Govt trying to get Bhola gas as LNG

After a private operator fell far short of delivering the approved volume of gas from Bhola island to the mainland in compressed form, the government has now moved to pursue a liquefied gas option -- despite warnings that it may also prove commercially unviable due to high costs.

A more viable alternative could be to set up power plants in Bhola and transmit electricity to the mainland, or develop export-oriented industries on the island to directly utilise the gas reserves, said sector stakeholders in a public hearing yesterday.

They expressed frustration as the plans to instal a gas pipeline from Bhola to Barishal to feed underutilised power plants in Khulna or to connect Bhola’s gas to the Padma Bridge pipeline for national distribution -- remain stalled.

The Bangladesh Energy Regulatory Commission (BERC) held the public hearing to set Bhola’s gas prices for industrial and captive power usage in LNG format.

Following instructions from the energy division and applications from Petrobangla with two other distributor companies -- Titas Gas and Sundarban Gas -- the technical evaluation committee of BERC proposed a gas price of Tk 47.50 per cubic metre at the consumer level.

The proposed price matches the rate at which the private company Intraco supplies gas to industries in small quantities as compressed natural gas (CNG).

During the hearing, most stakeholders opposed the move, arguing that such high rates would make usage unfeasible, as they currently receive gas at Tk 30 per cubic metre from the pipeline.

Recently, the BERC fixed Tk 40 per cubic metre as the gas price for new industries.

According to the proposals, six gas wells from Shahbazpur Gas Field are currently in operation, with a production capacity of around 120 million cubic feet per day (mmcfd). 

Bhola island’s demand stands at 90 mmcfd. The remaining 30 mmcfd is planned to be supplied to industrial areas under Titas Gas. 

Additionally, two more gas fields -- Bhola North and Ilisha -- are idle, with a combined capacity of 60 mmcfd.

Bangladesh has discovered 29.74 trillion cubic feet (TCF) of gas so far, of which only 8.66 TCF remains. 

Bhola’s gas is seen as a key source for new gas supplies as most onshore fields are declining and the import facilities are almost in fully utilising.

Proven reserves in Bhola’s three fields total about 1.4 TCF, with further drilling expected to yield more. The Bangladesh Petroleum Exploration and Production Company, the government company responsible for oil and gas exploration and production, plans to drill 19 additional wells in the fields to increase production.

Based on Bhola’s reserves, several pipeline projects -- including one via the Padma Bridge -- and gas-fired power plants have been planned in the gas-hungry Khulna-Barishal region. 

The largest, an 800-megawatt Rupsha plant, is near completion, but no updates exist on pipeline instalation.

In May 2023, Intraco Refueling Station was awarded the task of supplying CNG from Bhola to Dhaka and nearby industrial areas. They planned to supply 5 mmcfd since January 2024, gradually increasing to 25 mmcfd by 2025.

However, Titas Gas officials said the company has yet to supply more than 1 mmcfd. 

At the public hearing, an Intraco representative said that they carried CNG on an emergency basis without approval from the Department of Explosives.

The department has yet to grant approval, and the company was asked to halt supply from November 9 last year. 

“We have invested Tk 250–300 crore. And operations were halted for four months amid protests from locals demanding that gas is not carried outside from there. Yet we had to pay staff,” the Intraco representative said.

Intraco had proposed a CNG price of Tk 52, but the government fixed it at Tk 47.50. 

“LNG processing would require at least Tk 2,000 crore investment. I don’t think it would be feasible for any company,” he said.

Md Jamal Uddin Miah, director of the Bangladesh Knitwear Manufacturers and Exporters Association, said industrial sectors like theirs cannot operate at such prices. 

“We received gas at Tk 12 per unit, then it rose to Tk 17, and now it stands at Tk 32. Staying operational is becoming very difficult,” he said. 

As many as 300 factories have already shut down, with another 300 at risk.

“This will negatively impact foreign exchange earnings, employment and tax revenue. Our competitors -- especially neighbouring countries -- are far ahead. Gas prices must consider industrial competitiveness,” he added.

A representative from the Bangladesh Power Development Board (PDB) opposed supplying gas from Bhola in either CNG or LNG format. 

Instead, he suggested building a gas-fired power plant on the island and transmitting electricity to the mainland.

Using one cubic metre of gas, it is possible to generate 4 to 5 units of electricity, said Syed Zulfikar Ali, additional director (Finance) of the Bangladesh Power Development Board. 

Transmitting that electricity to Dhaka would cost only Tk 1.24 per unit and no additional investment would be required as a transmission line already exists here.

By contrast, transporting gas from Bhola in LNG format has been proposed at a cost of Tk 29.90 per cubic metre, he said.

Transporting the proposed 30 million cubic meters of LNG would cost around Tk 930 crore per year and Tk 9,300 crore over a 10-year contract.

Instead of spending such a large amount, a 200MW plant could be built at a cost equivalent to just two years of gas transportation expenses.

“The plant would require about 45 mmcfd of gas. If that much gas could be balanced through Dhaka’s supply network, it would help ease both the capital’s gas shortage and the power deficit,” he added.

While the Bhola–Barishal pipeline construction is technically challenging due to long river crossings, it remains a priority, said BERC Chairman Jalal Ahmed. Since a pipeline already exists on the Padma Bridge, it could be utilised.

“If Bhola’s gas production rises to 350–380 mmcfd, pipeline transmission will be unavoidable. We will formally recommend it as a national priority,” he said.

Written submissions on the issue will be accepted until February 2, with a decision to follow.