After spearheading the negotiations that brought Unocal Corp. to Bangla- desh in 1996, James Stone, president of the company's Unocal South Asia Energy Ltd. unit, is looking forward to first flow of natural gas through the company's proposed Bangladesh-to-India pipeline, projected to cost $500-700 million to develop. The proposed pipeline will link Bibiyana field on Unocal's Block 12 to India's main natural gas system, HBJ Pipeline. But the Unocal unit—and Stone himself—has witnessed many highs and lows over the pipeline's various planning and development stages, and there still exist a number of hurdles yet to surmount before the project gets a green light.
The most recent low point came in November when the seven-member Nagorik Committee—formed by the Bangladesh Geological Society and the Bangladesh Economic Association—deemed that the country has insufficient gas reserves to serve both domestic and foreign markets and advised against the government authorizing the export of any gas (OGJ Online, Nov. 25, 2002). The committee listed Bangladesh's gas reserves at 6.2 tcf proved and 5.8 tcf probable.
Bangladesh's gas resources
Stone, however, contends that Bangladesh's present total gas resource base exceeds 60 tcf.
"According to the Society of Petroleum Engineers (SPE) and the World Petroleum Congress (WPC)," he said, "in addition to the proven reserves, the entire resource base includes the quantity of petroleum accumulation that is currently subcommercial or that is yet to be discovered."
Stone explained that this total resource base quantity breaks down into three parts:
16.1 tcf of proven plus probable gas reserves, as measured by the Energy Ministry's Hydrocarbon Unit (HCU) and accepted by the National Utilization Committee.
12.8 tcf of additional field-growth gas reserves within existing fields operated by state-owned oil and gas firm Bangladesh Oil, Gas & Mineral Corp. (Petro- bangla). In a recent report entitled "Natural Gas Demand and Supply Forecast: Bangladesh FY 2001 to 2050," Petrobangla stated that substantial reserves could be added as field growth through more appraisal drilling, 3D seismic surveys, thin bed pay analysis, use of compression, and appropriate reservoir management techniques, Stone said.
A minimum estimate of 32 tcf of new-field gas discoveries derived from various studies conducted over time by several agencies, including Petro- bangla's Hydrocarbon Habitat Study in 1986 (42.8 tcf), Bangladesh Study Group in 1989 (62 tcf minimum), Petrobangla-US Geological Survey (USGS) joint study in 2001 (32.1 tcf), USGS worldwide resource study in 2002 (33 tcf), and HCU-Norwegian Petroleum Directorate (NPD) in 2002 (41.6 tcf). "None of the studies have produced estimates less than 32 tcf," Stone noted.
A joint recommendation from SPE, WPC, and the American Association of Petroleum Geologists stated that, because "undiscovered resources represent potential future additions to the reserves," Stone said, "the entire resource base is important to both countries and companies for planning and portfolio management purposes."
In addition, the recent "Bangladesh Optimal Gas Utilization Study" conducted by HCU-NPD considered the entire resource base for the country's future supply-demand projection, and "concluded that gas export by pipeline represents the greatest economic value to Bangladesh for gas that will not be consumed domestically in the near to medium term," said Stone.
"It is particularly important for Bangladesh to consider the entire resource base," he said. "With an area of 207,000 sq km and only 65 exploratory wells drilled to date, the country ranks as one of the world's most significant, underevaluated hydrocarbon provinces. With 22 discoveries, Bang- ladesh has a very high historical exploration success rate of about 35%—very strong by world standards.
"In the Gulf of Thailand, over 2,000 wells have been drilled in the last 20 years. In comparison, only 130 exploratory and development wells were drilled in Bangladesh in the last 95 years," Stone said.
And the country's deepwater potential is not included in the current known resource base, he said. "Exploration activities are now conducted in some places at water depths over 2,200 m, with significant discoveries of oil and gas accumulation," Stone said, adding, "Even (off) the east coast of India, just southeast of Bay of Bengal, successful exploration activities are going on up to about 1,800 m (see related story, p. 20). Recent discoveries there only add further emphasis to the need for the government of Bangladesh to move quickly on an export decision before the market window of opportunity closes completely."
Proposed benefits
Unocal's proposal to construct its pipeline will provide Bangladesh with many opportunities, including producing hundreds of millions of dollars annually in revenue to the government—billions of dollars over the life of the project—and creating thousands of jobs, Stone contends. It also would provide the direct foreign investment the country so desperately needs, particularly in the energy sector, he said.
