The Bangladesh Gas Fields Company Limited (BGFCL), a subsidiary of Bangladesh Oil, Gas and Minerals Corporation (Petrobangla), has announced plans for drilling operations in the Titas and Kamta gas fields, despite projections indicating a potential financial loss exceeding Tk610 crore.
The Ministry of Power, Energy, and Mineral Resources has submitted a proposal to the planning ministry, advocating for the drilling of four wells at an estimated cost of Tk1,255 crore.
However, concerns arise as the anticipated extraction value of gas and condensate amounts to only Tk644.98 crore.
The Industry and Energy Division of the Planning Commission has convened a meeting of the Project Evaluation Committee (PEC) to scrutinise the proposal.
It asked for justification for moving forward with the project that risks significant financial loss.
Dr Md Mustafizur Rahman, a member of the Industry and Energy Division of the planning commission who chaired the meeting said that they raised objections regarding the high-cost estimation for several components, apart from the rationale of the project.
“The meeting decided to send the proposal back to the Energy, and Mineral Resources Division with the recommendation to bring down the estimated costs of all these components to a reasonable rate,” he added.
However, officials from the Energy and Mineral Resources division argue that the overall economic gains from the project will outweigh the costs - factoring in the market value of extracted gas, LNG import prices, and fuel demand for industrialisation.
Despite the potential for significant financial loss in drilling four wells, BGFCL contends that the broader benefits justify the endeavour.
Four wells are expected to yield 191.6 billion cubic feet of gas at a rate of 55 million cubic feet per day over a decade.
BGFCL stands to gain Tk542.62 crore from this gas, based on the company's current wellhead gas margin of Tk1 per cubic metre.
Additionally, approximately 1.15 lac barrels of condensate will be extracted over the same period, amounting to Tk102.36 crore in market value.
Overall, BGFCL anticipates earning Tk644.98 crore from these products, slightly exceeding half of the project cost.
The Energy and Mineral Resources has put forward a separate explanation with the Development Project Proposal (DPP) to justify the formulation of the proposal despite the financial loss.
It revealed that the project will come to break-even point if the wellhead gas margin is set at Tk2.81 per cubic metre, increasing from current Tk1.
Besides this project, all the projects under process in the future in this sector will be profitable if this rate is increased to Tk 2.82 for per cubic metre, it added.
“The project is not financially profitable considering the existing wellhead gas margin, but considering the price of gas at the consumer level at Tk21.41 per cubic metre and the price of imported LNG at Tk 57.18 per cubic metre, the project is profitable,” the paper added.
The paper claimed that the price of extractable 191.6 billion cubic feet of gas is Tk11,617.50 crore considering the consumer-level price of Tk21.41 per cubic metre.
It said that the project should be taken up in the country's interest to contribute to economic development by reducing dependence on growing gas demand and imported LNG and increasing gas supply to the national grid.
“Apart from that, the project proposal also claims that the government's election manifesto has instructions to increase domestic gas production to meet the existing deficit,” it added.
Analysing the proposal it found that the government will finance Tk872.20 crore to implement the project while the implementing agency will spend Tk382.80 crore from its fund.
The BGFCL to implement the project by December 2026 subject to approval from the Executive Committee of National Economic Council (Ecnec).
The proposal revealed that the project named “Drilling of 4 appraisal-cum-development wells at Titas and Kamta fields” has been formed based on recommendations from a technical committee established to implement the decision of BGFCL and consultant BGP Inc, China National Petroleum Corporation, aims to address the increasing gas demand in the country. The Infrastructure Investment Facilitation Company (IIFC) has conducted the feasibility study of the project.
Drilling of 3 new wells in Titas field of Brahmanbaria will produce about 45 million cubic feet of gas per day and 1 new well in Kamta field of Gazipur will produce about 10 million cubic feet per day.
The proposal expressed expectations for the development of the domestic industry and the saving of foreign exchange in the LNG import sector by increasing the supply to the national grid by producing around 55 million cubic feet of gas per day.
Officials of the planning commission said that the PEC meeting asked for justification of the estimated cost of Tk80.20 crore for the component titled procurement and installation of the process plant with ancillary facilities.
The ministry proposed Tk10 lakh for five desktops, two laptops and three printers. The meeting asked for reducing the number of such equipment and proposed costs.
The commission recommended reducing proposed costs across various sectors, including Tk48 lakh for chemical store construction, Tk43 lakh for rural road construction, Tk1.40 crore for drainage construction, and Tk48 lakh for security posts and toilet construction.
The Energy and Mineral Resources division proposed Tk34.70 crore for 31 man-months of consultants raised concerns, equating to a monthly payment of Tk1.12 crore per consultant.
Consultant salaries for concluded BGFCL projects ranged from Tk45.33 lakhs to Tk57.42 lakhs.
Dr Md Mustafizur Rahman mentioned discussions at the meeting regarding the cost estimations and justifications for various project components, with the proposal now returned to the energy and mineral resources division for revision.
BGFCL Deputy General Manager (Planning) Meer Md Ashraful Islam said that the proposal was based on feasibility studies and market prices for component costs, with revisions to be made according to the PEC’srecommendations.
Officials from BGFCL stated that the company's current production capacity is 565 million cubic feet per day, expected to reach 620 million cubic feet per day by 16 September, 2026, through project implementation.
