Country Analysis: Bangladesh

Bangladesh is important to world energy markets because of its large potential natural gas reserves.
Bangladesh has received more than $ 30 bn in disbursed grant aid and loans from foreign donors (including the World Bank, the Asian Development Bank, the UN Development Program, the United States, Japan, Saudi Arabia, and Western Europe) since its independence in 1971, but remains one of the poorest and most densely populated countries in the world. Bangladesh historically has run a large trade deficit, which it finances largely through foreign aid and remittances from the many Bangladeshi workers abroad (largely in the Persian Gulf region).

Overall, foreign aid provides Bangladesh with around 40 % of government revenues and 50 % of foreign exchange. The World Trade Organization (WTO) has stated that Bangladesh's main problems include civil unrest and political instability, natural disasters, and inadequate infrastructure. Bangladesh's real GDP grew at an estimated rate of 4.9 % in 2002, and growth is projected to increase slightly to 5.4 % in 2003.
In November 2002, Germany agreed to provide Bangladesh with $ 27 mm to be used for the improvement of feeder roads and market facilities in rural areas, solar energy systems, and business development services. Previously undisbursed funds from Germany's other commitments to the country will now be earmarked for improvements in the energy sector.

Bangladesh is primarily agricultural (around two-thirds of the labour force and 35 % of the gross domestic product -- GDP), although urbanization is proceeding rapidly. This heavy reliance on agriculture makes Bangladesh vulnerable to natural disasters such as cyclones, floods, and droughts, as well as to world commodity prices. Over the past several years, however, Bangladesh has experienced bumper crops and strong growth in the agricultural sector.
Bangladesh has moved increasingly towards a market-oriented economy since the mid-1970s, although the majority of enterprises remain under state control. Bangladesh is attempting to diversify its economy away from agriculture, and has made industrial development a priority. Exports are increasing at around 8 % annually. Currently, cotton textiles and garments account for around 80 % of Bangladeshi exports.

Bangladesh is attempting to attract foreign investment, and has established export processing zones (EPZs) in Chittagong (the country's major port) and Dhaka (the capital), with plans for more such zones. Most investment is coming in the natural gas, electricity, and physical infrastructure areas. Exports of natural gas could provide a major additional revenue source for Bangladesh, but the issue remains controversial, and no final decision has been made on whether to allow exports.
A new government under the leadership of Prime Minister Khaleda Zia took office in October 2001 after her Bangladesh National Party (BNP) won the majority of seats in parliament in a national election. Political tensions remain high as the opposition Awami League party continues to stage strikes.
Bangladesh (along with Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka) is a member of the South Asian Association for Regional Cooperation (SAARC), created in 1985 to help promote regional economic cooperation, plus economic and social development in general in the South Asian region.

Energy
Bangladesh has small reserves of oil and coal, but potentially very large natural gas resources. Commercial energy consumption is around 67 % natural gas, with the remainder mostly oil (plus limited amounts of hydropower and coal). Only around 18 % of the population (25 % in urban areas and 10 % in rural areas) has access to electricity, and per capita commercial energy consumption is among the lowest in the world.
Non-commercial energy sources, such as wood, animal wastes, and crop residues, are estimated to account for over half of the country's energy consumption. Consumption of wood for fuel has contributed to deforestation and other environmental problems in Bangladesh. The World Bank has estimated that Bangladesh loses around $ 1 bn per year due to power outages and unreliable energy supplies.
Bangladesh's Ministry of Energy and Mineral Resources (MEMR) has overall responsibility for the country's energy sector, with policy formulation and investment decisions under its control. Within MEMR, the "Power Cell" acts as a single point of contact to facilitate the electricity reform and restructuring process, such as development of Independent Power Projects (IPPs).