Based on the findings of the various aforementioned studies and reports, Stone said that the decision to build a pipeline comes down to a list of five realities. These are:
Bangladesh is blessed with an enormous natural gas resource base, which is sufficient for its own domestic needs and the ability to export a portion of the surplus.
Bangladesh needs significant investments in the energy sector in order to fuel that sector's development and the country's overall economic development. The country could use this money to develop pipelines, power plants, fertilizer plants, roads, communications networks, and distribution systems. Investors need to be assured of a return on their investment, Stone said, which will unleash further investment, more exploration, more development, and foster domestic demand.
The project presents a unique gas marketing opportunity in the Delhi area of northern India.
These opportunities are going to disappear if Bangladesh doesn't act quickly on a decision to construct the pipeline.
A clear policy decision is required today that will allow export of gas by pipeline.
Project opposition
Despite optimistic resource projections, however, Unocal's proposed plan to export gas from Bangladesh via pipeline into energy-needy India continues to generate some opposition.
In a Jan. 10 letter to the editor published in the online edition of the Bangladeshi newspaper The Independent, a concerned citizen wrote of the public's unease about the possible "plundering of natural gas," and that the choice to export gas to India would "cause a very critical problem to Bangladesh's economy."
Stone's argument in favor of building such a pipeline, the citizen continued, is flawed in that it doesn't consider using Bangladesh's gas resources for yet-to-be-built gas-based industries, such as electric power plants.
"Bangladesh needs money for (its) future exploration, but exploration for the benefit of others is not needed by Bangladesh," the citizen wrote, adding, "If a huge reserve of oil and gas wealth is found in Bangladesh, then there will be no dearth of vultures turning Bang- ladesh into another Middle East. So we should explore slowly according to our needs through local experts and companies."
Unocal, meanwhile, awaits a clear policy decision from the Bangladeshi government as to whether it will allow export of gas via pipeline, Stone explained.
"This is a momentous decision for the government, and there certainly are those who oppose the project or oppose gas exports," he said. "It's a tough thing to move forward. At the same time, we were encouraged because the key factors that came out in the committee reports are that Bangladesh does have this enormous gas resource base."
Currently, Unocal has a production-sharing contract that provides for the export of gas in the form of LNG, and if LNG is not economically feasible, then it can propose a reasonable alternative, Stone explained.
Political hurdles
The tallest hurdle for the government reaching its decision, Stone said, remains politics. "They've got a big political challenge," he said. "That's an area that we really can't do much about."
Despite the similarities in the platforms of both of Bangladesh's major parties and their equal support of economic development, Stone said that there are political implications to a project exporting gas to India by pipeline.
"It's an easy target to attack the motives of those who might support it for political reasons," he said. "The government of Bangladesh, the party in power, and the opposition party have got to work that out and come to the decision of what's in the best interest for Bang- ladesh."
Stone said he remains hopeful that a decision will be made in the next few months.
"It's critical that a decision is made very soon. We talk about a 'window of opportunity' for the market in the Delhi area in northern India. There currently exists a large, credit-worthy, high-quality customer base that would like to purchase the gas from Bangladesh, is capable of paying a good price for the gas, and wants the project to go forward.
"The challenge is that there are other suppliers from other countries that are targeting that exact same customer base, and they are actually moving forward with LNG projects that are coming to the west coast of India that will be competing for the same customers," he said, adding, "The price advantage that Bangladesh would now enjoy, over time, diminishes because LNG is decreasing its costs, primarily due to technological advances. Once these high-quality, credit-worthy customers make long-term commitments to other projects, then the opportunity will be closed out for Bangladesh." F
Unocal South Asia Energy Ltd. Pres. James Stone
"Once these high-quality, credit-worthy customers make long-term commitments to other projects, then the opportunity will be closed out for Bang- ladesh (gas exports)."
Career highlights
James R. Stone is currently president of Unocal Corp. unit Unocal South Asia Energy Ltd.
Employment
Stone began his career in the oil and gas industry in 1978 as a landman for Oklahoma City-based Harris Minerals Corp. In 1985, he started his own independent exploration and production firms, Stonemark Energy Corp. and Stone Oil Properties, both based in Oklahoma City. He joined Unocal in 1989 as regional land manager, Midcontinent region, while continuing operations as an independent. In 1992, he joined Unocal's international business development unit, which has taken Stone to more than 30 countries.
Organizations
Stone is a member of the Texas Bar Association and the Association of International Petroleum Negotiators.
Education
Stone earned a BA in history from the University of Central Oklahoma in 1977, an MBA from Houston Baptist University in 1994, and a JD from South Texas College of Law in 2000.