Poverty-stricken Bangladesh is seeking new sources of oil and gas as it considers moving to a 5-day work week and raising fuel prices to reduce energy demand.
The nation of 140 million people currently has a 6-day work week, but Finance Minister M. Saifur Rahman said this may have to be cut by a day to reduce energy consumption.
“I am personally in favor of cutting working days,” he said. That’s a move likely to please voters in the country’s forthcoming elections.
In a statement that will be less popular, Rahman also said the country may have to raise fuel prices to deter consumption since the state-owned oil import agency, Bangladesh Petroleum Corp., had to borrow more than $770 million from state banks to cover rising oil import costs.
Subsidized trouble
The real problem, though, is the subsidy the state gives its citizens, a point underscored during a recent visit of World Bank officials.
Indeed, the WB mission advised Rahman that the government will have to scale up oil prices, particularly diesel and kerosene, in order to qualify for release of the latest tranche of the WB’s Development Support Credit.
While crude oil on the international market has risen to more than $60/bbl, in Bangladesh product prices remain where they were when the global crude price was $25-26/bbl.
If the government does not adjust the domestic price regime with the global range, Rahman said, it will have to bear a yearly subsidy of some $200 million. Such a huge amount will not come from tax, he said, adding that the government’s alternative is “inflationary” finance.
Still, there is a certain degree of hope on the horizon.
Hope enters
The local unit of Unocal Corp. is to start seismic work on Block-7 in southern Bangladesh this December under a July 25 addendum to its production sharing contract with state-run oil and gas corporation Petrobangla.
When asked why it is reviving exploration, Unocal Bangladesh Pres. and Managing Director Andrew L. Fawthrop said demand for natural gas is growing steadily in Bangladesh.
Fawthorp said Unocal hopes to boost gas production to ensure that supplies are available to meet not only present requirements but future needs as well.
“We are extremely encouraged to see the market vibrancy and believe that it is the right time for the company and the government of Bangladesh to go for further exploration activities,” he said.
The Finance Minister will probably agree with that statement.
Rahman is said to be in a great dilemma. He has to get money from donors by complying with their conditions, but he also has to convince his cabinet colleagues to make unpopular decisions in an election year.
Unocal’s timely exploration gives him another option altogether.✦
