Bangladesh Caught in 'Power Struggle'--Part 3 of 3

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Researched by Industrial Info Resources (Sugar Land, Texas)--Dr. Hossain Mansur, the new chairman of Petrobangla, is overwhelmed by the long queue in front of his Dhaka office from representatives of 44 foreign companies seeking permission to drill unexplored state-owned onshore gas fields and perform seismic surveys to raise natural gas output. For the first time, Bangladesh's state-owned fields are open to foreign companies because of capacity constraints of the Bangladesh Petroleum Exploration and Production Company (Bapex). There is a sense of urgency because Bapex's current gas reserves will run out by 2014-15 at the current consumption rate--less than five years from now.

Whether exploring for or exploiting untapped gas or other forms energy sources, Bangladesh needs financial and technological support from abroad. Poor management of gas resources has led to the current situation where Bangladesh, labelled as one of the Next Eleven (N11) by Goldman Sachs, is in the grip of energy famine and compelled to look for emergency assistance from outside. Gas continues to be the primary fuel source, while steps are under way to reduce gas dependency for growth.

When Petrobangla, the nodal agency for gas and other power-related issues in Bangladesh, invited expressions of interest last September in the natural gas sector, companies from across the world, including the U.S., U.K., Australia, Russia, Canada, France, Japan, China, Singapore, Malaysia, United Arab Emirates, Oman and India lined up to participate. On offer was the chance to drill six wells and carry out 3,100 line-kilometres of 2-D seismic surveys on 'fast-track' to raise gas production and meet the mounting energy demands for industries and power plants.

You name them, they are there: U.S. Parker, Jwe UK, Bareqa Drilling, PNG Drilling, Simmons Drilling, Sinopec, Weathercoat Asia Pacific, Sun Drilling, Poszukiwania Nastyi Gazu Krakow, Atlantic Oil Fields, ETA Star Holding, Senergy International, Orogenic Resources, NB Petroleum Services, Quippo Oil and Gas, Jaydee Energy, John Energy Limited, Baker Hughes, Deawanchand Ramsaran Industries, and others.

For conducting seismic programmes, 19 knocked on Petrobangla's doors: U.S. Global Geophysical Services, Australia's TGS - Nopec Geophysical Company Limited, Chinese Sinopec International Petroleum Services, SGC Shengli Geophysics Corporation, Japanese JGI Incorporated, Turkish Merty Energy Hizmetlerias, France's CGG Veritas, Singapore's YJP Surveyors, United Arab Emirates' Alma Rosue Terraseis and Cellseis Geophysical, and Indian companies Mindset Seismic, Pan India, Alpha Geo and Jet Peb.

Evaluation will be finished by November. The cost of the drilling and seismic programs will be absorbed by Dhaka. Petrobangla will also shortlist foreign contractors for surveying onshore state-owned gas blocks 3, 6, 8 and 11. The seismic contractors selected will be given two working seasons to complete 2-D seismic surveys and submit the analyzed data to Petrobangla. Other significant developments include the acceptance by Petrobangla of third-party assessor Chevron Corporation's (NYSE:CVX) report on the Bibiyana gas reserve and the decision to award more offshore gas blocks to ConocoPhilips (NYSE:COP) and Turrow of Ireland.

What's happening on the coal front? Bangladesh began commercial coal production in April 2003 with the opening of the Barapukuria coal mine, which is expected to produce 1 million short tons of coal per year for electricity generation. The mine is being used to fuel the 250-MW Barapukuria coal-fired power plant in Parbotipur. Another coal mining project at Khalashpir is under consideration as well. In July 2005, U.K.-based Asia Energy Corp. submitted a proposal to develop a coal mine in Bangladesh's Phulbari region. According to a Scheme of Development and Feasibility Study submitted to the government, AEC declares that the Phulbari site contains an estimated 572 million short tons of recoverable coal reserves. The initial investment in the project would be $1.4 billion, and the open-pit mine is expected to produce 15 million short tons per year of coal to fuel a planned 500-MW power station.

In 1996, independent power producers stepped in to ease power constraints. In May 2005, U.S.-based Vulcan Energy (Houston, Texas) signed a memorandum of understanding for the construction of $1.6 billion in gas, coal, and fertilizer projects that would bring an additional 1,800 MW in generating capacity online. The Tata Group of India spoke of $3 million energy projects, but subsequently backed out.

Bangladesh does not have any choice but to start coal mining without delay, adopting technically appropriate and economically feasible, environmentally friendlier mining. The total coal reserves in five coal fields of Bangladesh are estimated to be 2.9 billion metric tons. Out of the five coal fields discovered in Bangladesh, production is ongoing only at the Baropukuria Coal Mines. China's Shanghai Electric Company of China and Spain's Cobra are in the race for Bangladeshi power projects.

To woo foreign investment participation, Bangladesh is offering several incentives. These include 15-year corporate income tax holiday; exemption from customs value-added tax duties for plant, machinery and spare parts for the first 12 years of commercial operation for up to 10% of the total value of the project; free repatriation of equity and dividend; no income tax for foreign lenders in Bangladesh; tax exemption on royalties, technical know-how, etc.; provisions for transferring shares to domestic investors; easy remittance of 50% of salary for foreigners and the ability to consider reinvested foreign funds as new investments. Opportunities for foreign companies to do business in Bangladesh are plenty.

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