Energy: A Global Scan from

Bangladesh Perspective

Mohammad Tamim
Petroleum and Mineral Resources Engineering Dept,
BUET
mdtamim@yahoo.com
Prologue
„ Much of the material presented is
available in the internet
„ Presentation Outline
„ Background
„ Demand Supply
„ Reserve Adjustment and Reporting
„ Energy Price
„ Bangladesh
Background
„ Access to affordable energy services is important not
energy supply per se that matters
„ More than two billion people cannot access
affordable energy
„ Wide disparities in access to affordable commercial
energy and energy services – both among countries
and within countries
„ Environmental impact of energy linked emission
„ Dependence on imported fuels leaves many countries
vulnerable to disruption in supply
Background
Value Chain
Demand Supply
Proved oil reserves at end 2004

BP Statistical Review of World Energy 2005 3 © BP 2005

Demand Supply
Distribution of proved (oil) reserves 1984,1994, 2004
Demand Supply
World Crude Oil Production Milliom bbls/day
Demand Supply

10% of world reserve is held by IOCs

12th
Demand Supply

5th
Demand Supply
World Oil Spare Production Capacity
6.0
Forecast
5.0

4.0

Million 3.0
barrels
per day 2.0

1.0

0.0
1991- 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
1997
Average

Short-Term Energy Outlook, February 2006

Demand Supply
World Oil Demand Growth
(Change from Previous Year)
1.5
Forecast

Million 1.0
barrels
per day

0.5

0.0
2005 2006 2007

OECD* Non-OECD Asia FSU** and Eastern Europe Other

* Countries belonging to Organization of Economic Cooperation and Development

** Former Soviet Union
Short-Term Energy Outlook, February 2006
Demand Supply
Primary Energy Consumption
Demand Supply
Reserve Reporting
Definitions…
•Resources - total amount (of oil & gas) in place
•Recoverable resources - part that can be recovered with
available technology/economics
•Reserves - part that is discovered & recoverable
•Cumulative production - reserves already produced
•Remaining reserves - discovered reserves that will eventually
be produced but have not yet been
•Yet-to find resources - recoverable resources that will be
discovered
•Total cumulative - all reserves that have and will be
produced in the foreseeable future
Reserve Reporting
So why the uncertainty?
Ambiguity
•Actually no global standard definitions
•Treatment of unconventional sources varies:
•For example inclusion or exclusion of oil with different
economics (mined oil sands, NGL’s and GTL’s)
•Ignoring the time element to:
•discovery (“reserves growth”)
•production (“R/P ratio”)
•Estimates are technically uncertain (ranges)
•The terms proven, probable and possible confuse the
issue. They are volumes of perception.
Reserve Reporting
So why the uncertainty?

Bias
•When geologists say they are “optimistic”, the truth
is that “realism” will give a different result
•Industry may under-report for regulatory reasons
•Industry may over-report to maximize value
•Governments may over report for promotional
reasons
•Both governments and industry fail to update
•Public data sources (Oil & Gas Journal, World Oil, Oil
industry databases etc.) give different numbers
Reserve Reporting

But general agreement on total cumulative…

The consensus of past estimates, excluding

mined oil resources, has been:
Oil 2000-3000 bn barrels (produced 1000 bn
bbls)
Gas uncertain but perhaps 2000-2500 bn
barrels oil equivalent (marketed 480 bn)
Such estimates are made by reputable experts including the
major oil companies
Reserve Reporting

However what really matters…

•New oil cannot be instantaneously brought

onstream…

•…and there will come a year when the

production rate can rise no longer even though
there is a lot more oil left to be produced

•This is the production peak

Reserve Reporting
Reserve Reporting
Countries past peak?
•3 or 4?
•10 to 15?
•20 to 25?
•Of the 99 potential or actual producing countries in
the world:
•60 countries are at or past peak and a further 12
countries are near peak

BUT TECHNOLOGY MAY CHANGE THE

WHOLE SCENARIO!
Energy Price

Different perspectives
•Market fundamentals
•Data reliability?
•Shortage? Weather and Refiners?
•Speculation!
•World prosperity and poverty
•Third world demand
•OPEC population and GPD
•Actual cost of finding and developing
Energy Price
World Nominal Oil Price Chronology: 1970-2005

