Imported LNG: Bracing for gas rates rationalisation
Rupantarita Prakritic Gas Company Limited (RPGCL), a subsidiary of Petrobangla, is responsible for import and supply of imported liquefied natural gas (LNG) in the country. Re-gasified LNG supply is conducted through a Floating Storage and Re-gasification Unit (FSRU) at Moheshkhali, Cox’s Bazar. The FSRU has been installed and being operated by the US company Excelerate Energy within the scope of an agreement with Petrobangla. A second FSRU of similar kind is scheduled to be commissioned in April 2019 under an agreement between Petrobangla and Summit Group in partnership with Japan’s Mitsubishi. RPGCL has scrapped several other proposals for installation of FSRU in the Bangladesh coast including those of the Indian Reliance Power, a consortium of Hongkong Shanghai Manjala Power and Malaysia’s Petroleum National Bhd, Trafigura, Gunvor and Vitol, Exmar NV of Belgium etc. Earlier, Petrobangla decided to shelve the proposal for three small-scale FSRUs following objections from the Chittagong Port Authority. Meanwhile the government has decided not to build or allow anymore new FSRU, managing director of RPGCL disclosed to the media recently. Although commissioned in April 2018, the Excelerate FSRU started supplying gas to the national gas pipelines grid in August 2018. Within a few weeks of commencement of re-gasified LNG supply, the FSRU had to suspend its operation on November 04, 2018 as a sub-sea valve required urgent repairing to continue gas supply. It took 12 days to fix the technical glitch in the sub-sea pipelines and valve systems to restore gas supply. In the meantime, several power plants, industries, CNG pumps and households from a large part of the country suffered badly due to gas supply shortages. Bangladesh Power Development Board (BPDB) was compelled to shut down a number of gas-fired power plants due to the suspension of re-gasified LNG supply and switched to expensive oil-fired power plants. RE-GASIFIED LNG Since the re-gasified LNG started flowing into the gas grid, Petrobangla’s productions reached on an average 3,052 mmcfd, including around 300 mmscfd of LNG. With the introduction of LNG, the power sector is provided with around 1,200 mmscfd of gas against a demand of 2,020 mmscfd. As a result, some of the old industries already connected with the gas supply pipelines started receiving gas supply at required pressure and load. The new industries are also scheduled to receive supply of gas for which they have been waiting for a long time. The steps for LNG import and re-gasification facilities were initiated as the costs were comparatively cheap (almost at a half of the cost for installation of a Land-based LNG re-gasification and supply terminal) and delivery of the gas likely to be quicker. On the other hand, operating cost for FSRU is significantly high as the ships carrying LNG has to be chartered at a high rate for a considerable period to deliver LNG and the converted gas. Moreover, the extreme weather conditions, which is typical during monsoon in the Bay of Bengal coastlines, can adversely impact FSRU operations, hampering the objective of quick gas supply. OVER-DEPENDENCE ON GAS SUPPLY As Bangladesh has been over dependent (natural gas accounts for about 73 per cent of commercial energy) on gas supply for power generation, fertiliser production, and running industries and commercial operations, sudden disruption in gas supply not only upsets the whole system but also significantly increases production costs for industries and businesses. World Economic Forum’s report titled ‘Regional risk of doing business-2019’ has suggested that the increased costs of energy could hinder any improvement in doing business in Bangladesh. Bangladesh’s energy and power industry, transport sector and irrigation are becoming more and more dependent on imported petroleum products. INCREASING BURDEN OF GAS SUBSIDY Till date, the government has fixed the prices of fuel in the country. Hence, increased price of crude oil and petroleum products in the international market would put additional burden of subsidy on the national exchequer. With election around the corner, the government may not go for price adjustment immediately. For various reasons oil prices in the international market has been showing upward trends. The continuing trade war between US and China, sanctions against Iran and conflicts in the Middle East are likely to shrink supply of oil in the market. This will seriously impact energy prices in Bangladesh. Unfortunately Bangladesh has not been able to diversify its primary energy supply chain. The reduced natural gas share has so far been distributed mainly between imported liquid petroleum and LNG. Also, the prevailing ‘cheap’ gas supply had allowed wasteful uses. Most industries and businesses hardly tried to upgrade productions with efficient energy use. SECRET OF GAS AT CHEAP RATES Most of the domestic consumers are unaware of the fact that natural gas has been supplied at cheap rates to the consumers as the government of Bangabandhu Sheikh Mujibur Rahman