Oil
Bangladesh contains small proven oil reserves of 56.9 mm barrels and produces around 6,200 bpd, of which 6,000 bpd is crude oil. Until the beginning of the 1990s, state oil and gas company Petrobangla, along with its eight operating companies (OCs), was the sole player in the Bangladeshi oil and gas sectors. Over the past few years, however, Bangladesh has encouraged foreign oil companies to do business in the country.
At present, Shell, Texaco, Tullow Oil; Holland Sea Search, Unocal, and UMC Bangladesh Corporation are active in exploration under six Production Sharing Contracts (PSCs) partnership with Petrobangla. To date, oil exploration has proven largely unsuccessful, although hopes continue, especially onshore.
Petrobangla regulates the activities of foreign companies under PSCs, and serves as the sole purchaser of oil and gas from the companies. Around 65 % of Petrobangla's gross revenues are paid to the government in the form of taxes and compulsory dividends. Petrobangla has been characterized in recent years by a low level of investment and a lack of sufficient financing.

Refining/downstream
Bangladesh has one refinery, a 33,000-bpd unit at Chittagong. In December 2000, TotalFinaElf said that it would set up a $ 16 mm plant to bottle LPG, in a joint venture with Bangladesh's Premier LP Gas. LPG is used in Bangladesh mainly for domestic cooking, as well as in some industries and vehicles.
In July 1999, Bangladesh decided to remove lead from gasoline sold in the country. The decision was taken mainly due to health and environmental concerns, particularly in Dhaka, the capital. In January 2003, the Bangladeshi government announced that it had granted approval for price increases on retail sales of petroleum products by the Bangladesh Petroleum Corporation (BPC). The move reduced consumption subsidies and has helped to reduce border smuggling, which had existed due to the difference in retail petroleum product prices between Bangladesh and India. The government also has reportedly considered allowing firms other than BPC to enter the downstream market, but none has yet done so.

Natural gas
Natural gas is Bangladesh's only significant source of commercial energy, with 2001 production of 349.6 bn cf. Bangladeshi natural gas production began in 1960 from the Chattak Field. There is much uncertainty and debate about the level of natural gas reserves in Bangladesh. Current Bangladeshi government estimates, revised upward in May 2003, put net proven reserves at 18.0 tcf.
The US Geological Survey has estimated that Bangladesh contains an additional 32.1 tcf in additional "undiscovered reserves." Bangladesh may have the potential to become a major gas producer (as well as supplier to the vast potential market in neighbouring India) at some point.

Bangladesh also could use its natural gas resources to power vehicles (the government already has announced plans to convert government vehicles to compressed natural gas to help alleviate pollution problems in Dhaka, and also in response to high oil prices), to produce electricity, petrochemicals, and fertilizers, which it also could use both within the country as well as for export.
Natural gas exports are controversial within Bangladesh, with many people feeling that Bangladeshi gas resources first should be used for domestic purposes (i.e., electric power generation, fertilizer production, transportation), and also that the size of the country's gas reserves remains highly uncertain, particularly in relation to future domestic demand projections. Both major political parties are officially committed to considering natural gas exports only if Bangladesh has proven reserves sufficient to cover 50 years of domestic demand.

Unocal had submitted a formal proposal for an export pipeline to India in November 2001, which would link the Bibiyana field to India's main natural gas backbone, the HBJ Pipeline. In April 2003, it was reported by Agence France Presse that the Bangladeshi government had decided to put off its decision on natural gas exports due to the conflict in Iraq. Energy ministry sources were quoted as saying that the situation had made the climate "unfavourable" for a decision.
Petrobangla has approximately 20 natural gas fields nationwide, half of which are active. The main fields include: Bibiyana (discovered by Unocal in Block 12), Titas (the country's second largest natural gas field), Habiganj, Kailashtilla, Rashidpur, and Jalalabad, nearly all of which are located in the eastern part of the country, plus the Sangu offshore natural gas field (being developed by Cairn Energy, Shell, and Halliburton) in Block 16 of the Bay of Bengal, 30 miles southwest of Chittagong.

