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Home > BusinessWorld > Features > August 2001 > Full Story

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Gas export: A spate of wild speculation

Nuruddin Mahmud Kamal



Although gas represents a tremendous opportunity for Bangladesh, for taking advantage of that opportunity will require an efficient energy sector which is absent now. What is required "now" is to concentrate on reforms and reorganization of energy sector institutions, not export.

 

Despite the innocent reluctance being displayed recently by an international oil company (IOC) in its political oratory, the potent gas-lobby in Dhaka appear to have become active again, Presumably, a spate of wild speculation, anxiety and bewildering variety of canards swept around the country after the news item entitled "Export option considered in recently signed PSCs" was published in The Daily Star on 19 July 2001. The latest jolt is pretty strong, I must admit. If it is true, one would most certainly take exception to the heinous attempt of an IOC to subvert the interest of the nation. The country's energy policy does not provide any stimulus for gas export through pipeline. Yet, the headline news might give a signal that the caretaker government installed on 15-16 July 2001 tacitly conceded that without an assured market abroad one IOC would not fully develop a gas field they have acquired (illegally) through the courtesy of former energy minister Dr Musharraf Hossain in the mid 1990s. 

 

It is also intriguing that the news was withheld by Petrobangla and government that one company was allowed to begin production from offshore Sangu gas field (prior to evaluation of the gas reserve) violating the contractual provision, in the late 1990s. Then the report that none of the PSCs signed in the recent months guarantees supply to the national grid over the next decade would only fuel the fire leading to a new confusion in the energy sector. Worse still is that the news item displayed a map indicating a proposed pipeline originating from Bangladesh and terminating in India. This has enhanced the frequency of hiccups for some and would most probably rekindle their real intent.

 

A typical Bangalee gossip in a private club in Dhaka reacted sharply on this "energy gamble of Bangladesh." The gossip then as usual moved to another subject and appreciated the sharp-shooter like action on bureaucracy by the Chief Advisor of the caretaker government. The unexpected shake-up really jolted the backbone of the Boston Mafia, who are now divided. I shudder to think what would have happened to those four rebels if they were defence service personnel? The senior-most gossipmonger popularly known as Mia Bhai unhesitatingly observed, "So far governance has run the course of a cycle of hope: when the civilians failed the Army became the savior, and when generals imploded the country went back to democratic actions. The cycle seems to have run out of momentum because the top brasses in bureaucracy have been shot down." He sarcastically added, "It is rather futile to blame the bureaucracy for creating confusion because they are not only apt at it but at times enjoys misdirecting a political government to bring things to their favour. But never ever they were caught like "jhatka" in their own game. Lamenting on the misdeeds of some, he observed, "Governments that congratulate themselves privately upon their ability to use others, become remarkably dim when others use them." The gossip abruptly ended with a strange note: let there be a consensus that the caretaker government's life be extended to 365 days and for the elected government time be reduced to 1460 days. What an outrageous proposition? Suddenly the gossipers disappeared like the short story about two passages travelling in a train: It was dark inside the compartment (perhaps because of load shedding by DESA!). One gentleman asked the other, "Do you believe in ghost"? Sharp came the reply, "No", and he disappeared. I woke up from my siesta, a normal routine for a retired public servant. Thank Almighty, it was all a dream!

 

The potent gas lobby that I started discussing about in the beginning appears to have been lost in the gossip. In fact the origin of this lobby can be traced back to the World Bank financed Hydrocarbon Habitat Study conducted in the late eighties. The study had two positive and one negative outcomes. First, a benchmark of gas reserves that was established in Bangladesh for the first time through internationally accepted scientific means in 1987-88, and Second, a new beginning of the Production-Sharing Contracts (PSCs) came into being in the 1990s. It may be noted that the PSCs were initiated for the first time in Bangladesh in 1974. The negative outcome was that gas lobbies were created in the 1990s and they still carefully hide their daggers under their shirts. During my long stay in the Ministry of Energy in the 1980s, I was instrumental in preparing the negotiation documents, on behalf of the Government, which was negotiated in early 1983 in Washington DC. On the hindsight, it is one of my memorable negotiations with the Bank. I did not realize then why a number of oil company executives sought interview with the Bangladesh delegation. But now I do. From that time, gas interests knew they could never abandon vigilance on the Ministry of Energy and Petrobangla if they were to maintain their defences for the so-called GAS MARKET concept. At times these gas lobbyists turned into match-makers between the government and the oil companies. Yet, it has been generally observed that the IOCs had chosen to deny the existence of any such operations, until the late 1990s.

