Power System Master Plan 2010 Chapter 5 Natural Gas Sector In this chapter, a present data analysis is conducted about natural gas policy, which is the main source of primary energy in Bangladesh, domestic fuel situation, future development trends, and the demand according to sector. It works on the policy geared towards future stable reservation including LNG imports. A promising point connected to future development is investigated from the viewpoint that domestic resources are utilized to their utmost with regards to the development of natural gas, and the available supplies which are in charge of optimum power development plan decision, which are clarified. 5.1 National development plan 5.1.1 Government policy and plan The Government’s development goals are;1 to provide energy for sustainable economic growth and for maintaining energy security in the country to provide energy to all socio-economic groups in the country especially to the less developed areas to diversify use of indigenous energy; and to contribute towards protection of the environment. In order to achieve the above goals, the Government is planning to take various measures for the petrochemical fuel sector including natural gas such as to increase the proven gas reserves by hastening survey, exploration, prospect drilling, evaluation and production optimization; to make an adequate assessment before the development; to introduce a method of the legal control of natural resources by the state owned companies; to make a comprehensive control by the state-owned companies, specially commercial applications; to reduce the gas demined by curtailment of system loss and improving the efficiency; to solve the regional development unbalance by extension of the pipeline toward western part of the country; to have strategic stock pile of petroleum fuel for minimum two months; to work privatization of liquefied fuel sector. In recognition of the importance of natural gas in the socio-economic development of the country to support the poverty reduction strategy paper (PRSP), the Government would implement several measures to the gas sector, including hastening exploration and development of gas fields by the united efforts of government sector and private sector, facilitating foreign capital investments with giving incentives to them through Production Sharing Contract (PSC), privatization of the domestic gas sector, rationalizing the domestic gas price and making link with international gas price, making arrangements for environmental protection from the initial stage of development and evaluation. 5.1.2 Gas reserve estimation report 2003 The latest reserve estimation performed in 2003 by the Hydrocarbon Unit of Energy and Mineral Resources Division (HCU) and related parties, and published as then “Bangladesh Gas Reserve Estimation 2003”. The work of the "Bangladesh Gas Reserve Estimation 2003" was started in May 2002 in order to update the existing gas reserve report titled “Bangladesh-Petroleum Potential and Resources Assessment 2001”by forming an expert team comprised of HCU, Petrobangla, Bangladesh Gas Fields Ltd. (BGFCL), Sylhet Gas Field Ltd. (SGFL), Bangladesh Petroleum Exploration & Production Company Limited (BAPEX) and the Norwegian Petroleum Directorate (NPD). In order to update the gas reserve, old reports were examined with the seismic data, well log data, production and other relevant data that was collected. The gas fields operated by the PSC members such as Jalalbad, Sangu, Bibiyana and Moulavi Bazar were not included for this 1 National Energy Plan (Draft) 2008 5-1 Power System Master Plan 2010 re-evaluation work and the figures of the reserves of these fields provided by Petrobangla were kept unaltered and applied to this report. The gas fields in the Bangladesh were divided into Developed Gas Fields and Undeveloped Gas Fields. And for the purpose of re-estimation, developed gas fields were divided into Producing Gas Fields and Suspended Gas Fields. Out of 22 discovered gas fields, 16 gas fields were included for re-assessment by volumetric method. The producing sand of 5 gas fields were analyzed by Material Balance method using Shut In and Flowing Well Head Pressure since enough Shut in Bottom Hole Pressure data required for this method were not available for the most producing wells. Therefore, the results of re-assessment by the Material Balance were not considered to be correct. All of the previous reports relating to the gas reserves were described based on this "Bangladesh Gas Reserve Estimation 2003." In this MP, the latest preliminary reserve estimation which currently assessed by HCU is used. Since the latest estimation report has not published yet, the details are not clear at this stage, however, the accuracy of the estimation is expected to be improved by reflecting new material balance method and 3D seismic survey result. GoB formulated the National Strategy for Accelerated Poverty Reduction II (revised) (NAARP-II(revised)) in which it emphasizes essential infrastructure development in the 3rd block out of the 5 strategic blocks, especially focusing on the power and energy sector as a priority matter. It requires that the National Energy Policy be updated to provide the guidelines for achieving the nation’s energy security. 