Change in pricing and US regulation

Iran-Iraq war

Iraq Invasion

9/11

Kuwait Iraq OPEC Cut Demand Increase

Oct ’73 Oil Embargo

Energy Price

“Oil prices are the collective

notion of an elite group of
midstream refiners, traders, trade
journalists, based on a 360
degree scan of the forward
business environment of the
industry and its customers. Oil
prices have little physical
relationship with the substance of
oil and are simply an electronic
value in financial transactions”
Energy Price
Myth and reality in oil markets

•It is very tempting for those who explore and

develop oil and gas to believe that producers
should and do determine the price of oil
•This view often exaggerates the role of OPEC and
uses over simplified economics as justification
•The keystone in the market is the refiner—he
determines the price daily and is mainly
influenced by upward or downward movement
since this impacts his margin
•The upstream needs to understand how oil becomes
products and how the buyers and their agents
determine the fate of the E&P world.
•Most world oil forecasts look the same and do not
capture the dynamics of the market
Energy Price
Oil refinery utilization

Oil refinery utilization

Topics Reviewed
„ Energy value chain and its role
„ Demand Supply
„ Reserve Uncertainty
„ Pricing

Discussion on Bangladesh
Bangladesh

Asian Energy Status

„ Most countries have projections of huge
demand growth over next two decades:
„ 250-300%
„ 50-70% of gas demand growth is dependent upon
power generation
„ Supply to meet demand growth is dependent
upon multi-billion dollar projects – pipeline
and LNG - often from Greenfield locations
„ Viability of projects is uncertain due to:
„ cost/ability to pay, deregulation/liberalization,
domestic and international politics
Bangladesh

Three Distinct Asian Gas Growth Zones

„ SOUTH EAST ASIA –
„ ASEAN: LNG exporters with growing regional pipeline
linkages
„ SOUTH ASIA –
„ India, Pakistan, Bangladesh: existing gas markets
using domestic resources with no trade
„ NORTH EAST ASIA:
„ China – small but rapidly increasing domestic gas
market; LNG imports 2005/6
„ Japan, Korea – substantial markets dependent on
LNG
„ Russian Far East – huge potential supplier
Bangladesh
World LNG imports
120
Atlantic market
Asia Pacific market
90
Mt
60

30

0
1980 1984 1988 1992 1996 2000

Source: Australian Bureau of Agriculture and Resource Economics

Bangladesh
Economic Growth Assumptions
Average Annual Increase in Real GDP (%)

8.2

3.2 3.7 5.7 4.9 5.1

2.5 5.0
2.5 4.5
2.3 3.1 4.3
2.1 4.4 2.9
1.9 3.1 0.1 4.0 3.82.7 3.1
1.8 2.0 2.6
3.5 3.0
2.7 3.0
OECD 1971-2000
OECD
N.America
Europe
OECD
Transition 2000-2010
Pacific China
economies India
Other Asia 2010-2030
Middle East
Africa
Latin
Source: IEA, 2003 America

GDP growth is expected to be slower in the next three decades

in all regions except the transition economies & Africa
Bangladesh

World Natural Gas Demand

4,500
4,000
3,500
3,000
2,500
Mtoe

2,000
Source: IEA, 2003
1,500
1,000
500
0
1980 1990 2000 2010 2020 2030
Resi dential/servic es Ind ustry Transport
Pow er generation GTL O ther s ectors

Most of the projected increase in gas demand comes from the

power sector, while GTL plants emerge as a new outlet
Bangladesh
South Asian Power Generation and Accessibility

Installed Electricity
Capacity Access
MW %
of Population
Afghanistan 454 6
Bangladesh 4710 33
Bhutan 445 30
India 112058 56
Nepal 552 40
Pakistan 17953 56
SriLanka 1615 64
Bangladesh

India
„ gas demand strong but constrained by supply

„ LNG imports commenced early 2004

„ uncertainty over gas pricing

„ outlook depends on gas fired power capacity

„ LNG imports could be 11 Mt by 2015

„ LNG more likely to succeed than pipeline imports

Bangladesh
Gas consumption, India
28 8

21 6
share of primary
bcm energy consumption %
14 4

natural gas consumption

7 2

0 0
1980 1984 1988 1992 1996 2000

Source: Australian Bureau of Agriculture and Resource Economics

Bangladesh
Projected LNG imports, India
existing long term contracts
12

9 Uncontracted

Mt 6 Qatar

0
2002 2010 2015

Source: Australian Bureau of Agriculture and Resource Economics

Bangladesh
Southeast Asian Integrated Pipelines
Bangladesh
Meeting The Indian Demand
Bangladesh
Regional Demand and Solution!
Bangladesh
Bangladesh Gas Discoveries