Production from Sangu, Bangladesh's first offshore field (with estimated reserves of around 850 bn cf), began in June 1998. Sangu is one of Bangladesh's most important natural gas discoveries to date, and the first foreign-run natural gas field. In January 2000, Shell Bangladesh Exploration and Development -- SBED -- along with partners Cairn Energy and HBR Energy reportedly discovered a new natural gas field near Sangu (South Sangu-1).
In August 2000, SBED announced that it had invested $ 40 mm-$ 50 mm in new offshore natural gas exploration projects in Bangladesh, including the Sandwip East 1 well in Block 15 (Bay of Bengal). Other possible natural gas fields include Shaldanadi (estimated reserves of 500-1,000 bn cf), Fenchuganj, Feni, Kumta, and Shahbajpur.

Major foreign energy companies active in natural gas exploration and development in Bangladesh include Shell, and Unocal, which operates in Bangladesh through its wholly owned subsidiary, Unocal Bangladesh, Ltd. In early 1997, Unocal acquired 50 % interest in Occidental blocks 12, 13, and 14. Unocal also is involved in two PSCs with Petrobangla covering Blocks 12, 13, and 14.
In 1998, Occidental-Unocal discovered an estimated 4-5 tcf of gas-in-place on Block 12. In May 1999, Unocal took over the assets and operations in Bangladesh of Occidental, which had experienced a major explosion and fire at one of its wells in the Sylhet area in 1997. Unocal announced in March 2003 that it would begin development of the Moulavi Bazar field in Block 14, which is to begin deliveries of 100 mm cfpd in 2004, for use in the domestic market. Unocal has said that it hopes the additional domestic supply from Moulavi Bazar will help pave the way for exports to India from its Bibiyana field.

Besides foreign energy companies, natural gas in Bangladesh is being produced by two subsidiaries of state energy company Petrobangla -- Sylhet Gas Fields and Bangladesh Gas Fields. These two companies produce natural gas for domestic consumption. More than 80 % of the natural gas is consumed for power and fertilizer production, and the remainder by industry and households. Bangladesh's natural gas demand is expected by some independent analysts to grow by around 6 % annually over the next two decades.
Potential uses for natural gas in Bangladesh include: petrochemicals, compressed natural gas (CNG) for vehicles, power generation, and fertilizer. Bangladesh also contains around 55 mm barrels of natural gas liquids (NGLs), which could be used for petrochemicals production or as a cooking fuel to help reduce deforestation and pollution. Production of NGLs is currently only about 200 bpd.
Shahbazpur, discovered by Petrobangla subsidiary Bapex (Bangladesh Petroleum Exploration Company) in 1995, is estimated to contain 330-400 bn cf of recoverable natural gas. In September 1998, Unocal and Petrobangla initialled a PSC for development of Shahbazpur.

In July 1998, Cairn Energy reportedly made a large natural gas discovery in the Halda valley. Meanwhile, Unocal, along with Petrobangla, has developed the 1.6-tcf Jalalabad field, which came onstream in 1999 and is currently producing 80 mm cfpd. In late September 1998, Shell and Cairn said they had agreed to an alliance over natural gas development in Bangladesh (including the Sangu and Semutang fields), plus north-eastern India.
In late November 1998, Bangladesh raised the price of natural gas by 15 % as part of an effort to reduce government subsidies as recommended by international lending institutions and countries. Bangladesh has had relatively low natural gas prices by international standards, with electricity consumers, plus fertilizer plants and households, receiving around $ 600 mm a year in direct subsidies and savings associated with their gas consumption.
In addition to possible exports of its own natural gas,Bangladesh may eventually also become a transit corridor for natural gas from the Tripura state in eastern India to heavily-populated West Bengal. Unocal has proposed that natural gas from Tripura be linked into the pipeline it hopes to build to export Bangladeshi natural gas to India.

Coal
Bangladesh began its first significant coal production in April 2003 with the opening of the Barapukuria Coal Mine in the Dinjapur area of northwest Bangladesh. The project, backed by Chinese investors, will produce about 1 mm short tpy of coal, to be used primarily for electricity generation. Another possible coal mining project, at Khalashpir, is under consideration.

