World Bank calls on Bangladesh to raise domestic natural gas prices

The World Bank has called on Bangladesh to raise domestic natural gas prices after five years without an increase. Domestic natural gas prices in Bangladesh currently range from 93 cents/Mcf across residential, industrial, commercial and power generation sectors. The country purchases natural gas from international oil companies operating in the country in the much higher range of $2 – $4.50/Mcf.

Bangladesh has not raised domestic natural gas prices since August 1, 2009, when tariffs for all types of consumers excluding CNG were raised 11 percent.

State-owned Petrobangla in 2012 sought to raise domestic natural gas prices by up to 103 percent to meet rising exploration and gas purchasing costs, but was asked to re-submit its proposal to energy regulator Bangladesh Energy Regulatory Commission via its marketing and distribution subsidiaries with more documentation to justify the request.

The five-year plateau in prices may have discouraged investment in oil and gas exploration and been a factor in why the country had a poor response from international oil companies to its latest shallow water bidding round in 2012.

The country signed only three production sharing contracts for shallow water blocks with two joint ventures after receiving one bid for each of the three blocks, which were among nine on offer.

Blocks SS-04 and SS-09 were awarded to a joint venture between India’s ONGC Videsh Limited and Oil India Limited, and SS-11 to a joint venture between Australia’s Santos and Singapore’s KrisEnergy.

US-based ConocoPhillips refused to ink a fourth PSC for block SS-07 seven months after signing an initial PSC for the block, saying after further evaluation it was no longer competitive in the company’s portfolio.

Bangladesh’s natural gas production currently hover around 2.3 Bcf/d, short of demand for 2.7-3 Bcf/d. It does not import gas.

Gas shortages have prompted Petrobangla to ration new connections to industries, fertilizer factories and power plants, hindering economic growth since June 2009.