Titas
Habiganj
PB discovery between 1977-2004
is 2.5 tcf at 3:1 success ratio
8
Kailashtila

Bibyiana
Rashidpur

6 Bakhrabad
2 P G IIP tc f

M’bazar
Chattak

Jalalabad

Sangu
Sylhet

2
Res
0 Rev
1950 1960 1963 1977 1988 1990 1996
Year
Bangladesh
PROBABLE EXPLORATION OUTCOME

100
90
Optimistic 90
80
70
Gas in Tcf

60 55
50
Most Likely
40
30
20
20
Pessimistic
10
0
1:1 1:2 1:3 1:4 1:5 1:6 1:7 1:8 1:9 1:10
Success Ratio
Bangladesh 60

50
Resources
Reserves
40
Gas in Tcf

30

20

10
Used up to 2002
4.5 Tcf
0.4 Tcf/year
0
PAST PRESENT FUTURE
Bangladesh
Annual Gas Demand at Different Growth Rates

1.4
Year 2000 consumption = 0.33 Tcf 1.28
1.2

1.06
1.0
0.88
7%
Tcf

0.8
0.72

0.6 0.60

0.4
3%
0.2
01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20
Bangladesh
OLD GAS vs. NEW GAS
„ 90% of present PB gas was inherited for US$ 10
million in 1972!
„ Old Gas – less than $ 0.10/Mcf (!)
„ New Gas – Average $ 1.5/Mcf
(IOC Gas - $ 3/Mcf, Bangladesh Share of IOC Gas
(new) - $ 0/Mcf )
„ Even if we sell at $ 2, Bangladesh gets almost
nothing for its gas
„ What is the cost of finding new gas in Bangladesh
(by IOC and by PB)???
Bangladesh
Investment Requirement during 2003/04 –
2007/08 (Short Term)
ACTIVITIES ESTIMATED COST (million US$)
PETROBANGLA IOCs TOTAL
GROUP
A. EXPLORATION 81.33 141.20 222.53
B. APPRAISAL/DEVELOPMENT 120.87 70.10 190.97
(SEISMIC AND DRILLING)

C. WORKOVER 22.50 3.00 25.50

D. INSTALLATION OF PROCESS 27.66 48.28 75.94

PLANT

E. GAS TRANSMISSION PIPELINE 480.81 - 480.81

F. INSTALLATION OF COMPRESSOR 8.62 - 8.62

G. GAS DISTRIBUTION PIPELINE 196.07 - 196.07

GRAND TOTAL 937.86 262.58 1200.4

Source: Ministry of energy

Bangladesh
Yearly Gas Production

800
New Discovery
700 5 billion in gas
600 Maintenance
15 billion in Power

Investment!
500 Present scenario
Bcf

400
300
200
100
0
60
63
69
77
81
88
90
96
99
04
05
10
15
20
19
19
19
19
19
19
19
19
19
20
20
20
20
20
Bangladesh
Foreign Currency Requirement*
Petrobangla's Purchase of IOCs' Share of Gas (1998-2001)

Sangu Jalalabad
Total Value
Period Volume Volume
US$ US$ US$
(MMCF) (MMCF)
June 98 – June 99 21,431 37,651,897 4,784 7,578,057 45,229,954
July 99 – June 00 31,886 78,745,104 13,532 36,345,662 115,090,766
July 00 – June 01 34,973 101,546,718 16,104 44,494,903 146,041,621
July 01 – Dec 01 17,929 52,148,160 9,440 23,476,743 75,624,903
Total 106,219 270,091,879 43,860 111,895,365 381,987,244

™Presently IOC supplies 25% of gas at a monthly payment

of roughly $20 million (at cost recovery stage)
™In 2007 the share will go up to 40% at a cost of about
$50 million/month
* Gas Committee Report, 2003
Bangladesh
How About the Oil Picture?
Petroleum Product Sale

4000
3500
3000
2500
'000 MT

2006 Projected import bill

2000
$ 1 billion (’05 – 800 mill $)
1500
1000 Ever increasing transport demand
500
0
90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

