Threats to energy security

Ghulam Muhammed Quader

27 May, 2024, 00:00, Newage

THE daily demand for natural gas at present in our country is around 3,880 million cubic feet. The daily supply, however, is approximately 3,056mmcf, leading to a daily deficit of roughly 824mmcf.

The sector-wise deficit is as follows: Electricity: 452.65mmcf, industry: 197.52mmcf, households: 82.3mmcf, fertilizer: 57.61mmcf, compressed natural gas: 24.69mmcf and commercial: 8.23mmcf, resulting in a 21.21 per cent shortfall across sectors.

Two floating storage and regasification units, FSRU, are now used for receiving liquefied natural gas from imported ships and putting it into our gas supply system. Liquefied natural gas is unloaded from ships into these FSRUs, each with a capacity of 500mmcf.

Therefore, to import more liquefied natural gas, the number of FSRUs and their facilities would need to be increased. Additionally, the national grid’s pipeline has not been equipped to handle more than 1,000mmcf. As a result, it is currently not feasible to import additional liquefied natural gas and supply it to the national grid. Moreover, establishing these facilities is time-consuming.

The average per year import cost for the four financial years from 2018–19 to 2021–22 amounts to Tk 21,416.75 crore. If the current deficit of 824mmcf were to be met through imports, the cost would nearly double the current expenditure on liquefied natural gas import, given that currently 1,041mmcf are imported.

However, it is evident that the government lacks the financial capacity to address this shortfall. Furthermore, even if additional liquefied natural gas were imported, technical constraints such as the lack of existing facilities would hinder its unloading and supply to the national grid.

Currently, the supply of natural gas to the national transmission line comes from two sources. First, extraction and supply from domestic gas fields, amounting to around 2,015mmcf, and second, supply through the purchase of liquefied natural gas from the international market, amounting to around 1,041mmcf,. Thus, domestically produced gas accounts for 66 per cent, or two-thirds, of the total supply, while imported liquefied natural gas accounts for 33 per cent, or one-third of the total supply.

The gas extracted from domestic fields is connected to the pipeline from two sources: 791mmcf through state-owned gas companies and the remaining 1,224mmcf through international oil companies.

Two international companies supply around 1,224mmcf of gas. Of this, Chevron supplies 1,191mmcf from three gas fields, with the Bibiyana field alone contributing 1,016mmcf. The other company supplies 33mmcf from one gas field.

Approximately 33 per cent of the country’s current total gas supply, which amounts to 1,016mmcf out of 3056mmcf, is sourced from Chevron’s Bibiyana gas field. Survey projections indicated that the recoverable gas reserves of this field, estimated at 5.755 trillion cubic feet, were to be depleted by November 2023.

Given this projection, the supply from the Bibiyana gas field, which constitutes one-third — 1,016mmcf — of the total supply, from November 2023 to April 2024, can be considered beyond the proven reserves or essentially a bonus. However, it is important to note that this supply could cease at any time.

If the Bibiyana gas field ceases operation, our domestic gas supply would reduce to 999mmcf, comprising 175mmcf from Chevron, 33mmcf from Tallu, and 791mmcf from state-owned companies. This would result in a shortfall of 2,881mmcf, accounting for about 75 per cent of our total demand of 3,880mmcf, considering the current deficit, liquefied natural gas import, and Bibiyana’s contribution.

In other words, if the supply from the Bibiyana gas field ceases, which could happen at any time, approximately three-quarters, 74.25 per cent, of the total gas demand would need to be met by importing liquefied natural gas. In this scenario, only one-quarter of our current demand could be met by domestic natural gas production.

Currently, we import 1,041mmcf of liquefied natural gas. In the future, nearly three times this amount will need to be imported. This would require nearly three times the current expenditure on liquefied natural gas import. Moreover, it would not be feasible to import, unload, and supply such an amount of liquefied natural gas with the existing infrastructure.

Presently, the state-owned and international companies operating in the country have an estimated recoverable gas reserve of approximately 9.12 trillion cubic feet. Given our increasing demand, this reserve will be depleted within the next 5–6 years. If no new gas fields are discovered and production does not commence within this period, we will have to import the entire amount of our gas demand.

In other words, under the current circumstances, it is feared that almost the entire gas demand as an energy source will become import-dependent. Consequently, it can be said with certainty that the current situation poses a peril to energy security.

From 2018–19 to 2021–22, a total of Tk 1,10,703 crore was spent on gas purchases. It is noteworthy that state-owned gas production companies meet 26 per cent of our total gas demand but account for only 5.25 per cent — Tk 5,828 crore — of the total gas purchase cost. On the other hand, international produced gas companies supply 40 per cent of the total demand but account for 17.38 per cent — Tk 19,208 crore — of the total cost. Imported LNG meets 34 per cent of the demand but incurs the highest cost, accounting for 77.37 per cent — Tk 85,667 crore — of the total expenditure.

Simplifying the costs and supply amounts for gas purchases from various sources yields the following results: The cost of paying for one mmcf of gas from foreign companies operating in Bangladesh is 2.14 times higher than that of domestically produced gas by state-owned companies. The same for imported liquefied natural gas is 11.2 times higher.

The price of domestically produced gas per 1,000 cubic feet ranges from $1–3. The price of imported liquefied natural gas ranges from $12–40 — 12 dollars for long-term purchase contracts and 35–40 dollars in the spot market. Thus, the cost of imported liquefied natural gas is 4–15 times higher than that of domestically produced gas.

We have a demand for gas. Despite supplying gas to the best of our ability, there are significant shortages in each sector, according to current demand. We continue to increase the demand for gas-based power plants, different gas-based industries, and assorted other uses of gas.

In this context, the obvious question arises: Why are we not focusing on domestic production to reduce import dependency? Is there no availability or production potential for natural gas in the country?

In 2001, a joint survey was conducted by the USGS and Petrobangla on the undiscovered natural gas reserves in the western and southern regions. According to their data, these areas have a potential gas reserve of 32tcf. Again, in 2018, Denmark’s Ramboll consultancy company conducted a survey in the same areas and estimated a reserve of 34tcf of natural gas. Therefore, the western and southern regions have reserves of 32–34tcf of gas.

In a few years, production from the existing domestic gas fields will be nearing its end. According to reliable expert surveys, there are reserves of gas in new domestic gas fields. However, we are not focusing on exploration and production.

There is an allegation from various quarters that greater emphasis is being placed on imports to benefit vested interests, leading to a lack of interest in production from domestic gas fields. It is hard to find arguments to completely dismiss this claim.

Here is a summary of the gas exploration and production activities of domestic and international companies in Bangladesh: State-owned gas companies had a success rate of 50 per cent after drilling 18 exploration wells and spending Tk 6,832 crore in the last 23 years. In comparison, international gas companies had a success rate of 25 per cent after drilling 8 wells and spending Tk 56,545 crore in the same period.

Thus, the cost of gas exploration by state-owned companies is lower compared to that by foreign companies engaged in this sector. The success rate in exploration is higher for domestic companies. As mentioned earlier, the price of gas produced by state-owned companies is also the lowest. It can be said that it would have been desirable to make state-owned gas companies more active in gas exploration and production.

To bolster future energy security, it is crucial to focus on exploring, extracting and utilising gas from new domestic fields to ensure a reliable supply of natural gas amid uncertainties surrounding its availability in the energy mix. This would necessitate enhancing the capabilities and creating opportunities for domestic companies in the gas sector.

Ghulam Muhammed Quader is leader of opposition in the Bangladesh parliament.