& çâÌæÚUæð´ ·¤è ¥ôÚU Îð¹Ùæ ÁæÚUè ÚU¹ð´ ¥ÍæüÌ ¥ÂÙð ÜÿØ ÂÚU ŠØæÙ ÚU¹ð´Ð ãæÚU Ù ×æÙð´, €UØô´ç·¤ ·¤æ× ·¤ÚUÙð âð ¥æÂ·¤ô ©gðàØ ·¤è Âýæç# ãôÌè ãñ ¥õÚU ÁèßÙ ·¤æ ¹æÜèÂÙ ÎêÚU ãôÌæ ãñÐ ÖÜð ãè ÁèßÙ ×ð´ ç·¤ÌÙè Öè ·¤çÆÙæ§ü €UØô´ Ù ¥æ°, çÁ™ææâæ ¥õÚU ©ˆâæã ÕÙæ° ÚU¹ð´Ð ŠØæÙ ÚU¹ð´, ÜÿØ ã×ðàææ ¥æÂ·Ô¤ Âæâ ãôÌð ãñ´ çÁ‹ãð´ ÂæÙð ·Ô¤ çÜ° ÂýØæâ ¥æÂ ·¤Öè Öè àæéM¤ ·¤ÚU â·¤Ìð ãñ´Ð

Time for policy review

M. Tamim
PETROBANGLA went for Production Sharing Contracts (PSC) in 1974 after it was incorporated. They were signed on the basis of 1974 Petroleum Act. Six companies did 31,000 km seismic survey and drilled seven wells. Kutubdia was discovered by Union Oil during this time. The second phase of International Oil Companies (IOC) coming to Bangladesh occurred after the serious gas shortage in late eighties. First round bidding took place in 1993 and second round bidding was held in 1997. The biddings resulted in 10 PSCs signed with the IOCs. As a result Sangu, Moulavibazaar, Bibiyana and Bangura fields were discovered. Currently eight PSCs are in operation.
Since the beginning of the IOC production in 1997, there has been no major dispute between the companies and Petrobangla. A serious difference in contractual interpretation between Petrobangla and Chevron involving millions of dollars took place in 2004. Petrobangla won the case in 2008 through international arbitration. This was a great example of contractual arrangement and stable operation between Bangladesh government and a foreign investor.
At 1,230 million cubic feet per day (mmefd), the IOCs now supply more than 50% of the daily production of2250 mmefd. The contractual framework ensured smooth transaction between the IOCs and Petrobangla in the last 17 years. The fear of foreign oil company dependence with all its negative consequences are not based on facts. A similar situation prevails in the electricity sector where the first AL government signed one of the best IPP deals for the AES Haripur and Meghnaghat plants. They have been the best performing generation companies - in terms of efficiency and price. No dispute took place between the companies and BPDB in more than 15 years of operation. It only shows that a well-crafted contract is all that is required for trouble free operation in both energy and power sector. Ownership is immaterial.
The other allegation of high price charged by the oil companies is equally baseless. The five major gas fields of Petrobangla — Titas, Habiganj, Bakhrabad, Rashidpur and Kailashtila -- that hold 85% of Petrobangla reserve were bought for just £4 million ($10 million) in early August 1975 from Shell Oil Company. At $16/thousand cubic feet (mef) LNG import price, the original reserve of about 12 trillion cubic feet (tef) of this acquisition would be worth $192 billion today. Even now the remaining reserve of these fields is worth over $50 billion. Based on just the current operation cost, the unit price of this 'old' gas is calculated at a mere $0.10/mcf by Petrobangla!
As Bapex is an exploration company, the last caretaker government decided to pay $0.3/mcf to Bapex only. It means that the Petrobangla gas is essentially assumed free without considering its economic value or alternate fuel cost (mostly HFO for power and industrial use). When these prices are compared to the present replacement (finding and developing new gas) cost of $2/mcf, the ratio is stunningly 20 times (2.0/0.1). The long term marginal cost (new gas) is actually $5/mcf in this region now.
There are two components in the IOC payment - one is cost recovery and the other one is actual gas price for their share of the profit. When there are investments in new processing plants, drilling, compressor, gathering system and other ventures, the combined payment for the cost recovery and profit gas goes up to 70% of the daily production. When the major cost is recovered, IOCs get paid for about 30% of the daily gas production. Last year, the IOC payment varied between $35 and $50 million per month depending on the cost recovery component. On average 1,200 mmef daily production, the IOCs supplied about 0.438 tef gas last year. Petrobangla's estimated payment to IOCs was about $500 million including recovery cost. The average cost of the IOC gas to Petrobangla comes to $1.0/mcf. This is the true average price of the entire gas including Bangladesh's share of profit gas and recovery cost for the IOCs. Of course this is ten times more than the 10% Petrobangla gas. If one tries to twist the price issue using the $3/mcf paid for the recovery cost and the profit share of the IOCs, the price differential is 30 times more than the 10% gas Petrobangla pays to BGFCL and SGFL for the old gas. Even Bapex says that it cannot sustain and be effective if it is not paid $ 1 /mef for its gas. It has already been mentioned that LNG, which is the only alternate option to replace local gas, would cost $ 16/mef- a mind boggling 160 times more than the Petrobangla gas production cost. Cost of finding new gas by IOCs is obviously little more than that of Bapex, but it comes without the high risk of investment and with far more efficiency.
In Indian PSC, the IOCs are now offered $8/mcf. The average Indian
market price is about $5/mcf. Myanmar sold its Shwe gas to China at $4.25/mcf at the wellhead. With price indexing and transportation cost, it would not be less than $12/mcf in the Chinese market. Gas sold to Thailand is of the same price range.
Despite adding net production of 550 mmefd (400 mmefd coming from IOCs) from the existing reserves during 2009-13, Bangladesh now faces a daily deficit of700 mmef. This means the Bapex only policy of last ten years did not deliver the expected result. Without adding new reserves, the gas crisis will only worsen with time. After spending about Tk. 500 crore ($60 million) in last seven years in exploration, Bapex found only 200 billion cubic feet of new gas, which is just three months supply of current need. Unfortunately, they lack the huge financial capability and adequate technical capacity required to be successful in a matured basin. The time has come to review the Bapex only policy and its limitation.
On November 19, 1998, the High Court issued an interim injunction on all new oil and gas exploration contracts with IOCs on the basis of a Public Interest Litigation. However, the interim government in 2008 moved the High Court and was successful in vacating the order for offshore bidding. In early 2010, the High Court also cleared the onshore bidding embargo.
The current debate on allowing the IOCs for onshore/offshore survey or exploration is based on fear mongering propaganda without any reasonable substance. It is going to be extremely challenging just to maintain the current rate of production from the existing fields. Gazprom drilled 5 development wells from the known fields that were supposed to add at least 100 mmefd production, but it could achieve just over 60 mmefd. That means the wells are fast losing their deliverability due to declining pressure.
Finding new gas fields is extremely crucial to keep the gas sector alive. If it is not done, Bangladesh will face double the deficit it is facing today in next five/six years despite some reserve lying under the ground. No stone should be left unturned for finding new gas fields. The effort for strengthening Bapex that started in 2008 should continue with full sincerity but, along with Bapex, IOCs should be immediately allowed to conduct exploration activities both onshore and offshore through new bidding rounds.
The writer is Professor and Head, Department of Petroleum and Mineral Resources Engineering, Buet. E-mail: mtamim@pmre.buet.ac.bd