purchased the five major producing gas fields from Shell Oil Company on August 09, 1975 at only Tk. 173 million (4.5 million Pound Sterling). As of December 2016, out of a total 14.24 Tcf, 8.531 Tcf gas was produced from these five fields and the rest of the gas fields of the country produced 5.709 Tcf. The value of already sold gas is more than Tk. 700 billion (approximately US$ 9.0 billion plus). The price of the gas fields of Shell Oil Company was very low compared to their asset value and their infrastructures - and no exploration cost was incurred by the government. Since then, the gas fields have continued production and the government-owned gas utility companies continued to sell gas to consumers at very low prices. Later, a few gas fields were discovered under Production Sharing Contract (PSC) with the International Oil Companies (IOCs) and these added to the supply of gas. But the blended gas price in the country remained cheap. In the meantime, the IOCs have recovered their investment cost (under cost recovery provisions of PSC) and Petrobangla has been receiving the major share of the produced gas by the IOCs, thus enabling the former to continue to sell the gas at comparatively cheaper rate. GAS RESERVE As per Petrobangla sources, 26 gas fields have been discovered so far in Bangladesh. Among them 20 gas fields are in production, two are not in operation and production from four gas fields are suspended. The Gas Initial in Place (GIIP) is estimated at 39tcf. Out of this, estimated Proved Reserve (P1) is 20.8 Tcf, Proved+Probable Reserve (2P) is 27.12 Tcf, Proved+Probable+Possible Reserve (3P) is 31.31 Tcf. Till December 2016, as much as 14.24 Tcf gas has already been produced, leaving 12.88 Tcf of recoverable gas. At the present gas consumption rate, the remaining reserve may serve for another 12 years. The demand and supply situation of natural gas from the domestic gas fields in Bangladesh has been showing negative growth since 2001. No major of gas field has been discovered since Bibiyana Gas Fields in 1998. Demand of natural gas continues to increase by leaps and bounds, whereas production in the existing fields remains static. Some of the existing gas fields have also started indicating depletion in production. With the commissioning of Bibiyana Gas Fields in 2007, it was assumed that there would be a balance in demand-supply situation. But as the hidden demand for gas surfaced, additional production from Bibiyana Gas Fields failed to change the demand-supply situation. Petrobangla estimates that the overall demand of gas was 3,664 mmcfd in December 2016 and during that time overall production was 2,734 mmcfd. Therefore, there was a shortfall of about 930 mmcfd. Petrobangla has projected overall gas demand for 2018 at 3,979 mmcfd and for 2019, 4,023 mmcfd. If the trend of gas production of 2016 is considered static, then there would be a shortfall of 1,245 mmcfd in 2018 and around 1,289 mmcfd in 2019. To tackle the situation, the government had stopped gas connections to new factories and power and fertiliser plants for the last 8 years. Most of the existing industrial, power or fertiliser plants also did not receive required volumes of gas. As a result, the performances of these plants are not up to the mark.Though new areas like Khulna were brought under the gas network, the division does not receive gas supply properly in most areas. If hidden demand is taken into consideration, the daily demand is likely to shoot above 5,000 mmcfd in the country. The imported LNG is costing about four times higher than domestic gas. With the increased share of LNG import, the blended gas price will increase significantly for domestic consumers. As gas will have to be sold at energy value (calorific value), the choice of usage must be restricted to the value-added customers only. Therefore, usage of gas must be prioritised for the power, fertiliser and industrial sectors. The gas marketing companies need to re-structure their marketing and revenue earning targets to ensure timely collection of gas revenue. Under these circumstances, industrial units, power, fertiliser and all other types of customers should realise that there would be no more gas supply at cheap prices. Dr. Mushfiqur Rahman is a mining engineer and writes on energy and environmental issues. Sourec: Financial Express
‘Journey of smart pre-payment meter production starts in Bangladesh’