Electricity
Bangladesh's installed electric generating capacity in 2001 was 3.6 GW, of which 94 % was thermal (mainly natural-gas-fired), and the remainder hydroelectric, at 18 power stations. Only around two-thirds of Bangladesh's total electric generating capacity is considered to be "available," however.
Problems in the Bangladeshi electric power sector include high system losses (up to 40 %), delays in completion of new plants, low plant efficiencies, natural gas availability problems, erratic power supply, electricity theft, and blackouts, shortages of funds for needed maintenance at the country's power plants and other power infrastructure, and unwillingness of customers to pay bills.

Overall, the country's generation plants have been chronically unable to meet system demand over the past decade. With only around 18 % of the population connected to the electricity grid, and with power demand growing rapidly, Bangladesh's Power System Master Plan (PSMP) projects a required doubling of electric generating capacity by 2010. Total investment required for this increased capacity is estimated at $ 4.4 bn through 2005.
In addition, Bangladesh also may need to replace 30 %-40 % of its current generating capacity, due to aging infrastructure.

The Padma-Jamuna-Meghna river system divides Bangladesh into two zones, East and West. The East contains nearly all of the country's electric generating capacity, while the West, with almost no natural resources, must import power from the East. Electricity interconnection from the East to the West was accomplished in 1982 by a new, 230-kV power transmission line.
The vast majority of Bangladesh's electricity consumption takes place in the East, with the entire region west of the Jamuna River accounting for only 22 % of the total. Greater Dhaka alone consumes around half of Bangladeshi electricity. Through MEMR, the Bangladeshi government owns and supervises the Bangladesh Power Development Board (BPDB). BPDB is an integrated utility distributing electricity directly to retail consumers, as well as to two other distribution utilities -- the Dhaka Electric Supply Authority (DESA, established in 1991), and the Rural Electrification Board (REB, established in 1977).

Given Bangladesh's electricity supply shortage, the government decided in October 1996 to issue a "Private Sector Power Generation Policy of Bangladesh." As part of this plan (and also following the Power Systems Master Plan developed by Acres International in 1995), the government decided to solicit proposals from international companies for IPPs.
This has resulted in solicitations for a number of fast-track barge-mounted plants, plus two large-capacity gas-fired, combined-cycle plants (a 360-MW plant at Haripur and a 450-MW plant at Meghnaghat), and a 124-MW gas-fired plant at Baghabari. The Haripur plant began operation in October 2001, and the Meghnaghat plant began operation in November 2002.

Both projects were built by AES of the United States, but were sold to the British firm CDC Globeleq in April 2003. Bharat Heavy Electricals of India completed the gas-fired Baghabari generating unit in November 2001. A consortium of Chinese firms concluded an agreement with Bangladesh in June 2001 for the country's first coal-fired power plant. It is to be built by 2004 at Barapukria in northern Bangladesh, near the country's main coal deposit, and will have a capacity of 250 MW.
In addition to large IPP projects, in April 1998, Bangladesh adopted a "Small Power Generation Policy," which encourages development of small local generation projects of up to 10-MW in capacity in underserved areas. The country also has an active rural electrification program. All of these initiatives aim to increase power generation and to reduce the country's power shortage significantly in coming years, with a goal of achieving universal electrification by 2020.

Bangladesh has several barge-mounted power stations under construction. Westont Power's 130-MW, $ 37 mm Baghabari project began delivering power to BPDB in July 1999. A $ 103 mm, 110-MW, fuel-oil-fired power plant at Khulna, built on two barges, was commissioned in October 1998 and is being operated by Waertsilae NSD of Finland in a joint venture with two local companies (plus financing from the International Finance Corporation). Power from the plant supplies western Bangladesh.
Discussions have been underway for several years about the possibility of Bangladesh connection its electric grid to those of India, Nepal, and Bhutan. Nepal and Bhutan have substantial untapped hydroelectricity potential. This power could be consumed in those two countries and also exported to India, Pakistan, and Bangladesh. In March 1999, it was reported that India's Power Grid Corporation had completed a feasibility study on possible exchange of 150 MW of power between Bangladesh and India. Interconnection points would be Ishwardi, Bangladesh-Farakka, India and Shahjibazar, Bangladesh-Kurnarghat, India.

