With the dispute over its maritime zone with India having been ruled in its favor and the recent discovery of vast reserves of oil and gas deposits adding to its stockpile of this very crucial driver of growth and development, it would be in the benefit of Bangladesh to cooperate with its giant South Asian neighbor India and make the most of its natural bounty, writes Rupak Bhattacharjee for South Asia Monitor.
By Rupak Bhattacharjee
The prospects of Bangladesh’s oil and gas industry appear to be on the glowing edge ever since huge reserves of oil and gas deposits have been discovered in its maritime zone. In 2014, Bangladesh was the eighth largest natural gas producer in the Asia-Pacific region. By 2014, Bangladesh discovered 26 gas fields, of which gas has been extracted from 20. According to the Bangladesh government, the country’s gas reserve stood at 27.12 trillion cubic feet, of which 12.96 trillion cubic feet had been used until June 2014.
Natural gas is the most important indigenous source of energy which accounts for 75% of Bangladesh’s commercial energy. The country produces 833 billion cubic feet gas per year and all of it has been domestically consumed. At present, onshore fields meet the entire gas requirement of Bangladesh, but energy experts say production is likely to recede in the next few years. Dozens of Bangladesh’s offshore blocks are located in the Bay of Bengal. The experts believe that the country’s Exclusive Economic Zone in the Bay possesses one of the largest oil and gas reserves in Asia-Pacific.
The key domestic players in the energy sector are state-owned Petrobangla and its subsidiary Bangladesh Petroleum Exploration and Production Company (BAPEX). Besides, a number of foreign enterprises, including India’s ONGC Videsh Limited (OVL) are currently engaged in Bangladesh’s hydrocarbon industry. The OVL signed a contract for two shallow-water exploration blocks of Bangladesh in the Bay on February 19, 2014.
The delimitation of maritime boundary between Bangladesh and its neighbours India and Myanmar by the successive United Nations tribunals’ verdicts has enabled Dhaka to open up its waters for foreign firms to explore and exploit hydrocarbon in the Bay. It will help the country to compensate gas shortages in its turbine-run industries and plants and contribute to the country’s development. The vast gas reserves in the Bay region have unfolded vast opportunities for the littoral states to enhance mutual cooperation. The 900 km-long proposed Myanmar-Bangladesh-India (MBI) gas pipeline, which was conceived by Dhaka-based Mohona Holdings in 1997, is one such multilateral initiative. This $1 billion project seeks to transfer 5 billion cubic meters of gas from the Swe field in southern Myanmar to India through Bangladesh.
The three nations had reached an agreement in January 2005 but Khaleda Zia-led Bangladesh government withdrew from the project after India refused to accept its additional conditions. Following her return to power in 2009, Sheikh Hasina approved the project. However, in the mean time, Myanmar lost interest in the tri-nation project as it had struck a deal for 2,388 km dual gas and oil pipeline from Kyakphu port on the western coast of the country to the border town of Ruili in Yunnan province of China.
The reports indicate that official talks on the MBI pipeline would resume soon. The project was re-evaluated during India’s Prime Minister Narendra Modi’s landmark visit to Dhaka in June 2015. It is expected that the three nations will sort out the differences in their respective energy policies and take concrete steps to implement the MBI pipeline. The project is important for India as it will help meet the country’s growing energy needs. Bangladesh is also part of the Trans-Afghanistan gas pipeline project, called Turkmenistan-Afghanistan-Pakistan-India (TAPI) initiative.
In order to save time and cost of transporting LNG and liquefied petroleum gas (LPG) to the North Eastern and eastern states, India seeks to use facilities and territory of Bangladesh. A 10-member Indian delegation that included representatives from Indian Oil Corporation Limited (IOCL), Numaligarh Refinery Limited (NRL) and Engineers India Limited met Bangladesh’ State Minister for Power, Energy and Mineral Resource Nasrul Hamid in Dhaka on November 23, 2015 and expressed their desire in this regard.
India wants to set up facilities along Bangladesh coast to import LNG and LPG for supplying them to its provinces. Reports say imported LNG, after re-gasification, would be supplied to the provinces using Bangladeshi pipeline, while the imported LPG would be bottled in the neighbouring country and also be supplied there. The IOCL proposed to build LPG bottling plant in joint venture with state-run Bangladesh Petroleum Corporation (BPC) and LNG terminal in another joint venture with Petrobangla.
Similarly, Bangladesh has been seeking export of diesel from India to meet its ever-increasing demand for fuel. Assam’s NRL has agreed to export 1 billion metric tonne of diesel per year after the completion of Rs 200 crore pipeline project from Siliguri in North Bengal to Parbatipur in Bangladesh. According to reports, the feasibility study has already been completed. On April 22, 2015, NRL signed a memorandum of understanding with BPC to lay 130 km pipeline from its marketing terminal in Siliguri, to the latter’s depot at Parbatipur in northern Dinajpur Division of Bangladesh. Initially, NRL and IOCL would export diesel to Bangladesh through rail network. On March 18, 2016, India’s union Minister for Petroleum and Natural Gas Dharmendra Pradhan flagged off a goodwill rail rake consignment carrying 2200 MT of high speed diesel from NRL’s terminal in Siliguri.
The energy cooperation between India and Bangladesh has gained momentum in recent months. Earlier on February 6, 2016, Bangladesh premier’s Energy Adviser Tawfique-e-Ellahi met India’s Petroleum Minister Pradhan and explored the ways for strengthening bilateral cooperation in petroleum exploration and trade. They also discussed the possibility of shipping petrol and diesel to Bangladesh from the newly-built IOCL’s refinery at Paradeep in Odisha. This refinery has an added advantage of geographical proximity to Bangladesh. Moreover, India underscored the need for expanding commercial ties between the two nations via sea by connecting the ports of Chennai and Paradeep with Chittagong and Mongla ports in Bangladesh.
Bangladesh is the net importer of crude oil and petroleum products. The country processes crude oil at Eastern Refinery Limited in Chittagong—Bangladesh’s largest oil refinery. Securing the domestic energy needs has been a challenging task for the successive governments in Bangladesh. Power and Energy Minister Hamid informed the parliament on June 28, 2014 that that the country’s gas reserve are expected to last till 2031 at the current production rate. The acute gas shortage in Bangladesh compelled Petrobangla to ration new connections to industries, fertilizer factories and power plants, impeding economic growth in recent years. The current Awami League (AL) government wants to increase natural gas supply through LNG imports to address the problems of power grids and reduce black outs.
Despite enough potential, the Bangladesh government’s protectionist oil policy coupled with technical deficiencies has stood in the way of the country’s emergence as a major global hydrocarbon producer. As per Bangladesh’s oil policy, only state-owned BAPEX has the right to explore unlicensed acreage in onshore blocks. BAPEX has been facing fund crunch, and human and technical resources constraints even though it recently discovered new reserves. Foreign firms could help BAPEX to harness the newly-found reserves if the government liberalise oil and gas policy. The Bangladesh government has to initiate reform measures to ensure its energy security.
The country is seeking greater foreign collaboration in its offshore area. The AL government intends to launch the next licensing round for several shallow and deep water fields in 2016—nearly four years after the last tender. The OVL stands a chance to win lucrative contracts in Bangladesh’s oil and gas fields. The Indian companies are keen to participate in oil exploration and refinery expansion work in Bangladesh. We hope that both the neighbouring countries would calibrate their energy security policies on the basis of mutual interests and benefits.
(Rupak Bhattacharjee is an independent analyst working on issues concerning India’s North-East and Bangladesh. He can be reached at: email@example.com )