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.