Country overview
President: Iajuddin Ahmed
Prime Minister: Begum Khaleda Zia (since 10 October 2001)
Independence: December 16, 1971 (from Pakistan)
Population (July 2002E): 133 mm
Location/size: Southern Asia, bordering Bay of Bengal, between India and Burma/55,813 square miles (about the size of Wisconsin)
Major cities: Dhaka (capital -- population, 10 mm), Chittagong (2.8 mm), Khulna (1.8 mm), Rajshahi (1 mm)
Languages: Bangla (official, also known as Bengali), English
Ethnic groups: Bengali (98 %), tribal groups, non-Bengali Muslims
Religions: Muslim (88 %), Hindu (11 %), Christian, Buddhist, others (1 %)
Defence (8/98): Total manpower 121,000 (Army 101,000; Navy 10,500; Air Force 9,500); Paramilitary (49,700)

Economic overview
Finance Minister: M. Salifur Rahman
Currency: Taka (Tk)
Market exchange rate (5/1/03): $ 1 = 58.2 Tk
Gross Domestic Product (GDP) (2002E, market exchange rates): $ 48.3 bn
Per capita GDP (market exchange rate, 2002E): $ 356
Real GDP growth rate (2002E): 4.9 % (2003F): 5.4 %
Inflation rate (consumer prices) (2002E): 3.6 %
Current account balance (2002E): $ 240 mm (Bangladeshi government figure)
Merchandise exports (2002E): $ 6.8 bn
Merchandise imports (2002E): $ 7.5 bn
Merchandise trade balance (2002E): -$ 1.3 bn
Major trading partners (2002): United States, India, China, Japan, United Kingdom, Germany, France
Major export products: Garments and knitwear, frozen fish, jute and jute goods, leather and leather products, tea, urea fertilizer, ceramic tableware
Major import products: Capital goods, food grains, petroleum, textiles, chemicals, vegetable oils
Total foreign debt (2002E): $ 16.7 bn

Energy overview
Minister for Energy and Mineral Resources: Begum Khaleda Zia
Proven oil reserves (1/1/03E): 56.9 mm barrels
Oil production (2002E): 6,200 bpd, of which 6,000 bpd was crude oil
Oil consumption (2002E): 75,000 bpd
Net oil imports (2002E): 68,800 bpd
Crude oil refining capacity (1/1/03E): 33,000 bpd
Natural gas reserves (May 2003E): 18.0 tcf (current estimate of the Bangladeshi government. Other estimates vary widely. The US Geological Survey has estimated that Bangladesh has an additional 32.1 tcf in "undiscovered reserves.")
Natural gas production/consumption (2001E): 349.6 bn cf
Coal production (2001): None
Coal consumption (2001): 0.55 mmst
Electric generation capacity (2001E): 3.6 GW
Electricity production (2001E): 15.4 bn kWh (88 % natural gas, 6 % oil, 6.3 % hydro)

Environmental overview
Minister of Environment & Forests: Shajahan Siraj
Minister of Water Resources: L.K. Siddiqui
Total energy consumption (2001E): 0.51 quadrillion Btu* (0.1 % of world total energy consumption)
Energy-related carbon emissions (2001E): 8.1 mm tons of carbon (0.1 % of world carbon emissions)
Per capita energy consumption (2001E): 3.7 mm Btu (vs. US value of 341.8 mm Btu)
Per capita carbon emissions (2001E): 0.06 tons of carbon (vs. US value of 5.5 tons of carbon)
Energy intensity (2001E): 12,743 Btu/ $ 1995 (vs. US value of 10,736 Btu/ $ 1995)**
Carbon intensity (2001E): 0.20 tons of carbon/thousand $ 1995 (vs. US value of 0.17 tons/thousand $ 1995)**
Fuel share of energy consumption (2001E): Natural gas (66.8 %), oil (29.2 %), coal (2.0 %)
Fuel share of carbon emissions (2001E): Natural gas (61.2 %), oil (35.6 %), coal (3.2 %)