It is such a great news for Bangladesh’s power sector that we are going to set up a smart pre-payment meter manufacturing plant in the country. The plant is expected to start production from January 2019. On October 21, West Zone Power Distribution Company Ltd (WZPDCL) and Chinese Hexing Electrical Company Ltd has signed a joint venture agreement to set up a manufacturing unit in Bangladesh under the name and style as ‘Bangladesh Smart Electrical Company Limited (BSECL)’ for manufacturing smart prepaid meters. Indeed it’s a memorable day for WZPDCL, because with signing of this contract we have stepped forward to manufacture a product which is one of the key elements for all power distribution entities. WZPDCL is a 100% government owned electricity distribution company under Bangladesh Power Development Board responsible for operation, maintenance and development of electricity distribution system in south western zone of the country consisting 21 districts and 20 upazillas. Presently it provides electricity supply to almost 1.1 million consumers covering Khulna and Barisal divisions and greater Faridpur district. On the other hand, Hexing is a Chinese origin smart prepayment meter manufacturing company having three production factories in China while their annual sell is around 20 million metering devices. They have supply record of more than three million digital meters and 1.2 million pre-payment meters in Bangladesh. Apart from that Hexing is operating five overseas JVC or fully owned companies which are doing business smoothly. Bangladesh Smart Electrical Company is formed as a Joint Venture Company with 51% share owned by WZPDCL and 49% share held by Hexing. It is the first of its kind in Bangladesh to manufacture smart prepayment meter under joint venture incorporating a state owned distribution utility with a foreign company. The factory will be set up in Khulna under WZPDCL area. Government is committed to enhance the quality of service to all citizen of the country and this can only be achieved through digital technology. That is why our Hon’ble Prime Minister has time and again reiterated for digital Bangladesh with a view to make the government service available to doorstep of people. Prepaid meter is introduced with this objective to enhance the customer service quality. We have seen that transparency in billing process is being ensured to a great extent through installing the prepaid meter at consumer premises by this time. Though initially customer satisfaction could be achieved partially with the prepaid meter due to certain limitation like inadequate vending facility and other technical issues, but new technology with smart pre-payment meter has removed almost all hassle by now. Consumer can now easily make payment of electricity bills from anywhere using different online payment gates including mobile apps. With this end in view sustainable development goals (SDGs) has set the target to replace 7.5 million existing electromechanical or digital post-paid meter with pre-paid meters within 2020 under 7th five year plan. Out of those target only 1.58 million pre-paid meters have been installed so far and needless to say all of those were imported from foreign countries. Moreover, at present total number of consumer in the country is around 31.10 million all of whom have to be brought under pre-paid meter as per government decision. So, we think that the country has great demand of prepaid meters now and also in future. Considering this facts and figures this joint venture company can play a pivotal role in fulfilling the demand of prepaid meter in the country. We want self reliance working along with foreign companies to upgrade our technology and development our human skill. Obviously this JVC will save huge foreign currency needed for importing meters to achieve the SDG goal within the time frame set by the Government apart from that it will create the opportunity for foreign direct investment (FDI), job opportunity to many people of the country thus alleviating poverty level, transfer latest technology to the country, constant up gradation of technology, sharing research and development with foreign counterpart. All the most consumers of our country will get the meter in cheap price than the imported ones with added advantage of after sale service which is not being possible in case of importing the meters. The JVC will also export the meters besides meeting the requirement within the country which will pave the way for earning foreign currency. However, the greatest challenge before the JVC is initially marketing the product in the country. Government is always kind enough to support the entrepreneur in this regard for which 7.86% GDP growth in the country has been possible. We hope this JVC will likewise get government patronization to sell their product. We also seek cooperation from all distribution utilities, particularly the head of the entities who may procure their meter from this JVC with all added advantage. Of course we are committed to maintain quality of the product as well as price competitiveness in order to get the support from all quarters. We expect government would do its best to save guard the interest of the country as a whole. Last but not the least this smart meter company will play an important role to implement the Vision-2021 policy of the government to make Digital Bangladesh for which the government Hon`ble Minister of Power Ministry, all executing agency in power sector are relentlessly working for realizing Sonar Bangla our father of the Nation Bangabandhu Sheikh Mujibur Rahman dreamt of with the blessing of all we are hopeful to achieve that goal. Md Shafique Uddin, is an engineer and Managing Director of West Zone Power Distribution Company Ltd.