GNP, Energy Consumption, Gas Reserves and Utilization

Dr. Ahmed Badruzzaman

There is a considerable ferment on energy issues in Bangladesh. A process is under way to award gas blocks for exploration and production. Many foreign oil companies and others are almost pressuring the government to permit export of gas to neighbouring India, while others argue against it due to the limited reserve and future needs of the domestic market. There is a renewed effort to build the Rooppur nuclear power plant in Pabna, first proposed in 1962. There is discussion of renewed research efforts in renewable energy technologies.

In order to succeed in her efforts to develop the economy, Bangladesh needs to make a sustained effort at energy sector development, for energy is a key resource for the economic and industrial progress of a nation. Developed countries use a mixture of energy sources. While some of these countries have indigenous supplies of these resources, others import much of the raw material to power their plants. For example, the U.S., Canada, and Russia have a significant supply of oil, gas, coal, uranium, and hydroelectricity, while Japan imports almost all its fuel.

Energy options are limited for Bangladesh, as has been pointed out in a number of studies in the past twenty-five years. By some estimates, traditional sources of energy, such as fuel wood, twigs, cow dung, sticks, etc., contribute nearly 60-90 per cent of the total energy consumption in the country. Modern sources, such as fossil fuels and electricity, contribute the rest. The current use of traditional energy sources is inefficient and these sources contribute to generation of greenhouse gases and other pollutants. Use of trees as a fuel source on a mass scale will lead to deforestation, with catastrophic effects.

Modern energy alternatives are fossil fuels, nuclear power, hydroelectric power, solar, wind and other renewable sources. Fossil fuels produce greenhouse gases and other pollutants. Although coal has been discovered in Bangladesh, its utilization may not yet be economically viable. Besides, coal is one of the most polluting sources of energy, as will be discussed elsewhere in this series of articles. Solar and wind are not yet viable in most developed countries. Kaptai dam is the only source of hydroelectricity in Bangladesh and additional hydroelectric dams are unlikely. Bangladesh's attempts to acquire a nuclear power plant have been unsuccessful. Although oil/gas sources in Bangladesh remain relatively unexplored, the country appears to have a large gas reserve. A significant oil reserve is yet to be found.

In this five-part series of articles we explore a number of prospective energy sources for Bangladesh and discuss their technological merits and disadvantages as they relate to the country.

Gross National Product and Energy Consumption: In order to understand the significance of energy in a country's economic wellbeing, let us examine the relationship of energy consumption to the gross national product (GNP). The correlation here is between economic strength and energy consumption apparent. Clearly, the energy consumption in Bangladesh will have to increase significantly to achieve a noticeable economic growth.

The per capita GNP in Bangladesh is one of the lowest in the world and it will take a long time for this to increase appreciably. From Table 1 we note that at a growth rate of 5 per cent per year, it will take approximately 47 years to raise the per capita GNP ten-fold, to $2400. The elapsed time can be reduced to 24 years with a very aggressive (and possibly unrealistic) 10 per cent annual rate of growth. Later in this article, we will examine whether Bangladesh possesses sufficient usable energy resources to reach this modest GNP level.

Natural Gas Production: History and Reserves: Natural gas is the only significant modern energy source in Bangladesh. However, the estimate of the reserve varies widely, ranging from 13 to over 50 trillion cubic feet (Tcf) recoverable. The latter amount, if confirmed by further assessments, will be larger than recoverable reserves of either Pakistan or India. The current proven reserve is nearly 11 Tcf. Although the potential amount of gas appears to be large relative to the current usage in Bangladesh, it will dwindle quickly as economic activity picks up. Later in this part of the article we will examine how long these reserves will last at various rates of increase in production. However, let us first examine the exploration and production history to assess the likely longevity of the reserve.

Past Oil/Gas Exploration and Production: Gas consumption and production in Bangladesh increased from nearly 24 billion cubic feet per year (Bcf/yr.) at the end of 1973 to approximately 292 Bcf/yr. by 1997. Compounded annually, this represents an annual growth rate of 11.05 per cent.

However, oil/gas exploration in Bangladesh in the past 26 years has been sporadic. After a brief interest shown by foreign oil companies in 1973-74, the country was primarily on its own to pursue development of this sector. In the 1973-97 time period only 24 wells were drilled, and nine gas fields and one oil field were discovered. Prior to 1973, 30 wells were drilled with eight discoveries, some before the 1947 partition of India.

Oil/gas exploration and discovery has lagged behind the increase in production in Bangladesh for a number of economic and political factors. A 1994 paper by Hallermann of the Colorado School of Mines, using a number of economic and geological criteria, ranked Bangladesh near the bottom of a list of seven developing countries - Albania, Bangladesh, Burma, Gabon, Indonesia, Malaysia, and Vietnam - for exploration desirability. Only Albania fared worse. Recently, the potential for a higher proven reserve in Bangladesh has increased considerably as a result of substantial new discoveries and modern surveys. This has increased the exploration desirability of the country.