Status in climate change negotiations: Non-Annex I country under the United Nations Framework Convention on Climate Change (ratified on April 15, 1994). Not a signatory to the Kyoto Protocol.
Major environmental issues: Many people are landless and forced to live on and cultivate flood-prone land; limited access to potable water; water-borne diseases prevalent; water pollution especially of fishing areas results from the use of commercial pesticides; intermittent water shortages because of falling water tables in the northern and central parts of the country; soil degradation; deforestation; severe overpopulation.
Major international environmental agreements: A party to the Conventions on Biodiversity, Climate Change, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Nuclear Test Ban, Ozone Layer Protection and Wetlands. Has signed, but not ratified, the Law of the Sea.

* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar, wind, wood and waste electric power. The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data.
**GDP based on EIA International Energy Annual 2001

Oil and gas industries
Organizations: Bangladesh Oil, Gas, and Minerals Corp. (also known as Petrobangla), formed in 1974, is the state company responsible for oil and gas exploration, production, and distribution. Petrobangla also is involved in exploration and production for minerals, including coal. Petrobangla has 10 operating companies, including Bangladesh Petroleum, formed in 1976 and a separate corporate entity, handles oil imports, refining, and marketing.
Bangladesh Petroleum Exploration (Bapex) is the exploration subsidiary of Petrobangla. Besides Bapex, Petrobangla has 7 other subsidiaries: Bangladesh Gas Fields (gas development and production, mainly in central gas fields); Sylhet Gas Fields (responsible for northern gas fields operation) Gas Transmission Company (national gas transmission system); Rupantarita Prakritik Gas Company (natural gas liquids and LPG); Titas Gas Transmission and Distribution Company (regional gas distribution, with 73 % of the market); Bakhrabad Gas Systems (regional gas distribution, with 21 % of the market); Jalalabad Gas Transmission and Distribution System (regional gas distribution, with 6 % of the market).
Refinery: Chittagong (33,000 bpd)
Foreign energy company involvement: Cairn, Halliburton, Occidental, Rexwood-Okland, Shell, Texaco, Unocal
Gas fields: Bakhrabad, Beani Bazar, Chattak, Feni, Habiganj, Jalalabad, Kailashtilla, Narshingdi, Rashidpur, Sangu, Shahbazpur, Sylhet, and Titas
Ports: Chittagong,Mongla (Khulna)

Sources for this report include: Central Bank of Bangladesh; Dow Jones News wire service; Global Insight Asia Economic Outlook; Economist Intelligence Unit ViewsWire; Electric Utilities Databook for the Asian and Pacific Region; Financial Times; the Independent; Modern Power Systems; New York Times; Oil and Gas Journal; US Commerce Department, International Trade Administration -- Country Commercial Guides; US Energy Information Administration; US State Department Background notes on Bangladesh; US Trade and Development Agency -- Bangladesh Strategic Gas Utilization Study; World Gas Intelligence, World Markets Online.

For more information from EIA on Bangladesh, please see:
EIA - Country Information on Bangladesh
US-Bangladesh Energy Data Exchange Home Page
Links to other US Government sites:
CIA World Factbook -- Bangladesh
US Agency for International Development (USAID) -- South Asia Regional Initiative/Energy (SARI/E)
US Geological Survey -- Bangladesh Cooperative Gas Resources Assessment
US International Trade Administration, Country Commercial Guide -- Bangladesh
US Department of Energy -- Office of Fossil Energy -- Bangladesh
US Department of State Country Background Notes -- Bangladesh

The following links are provided solely as a service to our customers, and therefore should not be construed as advocating or reflecting any position of the Energy Information Administration (EIA) or the United States Government. In addition, EIA does not guarantee the content or accuracy of any information presented in linked sites.
Web Bangladesh.com
Permanent Mission of Bangladesh to the United Nations
Embassy of Bangladesh -- Washington, DC