February 2021, Vol. 248, No. 2
Features
Pipelines at Heart of Bangladesh’s $453 Million Gas Project
By Gordon Feller, Energy Writer
Bangladesh’s government has undertaken an expensive gas infrastructure project with two goals: efficiency in gas production is to be improved and gas transmission pipeline capacity is to be extended.
The motivation behind spending $453 million can be understood by some simple math. The supply of natural gas through exploration and production has not kept pace with demand growth.
The Bangladesh Petroleum Exploration (BAPEX) and Production Company was established in 1989 by the national government. In October 2017, the company discovered gas in Bhola, which is at the heart of the Shahbazpur Gas Field. In March 2020, the company discovered the Srikail Gas Field in Comilla District.
Unfortunately, BAPEX has not done extensive exploration for many years – due to what the executive team says is a lack of public funds. Exploration in the offshore blocks stalled in the early 2000s for various reasons, including unattractive production-sharing contracts.
To combat the country’s severe gas supply crisis, the government’s leaders have argued for making a priority of the urgent need to accelerate gas exploration and production. The government established the national gas development fund in 2012 to support upstream activities.
The goal was to undertake large-scale exploration in onshore and offshore areas. BAPEX initiated some well appraisals, such as three-dimensional seismic surveys and development of discovered and producing gas fields, to prove additional gas reserves.
Another state-owned company, Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) was assigned offshore exploration rights. Petrobangla signed new production-sharing contracts with international oil companies to complement BAPEX’s onshore exploration program. In the meantime, Petrobangla has been pursuing a program to increase recovery from existing gas fields by installing wellhead gas compressors.
Inadequate gas transmission infrastructure is certainly one of the major hurdles facing Bangladesh’s gas sector. The gas transmission infrastructure’s current coverage is not in any way able to serve the country’s key market areas, as most gas supply points are in the northeast and central regions, while delivery points are in the central, south, and west.
Ongoing Asian Development Bank (ADB) loans have greatly enhanced the transmission capability. However, the Chittagong area is still suffering from a gas supply shortfall due to full capacity attainment of the existing 108-mile (175-km), 24-inch (0.61-mm) Bakhrabad Chittagong gas transmission pipeline.
To enhance the throughput capabilities and facilitate transmission of additional gas, the gas transmission network must be expanded to accommodate the upcoming diversified gas supply sources from imports and offshore discoveries into the national gas network.
Everyone inside and outside of Bangladesh agrees on one key fact: natural gas is the key indigenous source of energy in the country, and it accounts for almost 75% of the commercial energy and about 65% of electricity generation.
Despite its importance, growth in the country’s gas supply has not kept up with increasing demand for gas, such as power generation and fertilizer production. Currently, gas production is 2,700 MMcf/d against a gas demand of 3,150 MMcf/d, indicating a daily shortage of 450 MMcf/d. It was estimated that around 800- to 1,000-MW generation capacity was not operational due to shortage of gas supply in 2015.
The gas supply deficit is expected to further exacerbate in the wake of declining gas reserves and fast-rising gas demand that will eventually impact Bangladesh’s energy security and constrain the nation’s economic growth.
To more effectively combat the gas supply crisis, the national government has launched several programs to increase the gas supply. Among those are these three initiatives:
- Accelerating gas exploration and production. The national government established the gas development fund (GDF) in 2012 to support the upstream activities and undertake large-scale exploration in onshore and offshore blocks.
- Increasing gas production from existing gas fields. The government has been trying to lower the abandonment pressure and maintain the gas delivery pressure of existing gas fields by installing wellhead gas compressors.
- Importing gas
The national government has also taken steps to diversify the gas supply through imports, either by cross-border gas transmission pipeline or by purchasing liquefied natural gas (LNG) from foreign suppliers.
The Bangladesh government sees the new project as critical to the success of their Seventh Five-Year Plan 2016-2020, which was launched in October 2015, since the energy sector’s contribution to sustainable economic growth is increasing.
Seven wellhead compressors (five operating and two stand-by) have been installed in the Titas Gas Field. These help to improve gas production efficiency by maximizing recovery from Titas Gas Field. In addition, a 112-mile (181-km), 36-inch (0.91-mm) gas transmission pipeline is being constructed.
The pipeline constitutes a trunk transmission pipeline between Chittagong and Bakhrabad to transport regasified LNG to central and west gas markets.
All the current project’s contracts have now been awarded. Six contracts have been completed and two are ongoing. Among the most recent project developments are the following:
- Wellhead gas delivery pressure at the Titas Gas Field has been increased and sustained.
- Capacity of the vital Chittagong-Feni-Bakhrabad gas transmission pipeline has been expanded.
- The wellhead compressor package was awarded in October 2020.
ADB is the project’s lead financier. Upon the government’s request, the Asian Infrastructure Investment Bank (AIIB), based in Beijing, provided a loan of $60 million.
The core objective of the project is to improve efficiency in gas production in the Titas Gas Field and expand gas transmission pipeline capacity between Chittagong and Bakhrabad.
Upon completion, it will help maintain the current level of production at required delivery pressure to the gas transmission network to overcome the capacity limitation of the existing 24-inch transmission line and complete a full looping of the original trunk gas pipeline, which is crucial for a dependable and reliable gas transmission network. It will increase operational flexibility and supply integrity.
This project’s financing includes the following:
Asian Development Bank (ADB)
$167 million
37.0% of total
Asian Infrastructure Investment Bank (AIIB)
$60 million
13.0% of total
Bangladesh National Government
$226 million
50% of total
The project’s total cost is $453 million, including taxes, duties, contingencies and financing charges during construction. ADB’s loan and AIIB’s loan have been used on a pro-rata basis, to finance the cost items. Any shortfall in the funds required would have to be covered by either the government or by the implementing agencies.
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