4:32 pm - Friday September 25, 9367

Govt to consider upstream costs in setting gas tariffs: source

The governemnt has for the first time decided to set the domestic gas tariffs in line with the costs of production following requests from international oil companies for an increase, a former senior Petrobangla official told Platts Monday, October 20.

Bibiana-gasThe Energy and Mineral Resources Division of the Ministry of Power, Energy and Mineral Resources, or MPEMR, asked Petrobangla earlier this month to propose an increase in the gas tariff by calculating upstream costs, former Petrobangla chairman Hussain Monsur said.

“We have started calculating the upstream costs of natural gas production,” he said.

Natural gas will be treated as a commodity for the first time in the country and a tariff hike will be proposed accordingly, Monsur said.

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Once prepared, the tariff hike proposal will be submitted to the Bangladesh Energy Regulatory Commission to scrutinize and subsequently announce a gas tariff increase for all types of consumers in the country.

Bangladesh has never set gas tariffs by taking into account upstream costs, Monsur said.

Until now gas tariffs in Bangladesh have been fixed mainly by taking into consideration the profitability of gas marketing and distribution companies, a senior official of the country’s sole oil and gas exploration company, Bangladesh Petroleum Exploration and Production Company Ltd, or BAPEX, told Platts Monday.

The market and political impacts had also been considered in previous tariff increases, he said.

But IOCs urged the government to revisit the price structures of domestic gas to encourage oil and gas exploration in the country’s potential onshore and offshore structures.

Inadequate offshore fiscal terms in production sharing contracts and restrictive onshore access have resulted in limited exploration investment in the country, IOCs said during a meeting in May with MPEMR state minister Nasrul Hamid.

Bangladesh last raised gas tariffs for all types of domestic consumers, except CNG, by 11% on August 1, 2009.

The country’s energy regulator increased the price of CNG by 20% on September 20, 2011.

Domestic natural gas prices in Bangladesh currently range from Taka 72.92/Mcf (93 cents/Mcf) to Taka 268.09/Mcf across industrial, commercial and power generation sectors, according to Petrobangla.

The country buys gas from international oil companies operating in the country in the much higher range of around $2-4.50/Mcf, a Petrobangla official said.

As at October 14, Bangladesh was producing 2.390 Bcf/day against demand of around 3.0 Bcf/day, Petrobangla data showed.

Of the total natural production, IOCs produce 54.56%, or 1.304 Bcf/d, while state-owned gas firms produce the remainder, the data shows.

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