Bhola Gas Field Redefines Bangladesh’s Energy Dynamics: A Pragmatic Leap In Nation’s Energy Landscape

134

In a historic milestone for Bangladesh, the Bhola gas field has facilitated the transportation of extracted gas to another region of the country, specifically for industrial purposes, through its conversion into compressed natural gas (CNG). This groundbreaking achievement symbolizes the nation’s prowess in internal production and the seamless connectivity of energy transportation within its borders. The inaugural delivery of Bhola’s gas took place on December 21, when the first set of cylinders, laden with gas, arrived at a garments factory in Gazipur. This event not only marks a significant moment in Bangladesh’s energy landscape but also represents a paradigm shift in the utilization of domestic gas resources.

As of November 28, the overall natural gas output in Bangladesh stood at approximately 2,598 million cubic feet per day (mmcfd), reflecting a 30.5% shortfall compared to the country’s total production capacity of 3,716 mmcfd. The Bhola gas fields, comprising three distinct fields, boast a production capacity of around 200 mmcfd. However, the actual production has been fluctuating between 80 and 85 mmcfd, leaving a surplus capacity of approximately 120 mmcfd untapped across the Shahbazpur, Bhola, and Ilisha gas fields. Faced with the energy demands of various industries, authorities devised a plan to extract 80 mmcfd of gas in compressed form from the Bhola gas fields.

The strategic move is not limited to catering to the immediate needs of Gazipur; there are plans to extend this method of gas supply to other regions, encompassing Dhaka, the southwestern, and northern parts of the country. State Minister for Power, Energy, and Mineral Resources, Nasrul Hamid, revealed this ambitious vision during the official gas supply inauguration at Hotel Pan Pacific Sonargaon. The gas will be primarily utilized in industries by transporting it in the form of CNG via trucks. Furthermore, there are plans to construct a gas pipeline from Bhola to Barishal, and from there, a transmission line will reach Khulna, thereby covering the southwestern and northern regions of the country.

In emphasizing the significance of this initiative, Minister Hamid highlighted that this marks the first instance of transporting gas as CNG using trucks in Bangladesh. While this practice is commonplace in many countries globally, its implementation in Bangladesh is expected to offer cost advantages compared to traditional pipeline transportation. Minister Hamid asserted that this approach enables a more cost-effective and rapid supply of gas, positioning it as a viable alternative to pipeline-based transportation. The minister also hinted at both short-term and long-term plans for utilizing gas from Bhola, with the intention to move swiftly from the former to the latter once the initial phase is complete.

Moreover, Minister Hamid expressed discussions about supplying Bhola’s gas to residential consumers at the local level, signifying the potential broadening of the gas supply spectrum. As the gas is already being allocated to industries, the minister expressed optimism about extending its availability to residents in the future. This multi-faceted approach underscores the comprehensive nature of Bangladesh’s strategy in harnessing its domestic gas resources for the benefit of both industrial and residential sectors.

In the financial landscape, industries receiving the Bhola gas supply will incur a cost of Tk47.6 for each unit of gas, a notable increase compared to the current rate of Tk30 per unit for industrial gas. Intraco, the private company overseeing the gas supply from Bhola, will receive Tk30.5 per unit for retailing the gas. The specifics of the financial arrangements indicate a concerted effort to strike a balance between economic considerations and the imperative of ensuring a stable and sufficient gas supply to meet the country’s growing demands.

The logistical aspect of the gas supply involves the transportation of gas-filled cylinders, each containing 3,500 cubic meters of gas, by special trucks. Energy and Mineral Resources Division Secretary Nurul Alam, speaking at the inauguration ceremony, declared that the initial supply would involve 50 lakh cubic feet of gas per day. He emphasized that this is merely the starting point of Bhola’s gas supply and assured that the capacity would be progressively expanded. Additionally, Mr. Alam revealed ongoing efforts to boost overall gas production in Bangladesh by drilling more wells, thereby reducing the reliance on liquefied natural gas (LNG) imports and generating economic benefits for the nation.

Bangladesh presently procures approximately 3.5 million metric tons per annum (MTPA) of liquefied natural gas (LNG) through established long-term arrangements with two primary suppliers, namely Qatargas and OQ Trading (formerly known as Oman Trading International). Between May and August, the state-owned entity Petrobangla executed two additional sales and purchase agreements (SPAs) with QatarEnergy and OQ Trading, aiming to secure an additional 3.0 MTPA of LNG starting in 2026. Zanendra Nath Sarker, Chairman of Petrobangla, conveyed these developments to Gas Outlook.

