Natural Gas in Pakistan and Bangladesh: current issues and trends Ieda Gomes NG 77 June 2013 i The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the Oxford Institute for Energy Studies, of any of the Institute’s members, and/or of the author’s other affiliations. Copyright © 2013 Oxford Institute for Energy Studies (Registered Charity, No. 286084) This publication may be reproduced in part for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgment of the source is made. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the Oxford Institute for Energy Studies. ISBN 978-1-907555-76-3 ii Contents Acknowledgements ...................................................................................................................... vi Preface .......................................................................................................................................... vii Introduction ................................................................................................................................... 1 Regional Overview and Economy................................................................................................ 2 Energy Market Fundamentals ..................................................................................................... 3 Coal ............................................................................................................................................. 4 Renewable energy ....................................................................................................................... 5 Hydro-electricity ......................................................................................................................... 5 Petroleum .................................................................................................................................... 6 Natural gas overview ................................................................................................................... 8 Pakistan: Gas markets and industry overview ........................................................................ 10 Supply and demand of natural gas ............................................................................................ 10 Brief history of the oil and gas industry in Pakistan ................................................................. 11 Structure and organisation of the gas industry in Pakistan ....................................................... 12 Pakistan Upstream ..................................................................................................................... 14 Pakistan - Petroleum policies & fiscal regime .......................................................................... 16 E&P bid rounds ......................................................................................................................... 18 Upstream bid package ............................................................................................................... 20 Onshore Zones ....................................................................................................................... 20 Offshore blocks ...................................................................................................................... 20 Gas marketing provisions for onshore and offshore blocks .................................................. 20 Tight gas exploration policy ...................................................................................................... 21 Pricing policy for marginal gas fields ....................................................................................... 23 Gas marketing and pricing in Pakistan ...................................................................................... 23 Economic impact of gas and power shortages .......................................................................... 26 Gas import projects ................................................................................................................... 29 Iran Pipeline Project (IP) ........................................................................................................... 30 TAPI pipeline ............................................................................................................................ 31 LNG projects ............................................................................................................................. 33 Brief summary of proposed private LNG projects .................................................................... 34 Engro Elengy Terminal Pakistan Limited, (EPTL) ............................................................... 35 GEIP (GasPak) ...................................................................................................................... 35 Pakistan GasPort Ltd (PGP) ................................................................................................. 36 DSME (Daewoo Shipbuilding and Marine Engineering Company) ..................................... 36 Regasified LNG (RLNG) tenders (2012/2013) ......................................................................... 36 Will LNG projects be implemented? ........................................................................................ 38 Opportunities for cooperation with India on energy matters .................................................... 40 Pakistan gas markets: key findings and conclusions ................................................................. 41 Bangladesh: Gas Market and Industry Overview ................................................................... 42 Brief history of the Bangladesh gas industry ............................................................................ 42 Structure and organisation of the gas industry in Bangladesh .................................................. 42 iii Exploration and Production ....................................................................................................... 44 Transmission and Distribution .................................................................................................. 44 Gas supply and demand in Bangladesh ..................................................................................... 46 Bangladesh power sector ........................................................................................................... 48 Bangladesh upstream sector ...................................................................................................... 52 The 2012 Hydrocarbon Exploration tender ............................................................................... 54 Highlights of the 2012 Petrobangla offshore bid ...................................................................... 55 Outcomes of Bangladesh 2012 Upstream Tender ..................................................................... 56 Gas marketing, pricing and affordability .................................................................................. 57 Gas pricing to end-users ............................................................................................................ 57 Gas import projects ................................................................................................................... 59 Pipeline import project .......................................................................................................... 59 LNG import project ............................................................................................................... 60 Opportunities for cross border cooperation ............................................................................... 61 Critical energy issues impacting Bangladesh ............................................................................ 62 Subsidies.................................................................................................................................... 64 Bangladesh gas market overview: key findings and conclusions ............................................. 64 Overall Conclusions: Pakistan and Bangladesh....................................................................... 66 Appendices ................................................................................................................................... 70 Appendix 1: Summary features of Pakistan E&P 2012 exploration bid ................................... 70 Appendix 2: Key features of Bangladesh’s E&P 2012-2013 bid.............................................. 73 Bibliography ................................................................................................................................ 75 Notes ............................................................................................................................................. 79 Acronyms of Companies’ Names and Abbreviations .............................................................. 79 Figures Figure 1: Comparative GDP growth in South-Asian countries ...................................................... 3 Figure 2: Pakistan and Bangladesh Primary Energy Supply .......................................................... 4 Figure 3: Location of the Thar coal field in Pakistan .................................................................... 4 Figure