed. In the budget speech, the finance adviser announced a Tk 3.200 crore sevenyearbudget for Bapex.
In the past, successive governments had made big promises about Investment funds for Bapex but all those turned out to be hollow ones.