20

20

20

20
year
Bangladesh
Power Sector: Future Development Plan
At a glance

Description 2003 2007 2012 2020

1. Installed Capacity (MW) 4710 6716 9840 17500

2. Peak Demand (MW) 3622 5368 7887 14600

3. Net Generation (MkWh) 18458 26651 39157 79250

4. Transmission Line (km) 3859 5966 9281 13921

5. Grid Substation Capacity
230/132 kV (MVA) 3700 7270 12520 21284
132/33 kV (MVA) 6995 9162 12719 19078

Source: Ministry of Power, GOB

Bangladesh
Power Sector: Future Development Plan

Description 2003 2007 2012 2020

6. Distribution Line (km) 209932 266962 346173 519259

7. Nos of Consumers (ml) 7.1 9.0 12.5 24.30

8. No. of Village Electrified 41814 51900 63400 84000

9. Per Capita Generation (kWh) 144 190 260 470

11.
10.Investment Requirement
Access to Electricity -
32% 3.60 4.50
47% 65% 7.00
100%
(bl US$) (2004-07) ( 2008-12) (2013-20)

Source: Ministry of Power, GOB

Bangladesh

Bottom Line
„ Total Energy Sector Investment requirement
is about 20 billion dollars in next 20 years
„ Energy purchase bill (gas from IOCs, power
from IPPs and oil import) is about $1.5 billion
per year at present (2.2% of GDP)
„ Local energy price is much lower than the
cost of energy, a practice that cannot be
sustained
Bangladesh
Piece of the Pie (bar!) Bangladesh scenario
4.00
Govt. Share (SD+VAT) = 55% (fixed)
3.50

3.00
SD
2.50 Market share 10.8% VAT
11.4% PDF Margin
$/Mcf

2.00 Bapex Margin

Distribution
1.50 53% 22% Transmission
Wellhead
1.00

0.50

0.00

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Oil and Gas Costs of Finding, Development and Production ($/boe)
(2000)

$14
$11 $11

$10 $2*

$7 $7
$6

With time and maturity, ‘new’ gas is going to cost

much more than the ‘old’ gas
* Assumes finding and development costs minimal until output exceeds 20m barrels per day

Source:
Energy Restructuring in Bangladesh

Unregulated Deregulated
Regulated
State Competition
Competition
Monopoly

Past Present Future?

Task in Hand
„ Restructuring of commercial framework
„ Encourage private participation
„ Major changes in price and tax structure
„ Bring in regulatory reform to facilitate the
changes in a controlled and smooth fashion
„ Diversification of energy
„ Renewable energy in non-grid areas
„ Prepare for IMPORT!
 World Non-Hydro Renewables-
Based Power Generation
1,600
Share in total electricity generation (%) 4.4%
1,400

1,200

1,000
3.4%
TWh

800

600 2.6%

400
1.6%
200 1.4%

0
1990 2000 2010 2020 2030

Biomass W ind Geothermal S olar T ide/W ave

Non-hydro renewables, mainly wind & biomass, account Source: IEA, 2003
for a small but rapidly growing share of electricity production
Share of Renewables in
Electricity Generation
35

US & Canada Europe Japan, Australia

30 & New Zealand

25
per cent

20

15

10

0
2000 2030 2030 2000 2030 2030 2000 2030 2030
Reference Alternative Reference Alternative Reference Alternative
Non-hydro Hydro

The role of non-hydro renewables is much greater

in all OECD regions, especially Europe Source: IEA, 2003
Major natural gas trade
movements
 Upstream Midstream Downstream

GAS STREAM
BGFCL Wes Dom &
Gas Comm

SGFL Subsidy
B’bad
Petrobangla econ value
GTCL + T&Ds Ind &
Major(Aggregator) not realized Others
BAPEX
price
difference J’bad
Unbundling
IOCs
Fertilizer
Titas

Oil BPC

Power Stream
Import
Generation PDB IPP
BPC

State
Private
25%-35%

PDB &
Unbundling

PGCL
Transmission system loss
BPC LPG
Oil Refinery Lube
only 7-10% tech

REB DESA
DESCO
PDB

Distribution
 Energy Sector Restructuring
Private
state

960 MMcfd GAS

PB gas
NOC Upstream
$0.5/Mcf Distribution
Unbundled
Regulator PB Sub
End Users
Transmission Under
Petrobangla PB Sub
IOC IOC gas Co Act
HCU Weighted
PSC $3/Mcf
Average
Gas Price
300 MMcfd $ 1.5/Mcf
POWER
PDB
73% Distribution
Unbundled
Transmission PDB + Sub End Users
Under
Under
IPP Co Act
Co Act
27% 8% Tech loss
Energy
Regulatory Oil 10 – 30% stolen
Oil dist
Commission Full oil
BPC
Oil + Transport chain under
Product BPC
Refinery
Import (BPC) BPC privatization
Lub/LPG consideration
BPC/Private