The SPA with QatarEnergy delineates a commitment for the Qatari company to furnish a total of 12 LNG cargoes in 2026, with an option to augment this supply by an additional 12 cargoes during the same year. Subsequently, from 2027 onward, QatarEnergy is contractually obligated to deliver 24 LNG cargoes annually, corresponding to an approximate volume of 1.50 MTPA. Concurrently, the SPA with OQ Trading stipulates that the Omani entity will supply four LNG cargoes in the inaugural year of the agreement (2026), followed by 16 LNG cargoes per annum in both 2027 and 2028. Commencing from 2029 and extending until 2035, OQ Trading will furnish 24 cargoes annually. This agreement represents a substantial commitment to the importation of LNG from Oman.

Additionally, the cabinet committee on economic affairs has sanctioned the negotiation and execution of three more SPAs for the long-term importation of LNG from various sources. These prospective agreements involve Malaysia’s Perintis Akal Sdn Bhd, local Summit Oil and Shipping Company Ltd (SOSCL), and Excelerate Energy Bangladesh Ltd, a subsidiary of the U.S.-based Excelerate Energy. The envisaged timeline for these agreements spans from 2024 onwards, as highlighted by Chairman Sarker. Under the proposed arrangement with Malaysia’s Perintis Akal Sdn Bhd, Petrobangla aims to commence the importation of up to 1.0 MTPA in 2024. As per the cabinet committee’s approval, SOSCL, a subsidiary of the Summit Group, is anticipated to supply up to 1.5 MTPA of LNG from 2026 onward for a duration of 15 years.

Similarly, Excelerate Energy is expected to provide up to 1.5 MTPA from 2026, adhering to a 15-year contractual period. The cumulative volume from these three sources is anticipated to amount to approximately 4.0 MTPA of LNG, according to a senior official from the energy and mineral resources division under the Ministry of Power, Energy, and Mineral Resources, who provided insights to Gas Outlook. Upon full implementation, the SPAs with Excelerate Energy, SOSCL, and Perintis Akal Sdn Bhd will constitute Bangladesh’s seventh, sixth, and fifth LNG import agreements, respectively. This follows recent SPAs with QatarEnergy and OQ Trading, which represent the third and fourth agreements of this nature for Bangladesh.

Therefore, Zanendra Nath Sarker, chairman of Petrobangla, the state-owned gas company, echoed Alam’s sentiments, affirming that gas production is being scaled up to meet the country’s surging demand. Sarker disclosed plans for drilling new wells and increasing LNG imports, while also considering the possibility of importing gas from India through pipelines. This comprehensive strategy aims to bolster Bangladesh’s energy security and ensure a sustainable supply to drive its economic growth.

Overseeing the critical task of gas supply from Bhola is the private company Intraco, which holds a 10-year contract with the Sundarban Gas Company and Titas Gas Transmission and Distribution Company Ltd. The contract, signed on May 21, entrusts Intraco with the responsibility of delivering Bhola gas. Riyad Ali, manager of Intraco Refuelling Station PLC, highlighted that the trial supply of Bhola’s gas had commenced earlier, with the official supply delayed due to various factors, including the rainy season and unfavorable weather conditions. Intraco aims to augment its CNG supplies to industries by an additional 20 mmcfd within the next year, providing much-needed relief amidst the backdrop of inconsistent gas supply in the country.

The transportation of gas from the Bhola gas field to another region within Bangladesh for industrial use marks a significant milestone in the country’s energy landscape. This achievement showcases Bangladesh’s internal production capabilities and the effectiveness of its internal connectivity in energy transportation. The strategic utilization of Bhola’s gas through the innovative method of transporting it as CNG by trucks reflects a forward-looking approach to address the energy needs of various sectors. As plans unfold to extend this method to other parts of the country and explore additional avenues for gas utilization, Bangladesh is poised to enhance its energy security and contribute to sustained economic growth.

The collaboration between public and private entities, as exemplified by the contract with Intraco, underscores the importance of synergy in achieving comprehensive energy solutions. As Bangladesh navigates its energy landscape, the successful implementation of these initiatives will likely serve as a framework for optimizing domestic resources and ensuring a reliable and efficient energy supply for the nation’s development.

– Syed Raiyan Amir is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

Published in Eurasia Review [Link]