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Download PDF What should Bangladesh do when oil price hits a $200 per barrel mark?
Already battered by $100 plus price of imported petroleum, the government should prudently take some brave and quick steps to ensure energy security of the country, energy experts believe.
A readjustment of retail price of imported petroleum is not enough to face the deep energy crisis ahead, they noted.
Bangladesh Petroleum Corporation (BPC) has already sought Tk 6,800 crore from the government to subsidise losses from oil imports just for the period July to December this year. The government already swallowed many thousand crores of taka in losses for costly oil import and the BPC still owes different banks more than Tk 7,000-8,000 crore.
Combined with the power load shedding and gas supply crunch, the $200 a barrel situation will push the BPC and the country into an abyss, experts say.
Goldman Sachs Group earlier this month forecast that oil prices would reach $150 to 200 a barrel within two years. Oil price is already hitting $128 per barrel and the price has surged some 25 percent since the beginning of this year, when it crossed $100 a barrel for the first time. It now seems unbelievable that even in 1995-96 oil price hovered around $12 to 15 a barrel.
According to experts in Petrobangla, the BPC and oil companies, the government should prepare to face the inevitable. It should not waste time in taking steps to better utilise its condensate resources–which is a by product of natural gas– to produce both petroleum and liquefied petroleum gas (LPG).
The government should also prioritise exploration of new gas resources and take legal steps for withdrawal of a court injunction on on-shore oil and gas exploration. Both Bapex and foreign oil companies should be encouraged to go for exploration and drilling of well for new gas resources.
In addition, the government should not further delay taking decisions on utilising the under utilised coal resources that appear to promise energy security of the country.
“Asia Energy’s activities cannot be the reason for which the government is sitting on approving the coal policy. If the Asia Energy deal was made wrongfully, it should be cancelled, and we should move ahead. If there was no wrong-doing, then also we should go ahead,” said a Petrobangla official.
The country needs to reduce overall energy consumption by discouraging wastage of gas in domestic and commercial sectors. At the same time, compressed natural gas (CNG) network for the country’s transport sector should also be expanded so that when oil price hits $200 a barrel, this sector does not bog down, officials said.
“Bangladesh will have to think radically how to meet its energy demands,” says an executive of an oil company. “Like many other countries, we should be pro-active. Most European countries are not leaning to alternative and renewable energy resources like wind and solar power, and the government is subsidising those sectors to help them grow. We should also utilise renewable energy resources on a larger scale.”
He said that following India, Bangladesh should also go for plantation of Jatropa trees in fallow lands. Jatropa is a regional species, which is the source of bio-diesel. India meets 15 to 20 percent of its diesel demands from Jatropa.
High oil price has already done a lot of damage to the BPC. Its reputation has become so shaky that banks ask for three percent as confirmation charge on the value of letter of credit (LC) against any oil import deal. This situation will worsen in the coming months.
“First, let us be clear about this — there should not be any subsidy on any form of energy other than diesel. Again, subsidy on diesel should be offered only to farmers for farming, and public transports. To fix this subsidy, the government should analyse the previous data on consumption of diesel by farmers and public transports,” said a BPC official.
“The government should launch an awareness campaign about the oil price situation, and the reality around the world. This awareness is required because the market price of petroleum products should now be totally opened. What is inevitable should be faced bravely. We have to increase oil prices in pace with the import price,” he added.
BETTER UTILISATION OF CONDENSATE THROUGH NGL FRACTIONATION
When oil prices will sky rocket further, price of LPG –used for cooking in many areas of the country — will be higher. This is why the government should utilise the country’s condensation resources by installing NGL fractionation plant. Bangladesh produces more than 300,000 tonnes of condensate (6,768 barrels a day). By fractionating the condensate, it is possible to produce 80,000 tonnes of LPG, and the remaining can be used to make petroleum products.
Of the total condensate production, the Eastern Refinary now uses 1,30,000 tonnes to mix with crude oil and another 70,000 tonnes to fractionate and produce LPG. The old Kailastila fractionation plant also produces PG from condensate. A private firm named Super Refinery in Chittagong purchases 600 barrels per day for producing diesel and other petroleum products by wasting propane and butane of condensate.
