David Knott
London
[email protected]
On July 15, bidding will close in the second exploration licensing round organized by the government of Bangladesh and state petroleum company Petrobangla.
After a long period of political volatility, which made the country a no-go area for investors, Bangladesh is now an energy industry hot spot.
Wood Mackenzie Consultants Ltd., Edinburgh, attributes the sudden change to last year's parliamentary elections and subsequent improvements in international relations.
Under the new moderate government of Prime Minister Sheikh Hasina Wajed, gross domestic product is expected to hit the target of 5.5% growth this year, and inflation is reckoned to be under control at less than 5%.
A bid to boost foreign investment in Bangladesh is focused on the energy sector. Much of the effort is going towards electricity generation schemes, since Bangladesh is riven by strikes over growing power shortages.
Underestimated
"The current licensing round," said Wood Mackenzie, "has drawn interest from more than 80 companies, among which are many of the majors, all anxious to gain a stake in what could prove a dramatically underestimated natural gas resource.
"If the government and Petro- bangla can keep to the promised bid evaluation and petroleum-sharing contract (PSC) signing schedule, the round can only be a resounding success."
The analyst highlights key features of the PSC system as: no signature bonuses, no administration fee, no duty payable on imported equipment, no corporate tax, repatriation of profits, and the right to export gas as liquefied natural gas-subject to Petrobangla having first option on gas produced.
The government also has signed contracts for four independent gas-fired power projects so far this year, with combined capacity to generate 430 MW of electric power.
These are all to be barge-mounted schemes, three of which will be fueled with imported naphtha or furnace oil until indigenous gas production takes off in 1999.
Gas-to-liquids
Cairn Energy plc, Edinburgh, is one of the companies hoping to secure second round licenses.
This U.K. independent spotted the potential of Bangladesh and moved in before the political situation eased.
Cairn is operator of Sangu field, under development, and Sematung find, being appraised. Cairn is also a partner in a project to build a 150-MW power plant near Dhaka (OGJ, Sept. 30, 1996, p. 36).
This year Cairn farmed out 50% of its Bangladesh interests to Royal Dutch/Shell. Shell sees Bangladesh as a potential site for a gas-to-liquids plant using its proprietary technology (OGJ, June 23, 1997, p. 16).
Wood Mackenzie said Shell has proposed to the Bangladeshi government the investment of as much as $2.5 billion in a middle distillate synthesis plant, using natural gas feedstock.
"Shell envisions a project that could produce up to 50,000 b/d of petroleum products," said the analyst, "utilizing around 400 MMcfd of gas. Bangladesh currently imports some 30,000 b/d.
"This confirms the prospectivity that Shell sees in Bangladesh for significant new gas reserves and highlights a key reason for the company's recent deal with Cairn."
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