Gas Reserve Longevity: It is often heard that "Bangladesh is floating on gas" and thus can afford to export large volumes of gas. Others estimate only a limited reserve. Let us examine how long two significantly different reserve amounts, 13 Tcf and 52 Tcf, will last at various rates of increase in production.

Starting at the 1997 production level of 292 Bcf and assuming the historical rate of 11.05 per cent yearly increase, a 13 Tcf reserve will be exhausted around year 2014, less than 15 years from now, and a 52 Tcf reserve will be exhausted by year 2026. At a 5 per cent rate of production increase, these reserves will be exhausted in years 2021 and 2044 respectively, 21 and 44 years from now. If the production remains at the 1997 level, a 13 Tcf reserve will last about 46 years.

We had previously estimated that it would take approximately 47 years, at a rate of 5 per cent growth per year, to achieve a ten-fold increase in per capita GNP. While this amount will be impressive, it is less than 10 per cent of that of Japan in 1995. However, from the above analysis, we see that a 13 Tcf gas reserve will not last sufficiently long to span a time period for this growth in GNP if gas production increases at the historical rate. Even a 52 Tcf reserve will fall short. Thus these reserves would offer only a window of opportunity. It is imperative to find additional reserves, and conserve the reserves primarily for internal use, to achieve an appreciable economic growth.

Gas Utilization Alternatives: Current options - Natural gas is generally the cleanest of fossil fuels, the "prince of hydrocarbons," according to a 1979 Harvard University study, "Energy Future, Report of the Energy Project at the Harvard Business School," edited by Robert Stobaugh and Daniel Yergin. Its utilization generally produces no sulfur, nitrogen, or aromatics - pollutants that arise from burning other fossil fuels. In California, natural gas is replacing diesel as the fuel for buses. It could also replace diesel in trucks, motor boats, farm machinery, and possibly trains. Emission from diesel-powered vehicles and equipment pose a serious health hazard as it causes asthma, lung cancer, heart failures, etc. The price of natural gas has been climbing steadily.

Currently, natural gas is used in Bangladesh primarily for electricity generation, as a cooking fuel, and for producing fertilizers. Natural gas allows installation of pollution-free small power plants (a few Mwe) in a distributed manner, without extensive cross-country transmission systems that are needed for hydroelectric and nuclear energy sources. This can be a significant advantage in a country like Bangladesh, where transmission/ distribution infrastructure is limited and will be expensive to expand, especially due to the many rivers that crisscross the country. Currently, small power plants use diesel or oil, causing serious pollution.

Export, primarily to India, is being proposed as another alternative. It is argued that this will allow generation of much needed hard currency and give a quick return on investment to foreign oil companies. Under current production sharing contracts (PSC's), the government buys, with hard currency, the foreign oil companies' share of the gas at the world market price and sells it to the domestic market at considerably lesser price, thereby incurring huge losses (in hard currency). However, as noted previously, the current proven reserves are insufficient, even for internal consumption in Bangladesh, especially as economic growth accelerates. Even a more optimist reserve appears to be a limited amount. Consequently, the development of the domestic market with competitive pricing should be a high priority.

If economically viable, an option preferable to exporting the raw gas would be to export electricity produced using the gas. This will allow a more certain development of the industrial and economic infrastructure that the country lacks. With the various institutions in the country in their infancy, it is not unlikely that the funds generated from export of hydrocarbon could simply be squandered as has happened in developing countries such as Nigeria, while the people continue to live in poverty.

Synthetic Crude Oil from Natural Gas - Natural gas is much harder to transport than oil. Liquefied natural gas (LNG) and pipelines to nearby markets are the current options. Both are problematic. Consequently, large amounts of associated gas is either unutilized or flared, for example, as much as 2 Bcf/yr. in Nigeria and primary reserves such as that in Bangladesh remain underutilized.

There is a renewed interest in converting natural gas to a more easily transportable, clean-burning synthetic liquid fuel that remains stable under room temperature and pressure. Worldwide, the technology could yield 500 billion barrels of synthetic crude oil from readily recoverable gas, a 50 per cent increase in the effective oil reserve! Vigorous research is underway to increase the conversion efficiency to make the technology cost effective. Synthetic crude will not have the production and handling complexities that are associated with LNG. Since the synthetic crude oil will retain the virtual pollution-free attributes of natural gas, it can be sold at a premium price. Such advances would make gas reserves in countries like Bangladesh an even more valuable commodity in the future.

Source: The Daily Star, July 18, 2000