The government had taken move to install four NGL fractionation plants many years back. During the four-party alliance rule, when the tender was floated, all big wigs of BNP wanted the four contracts despite their lack of qualification for the project. Their pressure ultimately produced nothing, except awarding of one contract secretly to Bashundhara group. But that bid also failed after the change of government.
Sources said that after sitting on the matter for two years, the energy ministry has recently formed a committee to spearhead the fractionation projects.
NAPHTA PROCESSING
In 2007, the government signed a contract with Bangladesh-US joint venture Mobil Jamuna Fuel Company (MJFC) to set up a naptha processing plant in Chittagong, which will produce octane from naptha from 2009 at an investment of Tk 350 crore.
This will help the oil importing country to save its foreign exchange for import of 1,20,000 tonnes of refined octane worth Tk 450 crore (at $100 a barrel) a year to meet the entire local demand. It will also help best utilise naptha, produced while refining imported crude oil in Eastern Refinery. The refinery produces around 1,50,000 tonnes of naphtha while processing 14 lakh tonnes of crude oil. Since there is no domestic demand for naptha, the refinery sells it out to international buyers.
Sources said that the MJFC has acquired land for the project and it is hoped that this project will be completed as per schedule.
OIL AND GAS EXPLORATION
Despite repeated promises by successive governments, Bapex never received any shot in the arm to conduct oil and gas exploration activities. The current energy scenario demands putting all out efforts to discover and develop new oil and gas resources.
“The government should award all the marginal gas fields to Bapex to re-invest and re-explore. Bapex can hire high end oil companies for data collection, and even drill wells,” said an energy ministry official.
A Petrobangla official pointed out that the government should take quick decisions about both off-shore and on-shore gas exploration.
“Chevron has enjoyed a five year moratorium on Block-7 after signing a production sharing contract for the block seven years ago. After five years, it has conducted seismic survey. Now, it seeks extension of the contract for further survey. We should not entertain this kind of planning. Instead, we should ask Chevron to go for drilling in the next phase,” he said, adding that Block-7 apparently offers large promises.
A Chevron official on the other hand said the 1,000 km line survey detected three potential hydro-carbon zones. For better understanding, Chevron wants further survey so that the future drilling programme is highly successful.
“Gas resources are depleting fast. We have to invest enough to see if we have more gas resources, we should not give up. Norway made a big breakthrough after many frustrating attempts,” said another Petrobangla official.
COAL RESOURCES
There are five coal zones promising high quality proven coal reserve of 2,357 million tonnes (MT). Probable reserve in these five locations alone stands at 3,258 MT. If all of this coal is converted into power, it could generate 5,000 megawatts of power for up to 66 to 90 years. Sixteen million MT of coal can generate 5,000 MW power for one year.
The coal issue however became controversial due to the Asia Energy deal for Phulbari coal mine from 2005. To resolve this problem, besides addressing other issues, a coal policy has been debated, drafted, finalised and re-finalised but it is yet to be adopted.
“In the context of ensuring energy security, we believe that the government must take some major decisions on using the coal zones,” said a top Petrobangla official. Mentioning that Barapukuria underground coal mine is already operating and Jamalganj coal basin is too deep, he suggested that the government take decision on the other three coal zones– Phulbari, Khalaspir and Dighipara.
Of these three, data and plan on Phulbari have been detailed out by Asia Energy.
“If Asia Energy does not qualify for Phulbari mine, let there be open tender through which competent companies may take up the project. The government has already taken a decision on Dighipara zone but it will take some time to plan on Dighipara because there has not been any study on it yet,” the official said.
” Khalaspir zone also needs detailed studies before a plan can be chalked out about it,” he added.
Regarding the underground Barapukuria mine which aims at producing only 21 MT of coal in 30 years from a reserve of 389 MT, he said it is possible to increase the mine’s production by investing a little more. The mine is now producing about 8,00,000 MT a year, most of which is supposed to be consumed by a 250 MW power plant. “If we can increase coal production to nine lakh tonnes a year, we can feed coal for another 125 MW power plant,” he added.
“But given the country’s situation, producing coal for a mere 125 MW plant is nothing. We need to produce coal in bulk for our power and other energy needs,” the official said.
Technologies are available to produce synthetic petroleum from coal at a cost of around $30 a tonne.
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