Bangladesh Investment Climate and Gas Attracts $5 Billion Projects in 2005

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). Classified as a 'least developed country,' Bangladesh is beginning to attract increased industrial project investment year by year. The main underpinning resource for the country's long-term growth is a current estimated reserve of 15.3 trillion cubic feet (Tcf) of natural gas. These figures come from the state’s Petrobangla. The US Geological Survey has estimated that Bangladesh has an additional 32.1 Tcf of natural gas in 'undiscovered reserves.'

Home to the mouths and flood prone delta of the Ganges River, the country, which is about the size of Wisconsin, is crammed between India and Burma and has a population of over 140 million. Bangladesh's total electricity generating capacity is 3,600 MW. The country’s capital city Dhaka, with a population of over ten million, consumes about half of the total power output.

In the past month, two major investment initiatives, totaling $4.1 billion, have been made in the country's power, mining, steel, and fertilizer sectors, with the prospect of more gas-based industries spawning from these seed projects.

The Tata group (NYSE:TCS ) (India) is planning to construct a 1,000 MW power station, a 420,000 ton per year steel mill and a 1 million-tpy fertilizer production plant. The power and fertilizer plants will use gas as their feedstock, and the steel plant will also be powered by gas.

The projects are expected to create over 5,600 skilled and unskilled jobs, and the overall investment will stimulate the country's gas exploration and development and diversify its energy basket, said AKM Mosharraf Hossain, minister for energy and mineral resources.

Formal investment negotiations on the projects should be completed by the end of August, and final agreements should be signed before the end of November. Pricing and pressure in the gas pipeline project, coal mining and exploration, cross border railway transportation, customs regulations, freight charge, and investment incentives will be key issues during Tata's negotiations with the government's Board of Investment (BoI). For related news item see - September 3, 2004 - TATA of India to Pump $2 Billion Project Investment into Bangladesh Industrial Base.

The low entry base offered by Bangladesh as a 'least developed country' also ensures preferential duty access in third country markets. It also sits in a key location and has flexible labor laws.

In a plan of similar scope and scale, U.S. company, Global Vulcan Energy International (GVEI), has signed a Memorandum of Understanding (MoU) with the BoI for a package of power, coal, and fertilizer projects, with a total investment value of $1.6 billion.

$900 million will be put into a series of gas-fired power plants, with a total output of up to 2,000 MW. The $375 million coal mining project will include a 450 MW coal-fired power plant and $200 million will be invested in a 140,000 tpy year carbon-based organic fertilizer plant. A further $150 million will be invested in a range of coal-based projects in the country. GVEI will complete feasibility studies on the projects within the next six months, and formal work should start on some of the projects in January 2006.

GVEI is a limited liability company registered in Delaware and is affiliated with Vulcan Capital, a New York private equity firm, which has invested hundreds of millions of dollars into power, energy, coal, oil and gas companies, and projects worldwide. During the MoU signing, Ford F. Graham of GVEI said, "We feel the investment climate congenial in this country, as you have four components - rule of law, hardworking manpower, democracy, and the opportunity to move profit from your country.

Chinese companies have also invested $1 billion in industrial projects in the country since the beginning of the year.

With the 'seed' characteristics and downstream development prospects to be created by these projects (which alone will almost double the country's power output), Bangladesh should be on the cusp of dramatic project investment and development through 2020. If you were to put almost half the population of the U.S. into the state of Wisconsin with 3,600 MW of power, you might expect such an outcome.

Editors Note - On the announcement of the GVEI- Bangladesh MoU, the company was confused by some news sources with the Vulcan investment vehicle of Microsoft co-founder, Paul Allen. Allen's company issued a statement saying that news reports tagging its involvement in the Bangladesh projects as 'completely and categorically false'. There is no connection between the two Vulcans.

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