Shipped Bhola gas to cost higher, yet cheaper than spot LNG

Infographic: TBS

Factories in Gazipur, Dhaka and Narayanganj can expect some relief from the nagging energy crisis as the authorities are working on the idea of bringing surplus gas from the country's south-central Bhola island ashore to feed industries.

But the relief, though much smaller than the industrial energy appetite, will come at a higher cost. Users will have to pay Tk51 per unit, as proposed by the feasibility study committee, higher than Tk30 per cubic metre effective from this month after a 150% hike in gas price.

For state-owned Petrobangla, which will supply Bhola gas to industries through private fuel suppliers, the Bhola gas would be cheaper compared to the current spot LNG price which equals Tk73.

The price of this island's gas, however, is going to be costlier than the liquefied natural gas (LNG) imported under the long-term contracts. The cost of per unit LNG stands at Tk37 cubic metre if Bangladesh imports LNG at a long-term rate at $12 per metric million British thermal unit (mmBtu). The rate was $6-$7 when Bangladesh started entering long-term deals in 2019 mainly with Qatar and Oman.

As long-term suppliers are far inadequate from meeting the local demand, Bangladesh recently resumed spot market LNG purchase after months.

The Cabinet Committee on Public Purchase on Wednesday approved a proposal of the state-owned Petrobangla to import one cargo of LNG. Bangladesh stopped spot LNG purchase in July last year as the price crossed $37 per mmBtu from pre-Russia-Ukraine war levels of $6-10. The rate dropped from its peak later, but is still higher than pre-war levels.

The spot LNG rate for the fresh purchase was quoted at $19.78 per mmBtu, news agency UNB quoted an energy ministry source.

Amid the cry for a consistent industrial gas supply, Prime Minister's Energy Adviser Dr Tawfiq-e-Elahi Chowdhury on 23 October last year floated the idea of fetching 80 million cubic feet per day (mmcfd) of gas in compressed form from the Bhola gas field within the next two to three months.

Subsequently, around a dozen companies submitted proposals to Petrobangla and the Energy and Mineral Resources Division intending to convert the island district gas into compressed form and supply it to different industries.

Initially, five mmcf gas will be carried per day from Bhola to other parts of the country which will be scaled up to 25 mmcf by June, reads a feasibility report.

The volume might not seem big, but it would bring a brief relief for some industries reeling under a gas crisis as the amount is capable of running captive generators to produce around 150 megawatt electricity, officials said.

Md Helal Uddin, additional secretary (Development) of the Energy and Mineral Resource Division, told The Business Standard that Petrobangla and the gas distribution companies are working on how the cost of Bhola field gas could be reduced further.

Intraco among companies willing to carry gas from Bhola

Of the companies willing to carry Bhola gas to industries, Intraco Refuelling Station Ltd proposed to convert 25 mmcf gas per day in collaboration with German Linde.

Besides, Parker Bangladesh Limited proposed 23.34 mmcf, Hawladar Bangladesh ltd 26.67 mmcf and Super Gas Limited proposed to convert around four mmcf gas. Two other firms also proposed to use the surplus gas of Bhola to their factories.

Only a single company proposed to carry the compressed gas through waterways using a barge.

Though Intraco's proposal mentions Linde collaboration, Linde spokesperson Saiqa Mazed denied any such teaming up. "No, this is not right," she told The Business Standard on Thursday.

Analysing the proposals and after visiting the gas fields in Bhola, the feasibility study committee recommended that initially five mmcf and later additional 20 mmcf gas could be supplied to the industries in different zones of the country by cascade cylinders – a method proposed by Intraco.

Cascade filling is a procedure used to transfer compressed gas in storage cylinders.

The committee suggested that Intraco get the gas from the Sundarban Gas Company Limited, a distribution company that is entitled to distribute gas in Bhola, Barishal and Khulana.

Sundarban Gas Company limited will collect the gas bill from the industrial customers at the rate determined by Petrobangla and it will pay the operation charge for compressing the gas and the transportation cost to carry the gas to customer premises.

The pricing

The feasibility study committee considered the existing compressed natural gas (CNG) rate in order to determine the consumer price of Bhola gas for industries.

At present, the consumer rate of per unit CNG is Tk43 cubic metre which includes Tk35 as feed gas price and Tk8 as operating margin.

But the feasibility study committee proposed Tk51.12 per cubic metre, considering the feed gas price at Tk26 and carrying cost at Tk17.12.

For feed gas, the committee reduced different charges – production charge, LNG charge, gas development and energy security funds charge. However, the carrying cost of Tk17.12 per cubic metre has been proposed to directly go to the distributor.

Merely wishful thinking?

Energy expert professor M Tamim, Professor of Petroleum and Mineral Resources Engineering of the Bangladesh University of Engineering and Technology (Buet), labelled the Bhola gas carrying plan as "impractical and merely wishful thinking".

"How much gas will they carry through the cylinder and what would be the cost? This plan would not ease the industrial crisis," he said.

At present, the country has a deficit of around 800 mmcf of gas per day as the supply is only 2682 mmcf against the demand of 3500 mmcf per day.

Gas shortage had drastically affected power generation and industrial production last summer as some industries in Gazipur and Narayanganj rushed to the fuel stations for gas to complete their production amid the inconsistent supply.

Amid the outcry of different energy hungry industries, the government has intended to use the surplus gas of two fields of Bhola that have around 200 mmcf production capacity while the production hovers between 80 mmcf to 85 mmcf.

Therefore, around 120 mmcf surplus capacity remains unused in the eight wells of Shahbazpur and Bhola gas fields. But, the government cannot take Bhola's surplus gas to the energy crisis hit industrial zones due to lack of pipeline and transmission facilities.

How competent is Intraco?

Industry insiders said that in order to compress five million cubic feet of gas per day, the company will require 47 cascade tankers and around 12 compressor stations. And to compress 25 million cubic feet of gas per day, it might need 60 compressors and 238 cascade tankers, they said.

But the company now has 18 to 19 refuelling stations. Besides, the company has Tk100 crore in outstanding dues to gas distribution companies which Intraco is required to pay in 60 instalments.

But in its proposal, Intraco Refuelling Station Ltd, a sister concern of Intraco Group, informed that the company has been operating 32 CNG refuelling stations, four conversion units and cylinder re-testing units.

However, Intraco website says that the company operates 8 CNG refuelling stations and 12 compressor units in different locations of the country.

GM Salahuddin, company secretary of Intraco Refuelling Station Limited, said that they will share the details once they receive the awarding letter from the Petrobangla.

'Similar to mini-bombs going mobile'

Energy experts said the proposed plan to carry gas from Bhola will be "very risky" and "a wild idea".

Buet Professor M Tamim said, "Carrying the high pressurised gas in cascade cylinders would be like mini-bombs going mobile."

The Department of Explosives of the Energy and Mineral Resource Division is responsible for looking after such safety and security issues.

Mohammad Nayeb Ali, chief inspector of explosives at the department, refused to comment on the plan.