 

 

Nonetheless, it is true that civic virtue is not the only motivating force that encountered the visible onslaught for gas-export proposals. Former prime minister Sheikh Hasina played the most vital role and boldly faced the challenges that included internal and external political pressures. She sincerely felt that this important national wealth cannot be allowed to be squandered. She therefore, directed that a 50-year gas demand forecast be made, as part of an ENERGY SECURITY PLAN, prior to even considering gas export proposals. This had prima facie dampened the morale of the gas hunters. And the attempts to help gas grab by the three Bangladeshi stooges failed. But I have a hunch the infamous trio will try to create an enigma for export option again without even realizing that a proven/recoverable reserve of gas must match the demand forecast of gas in the next two to three decades. It seems to me that if there was a provision in Bangladesh law, the so called grass roots operators would have registered their names as lobbyists like the US senator-cum-lobbyists occupying important chairs in the old executive building situated next to the White House in Washington DC. For promoting their contention these anti-people interest groups provide three things for public consumption. First, an overestimation of gas reserves (50 to 80 TCF), and second, an overestimation of the prospects for enhancing economic progress of the country through export, and third, totally undermining the energy security of the people for sustainable development. Thus, there is good reason to be gloomy about the pressure tactics of the vested interest group who want to make short term gains for themselves by clearly ignoring the interest or the nation.

 

Needless to say that the issue is complex and to expect an early amicable resolution of the debate will be height of a folly. The positions of the parties concerned in the tangle are so divergent that any early settlement is a distant dream. With sharp rise in gas demand in the country in recent years, it is expected that the domestic consumption alone would be almost equal to gas supply envisaged from all the eight major discovered gas fields (each field having an estimated reserve of one TCF or over) in the next 20 years up to 2020, if not earlier.

 

It is no strange coincidence that attitudes in both the IOCs and the Petrobangla camps have already began to harden, and the extremists are in a rhetorical position to boast that they have been vindicated by the earlier collapse of negotiation during 1997-99. If, however, the lid could be kept closed and tempers kept cool, the nation would have been immensely benefited.

 

But the world has seen that both Petrobangla and the government finally gave in at the fag end of the previous political government and signed some contentious contracts, burden of which will be very heavy for future governments. According to Petrobangla, the only state enterprise authorized by the government to declare about the gas reserves, gas resource potentials and gas demand forecasts etc., the country has established a gas reserve (gas-initially-in-place) of 24.25 trillion cubic feet. Based on geological evidences about 60 per cent gas in-situ may be produced initially on techno-economic consideration, which provides a recoverable reserve of 15.55 TCF. Both Petrobangla and UNOCAL apparently agreed on a range of 15.1 to 16.1 TCF of gas reserve in March, 2001. During the past 40 years since first gas production in 1960, almost 3.95 TCF of gas has been consumed. Thereby some 11.60 TCF may be available for future consumption. From the data of National Energy Policy (1995) one may estimate that the most conservative total energy demand for a 20 year period (upto 2020) is about 24 trillion cubic feet of natural gas equivalent (TCFNge), out of which gas alone would meet approximately 70 percent or about 16.8 TCF. But the most intriguing part of the story is that Petrobangla did not find it necessary to conduct a full-fledged gas reserve estimate (of all the 22 gas fields) since 1989! Without assessing the total reserve of gas not only the long term commitment for optimum utilization of the only commercial energy resource i.e. natural gas would be jeopardized but also the energy security issue will be at stake.

 

Meanwhile, in pursuance of the directive of former PM Sheikh Hasina, Petrobangla has made a rough calculation of the 50-year demand forecast of gas, which is estimated at 62.9 TCF. The recent joint assessment by USGS-Petrobangla provides a statistical range of Undiscovered Resource not Reserves. The range is 8.4 TCF to 66.7 TCF, the mean is 32.1 TCF. However, mean in statistical term is very mean indeed and can be dangerously misleading. This reminds me of Mark Twain who once commented, "some people use statistics the way a drunk uses a lamppost not for light, but for support." Gas Resource Assessment and Reserve Assessment are two separate animals, perhaps of the same genus. Yet in a city seminar sponsored by BILIA and CERA in mid May 2001, the former state Minister Dr. Mohiuddin Alamgir said, "Gas export remains an option of the government." The most amazing statement however came from former Energy Secretary Azimuddin Ahmed on 14 June 2001 that, "gas export is no more an option, it is compulsion".

 

The nation is awakardly stuck in a catch-22 situation with its limited gas reserves. IOCs backed by the donors and the foreign governments are in the midst of a campaign underlining the rationale for gas export to spur the country's development efforts. For the IOCs, the question of export of gas through pipeline (though a violation of contract they signed in the mid 1990s) is very important. The US Embassy in Dhaka, particularly their Ambassadors, are keen for gas export to India to monetise the resource for using it as a development multiplier. But what is not cautioned is that although gas represents a tremendous opportunity for Bangladesh, for taking advantage of that opportunity will require an efficient energy sector which is absent now. What is required "now" is to concentrate on reforms and reorganization of energy sector institutions, not export. Export can penned for say another five to six years. The need for protecting the value of gas, not the product, is extremely important. So, I, recall the words of Dr Kamal Hossain, an eminent legal practitioner and former petroleum minister (who formulated the Petroleum Act and directed us to draft the first Production-Sharing Contract in 1974) of Bangladesh, "Let's not handle the issue in a cavalier fashion."

 

Nuruddin Mahmud Kamal is former Additional Secretary and ex-chairman, Power Development Board.

 

Source : The Daily Star.

 

   

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