5.1.3 Gas Sector Master Plan 2006 At present, the latest Gas Master Plan for the Bangladesh Government is Gas Sector Master Plan (GSMP 2006) published by Petrobangla/World Bank (Consultant: Wood Mackenzie ) in 2006. The following issues are presented in the GSMP 2006; (1) Current status in the Bangladesh gas sector The GSMP 2006 indicated that the Gas Sector in the Bangladesh faces a very financially weak sector, as a result of low gas prices and recognized that insufficient funds were therefore available to undertake the level of investment required in both supply and transmission to meet demand growth, which continues to be strong. The Bangladesh has only proved gas reserves to fully meet demand until 2011, although taking into account probable reserves this extent to 2015. For this reason, the GSMP 2006 suggested that there is an urgent need for radical reform measures to enable that gas demand can be met. (2) Gas demand forecast up to 2025 Based on GDP growth assumptions, the gas demand forecast was made for the three cases. Case A: Essentially a continuation of the recent GDP growth trend in 2006. Case B: Consistent with the Bangladesh Government PRSP and MDG aspirations. Case C: 9% GDP growth until 2015, then decrease to 7% by 2025. In comparison with actual gas demand (1,791mmcfd) at the end of fiscal year in 2009, it is nearly same as Case C (1,785mmcfd at the end of 2009) and the actual gas demand shows higher growth than Base Case (Case B) assumed by the GSMP2006. In Case C, the total demand as of 2025 is estimated 7,441mmcfd. In this case, there will be causing shortage of gas supply against gas demand in 2013 if the gas supply is only proved reserves (P1) plus probable reserves (P2). 5-2 Power System Master Plan 2010 (3) Gas network issue Substantial expansion and modification of gas network system in the Bangladesh is inevitable to satisfy with increasing gas demand. Significant investment is essential to improve the infrastructure, and then of addition of compressor. In total an investment requirement of US$1.3 billon was identified in the transmission sector over period to 2025. (4) Strategy and investment for the Bangladesh gas sector The expected total addition of gas needed from new gas fields will be 16 to33 Tcf, or which will require an investment of about US$5 billion to 10 billion. 5.1.4 Gas Sector Reform Road Map (2009-2012) The Bangladeshi Government dialogued with ADB to revise the Gas Sector Reform Road Map (GSRR) to address the various issues held in the Gas Sector. The GSRR forms the action plans to set concrete countermeasures, time frames, monitoring instruments etc, classified into following seven categories. By implementing these action plans, the GSRR aims to improve operational performance in the gas sector and reform the inadequate investment, uneconomic tariffs, inadequate investment resources, inefficient use of gas and inadequate capacity in the state-owned gas companies and government agents. (1) Policy Framework To update the road map on gas sector reforms covering 3 years, and outline the latest government’s vision on the gas sector. (2) Regulatory Instruments To develop rules and regulations for private sector participation and to establish competitive and effective markets in terms of gas purchases, sales, and transmissions. (3) Sector Planning To update the gas master plan and disseminate investment options for the private sector. (4) Increased Access to Natural Gas To develop a strategy for the exploration and utilization of undiscovered reserves. (5) Corporate Governance To reduce the accounts receivables from public and private customers and minimize system losses in distribution and transmission in order to improve financial management. (6) Gas Sector Restructuring To establish TGTDCL as three separate companies and BGSL into two separate companies in order to improve management performance. (7) Private Environment To allow private financing in the gas sector in order to reduce dependence on government funds. 5.1.5 Natural Gas Access Improvement Project (2010） In the face of impending gas shortage as well as the continued growth of Bangladesh's energy and natural gas requirements in recent years due to economic growth, the Bangladeshi Government has requested ADB financing for several priority projects in the sector that would help implement its Poverty Reduction Strategy (PRSP). In response to a request from the Government, the ADB in January 2008 engaged with Technoconsult International Limited (TCIL) who is a local technical consultant firm based in Bangladesh to undertake the Technical Assistant study for preparing a clean fuel sector development program (the Program). TCIL commenced its study for the Program from February 2008 and submitted a final report with its proposal after compiling investigation 5-3 Power System Master Plan 2010 results to ADB on March 2009.