How long can Bangladesh float on its gas fields?

A woman is drying clothes on top of her gas stoves. Bangladesh is heavily reliant on gas production and with its current output, consumption outweighs production.Photo: STAR

The quest to obtain a piece of land has been for centuries the most popular and possibly the only way to obtain wealth. If I was to rewind my life to the age where I wore the ubiquitous half pants as uniform, I remember history books filled with the conquests of emperors like Napoleon Bonaparte to the very recent East India Empire going great lengths to expand their kingdoms.
The most common way of expanding their powers was to enhance their territories by taking over huge tracts of land and retaining them until Lady Luck deserted them for a new emperor who would renew the process of land ownership to expand the size of his empire. By the mid 20th century, almost all available land was demarcated and the size of each country is now determined by the land mass it covers.
However, these days it is not the land but the seas that are stirring up trouble among countries. As the world economy continues to grow, so does the demand for energy resources and resources obtained by tearing the land surface have witnessed massive depreciation at an alarming pace.
The most viable alternative that remains for energy starved countries is to look at the seas beside their territories but with countries intertwined with each other, division of seas remains the most complicated equitable sharing formula yet to be discovered. It's not only the seas but also the airspace that has been subject to acquisition and therefore in the mad race to gaining rights over land, sea and airspace, countries as small as Bangladesh are vulnerable in catching the bus late.
On March 14 this year, Bangladesh for a change made no qualms in being at the driver's seat of the bus slated to reach its destination successfully by wining a legal battle against Myanmar over its territorial waters. This landmark court ruling has permanently erased any doubts in fishing and oil exploration rights in the EEZ (Exclusive Economic Zone) spread over 200 nautical miles in the Bay of Bengal.
As a customary norm, the ruling parties have celebrated our win amid much fanfare and also scored important points ahead of the impending elections. The premier of our country termed the win as the most important victory after gaining independence and surely no other sporting event, natural disasters or political upheavals has been able to put us on the news bulletin of global broadcasters for more than a couple of minutes.
For a change, the popular phrase “Bangladesh floats on gas” has resurfaced again and to top it all, we have resorted to our centuries old habit of drying our clothes on top of our gas stove. As proud Bangladeshis, we must congratulate a certain Navy Rear Admiral (retd) Mr Khurshid Alam, the man behind our historic win in reviving our habit that faced imminent extinction.
The worrisome sign that has been a constant itch to many of us is that over six months have passed since Bangladesh resolved its overlapping territorial waters dispute from Myanmar and still we are languishing in a economy bereft of a worthy energy plan to leave the fossil fuel era behind us.
Bangladesh is heavily reliant on gas production and with its current output; consumption outweighs production by over 500 mmcfd. At present, state-owned Petrobangla in order to counter the shortage has unveiled a new production sharing contract (PSC) with the various gas exploration companies wherein more than 70 percent higher price will be paid to them upon domestic sale of oil and gas.
In the new PSC 2012 Model, Petrobangla will get no less than 55 percent of profits that can go as high as 80 percent depending on production levels for natural gas and is 5 percentage points higher for oil or condensate.
In addition, Petrobangla is planning to roll out the brightest carpets to global energy companies to bid for 12 new offshore blocks later this year with its new PSC in an effort to entice multinational energy giants.
The US Administrators have included Bangladesh as a stopover destination more often now instead of the usual and rare courtesy visits. A recent example of Hillary Clinton choosing to visit Dhaka on way to Kolkata in her revamped itinerary stress the importance of the geo-strategic importance of Bangladesh post the ITLOS event.
Two of the largest US energy companies have a sizeable stake in Bangladesh's vastly untapped Bay of Bengal region and with their combined global revenue amounting to half of India's GDP; it surely isn't good signs resting the energy security of our country completely at the hands of these bottom-line driven mammoths.
PSC 2012 Model is a marked difference from the 2008 Model wherein only one successful PSC was signed although 28 offshore blocks were offered. This time increased incentives have been incorporated to lure the International Oil Companies (IOC) wherein higher share and higher prices will be offered with an option to sell its discoveries to third parties.
The problem, however, lies in the grim reality of being dependent on a foreign oil producer and until we build Petrobangla into a lesser cousin of Sinopec or ONGC Videsh , Bangladesh will continue to compromise on its virgin oil and gas blocks.
Sinopec and ONGC, brainchild of two of the roaring Asian economies, today have curtailed energy dependence on foreign oil companies in their countries of origin by a significant margin. To put that into perspective, ONGC produces so much oil that India's one third demand is met from this Fortune 500 Company.
On the other hand, Sinopec founded in 2000, today is the world's sixth largest company by revenue alongside the likes of its much heralded American peers.
Bangladesh needs Petrobangla to engage into deep-sea exploration on its own with adequate infusion of capital, technology and trained human resources for us to be more energy independent in the future.
Many opponents believe that oil exploration could lead to no discovery at all and could result in huge investment loss. An alternate strategy to invest in oil and gas blocks in other countries in cooperation with other global giants could be more successful as in the case of ONGC Videsh that has more than a dozen oil and gas projects in an equal number of countries.
The unabated fissure between the state-owned Petrobangla and major foreign oil producers in terms of technical knowhow, inadequate capital flow and little consensus puts Bangladesh on an uncertain dark alley with our emerging Asian peers set to parachute into a cleaner energy future.
It's, however, certain with every new PSC; we might gain in the short term but certainly stand to lose in the longer term.

The writer is a banker and can be reached at [email protected]