$230 Million Loan Package to Help Deliver Clean Energy to Western Bangladesh
MANILA, PHILIPPINES (27 October 2005) - ADB will help expand the natural gas infrastructure and delivery system in Bangladesh to support the country's economic growth through a US$230 million loan package approved today.
The project will construct four gas transmission pipelines totaling 353 kilometers to transport about 360 million cubic feet of natural gas per day to the less developed western region of the country, covering an area with a population of nearly 15 million.
To remove supply bottlenecks throughout the network, the project will expand the country's north-south system by installing compressors at two locations - Ashuganj south and Muchai. Another compressor station will be located in Elenga.
About 320 km of gas distribution pipelines will also be constructed to create a new distribution network in the Rajshahi area in
In addition, the project will conduct a survey of five existing gas fields to provide updates on the estimated gas in place and to determine the exact location for drilling.
"Through this project, the western part of Bangladesh will have the opportunity for the first time to receive natural gas on a large scale, which will help boost its economic development and alleviate regional disparities in the long run," says Piya Abeygunawardena, an ADB Principal Project Economist.
"By supporting the use of the much cleaner natural gas as a fuel for power generation and industry and transport, as well as for household use, the project will also contribute to improving air quality in urban centers and in households."
Studies show that
Based on an ADB-financed study, Petrobangla, the Bangladesh Oil, Gas and Minerals Corporation, has formulated an investment plan for the period 2002-2020 that envisages $3 billion in investments for the gas sector to meet the country's increasing gas requirements. In support of this, the Government, with ADB assistance, has developed a gas sector reform road map, which will be implemented over five years.
The project's physical investments are the most urgent requirements in the Government's gas sector investment program. The western region, despite its rich agricultural base, has a weak industrial base, poor infrastructure, and lower social indicators.
The pipelines to be constructed under the project will run through:
- Hatikumrul-Ishwardi-Bheramara
- Bonpara-Rajshahi
- Bheramara-Khulna
To help ensure the sustainability of improvements in the sector, the project will help strengthen the policymaking and technical capabilities of the Energy and Mineral Resources Division of the Ministry of Power, Energy and Mineral Resources. The project will also help enhance the role of the private sector through strengthening the enabling environment in the gas sector. Implementation of the gas sector reform road map provides the most needed regulatory and other sector reform in place sustainable development of the sector.
The total cost of the project is estimated at $413 million. A $225 million loan from ADB's ordinary capital resources will help finance the construction of the pipelines and installation of compressors. The loan carries a 20-year term, including a grace period of 5 years. Interest will be determined in accordance with ADB's LIBOR-based lending facility.
A $5 million loan from ADB's concessional Asian Development Fund will help finance the capacity building components. It will have a repayment period of 32 years, including a grace period of 8 years, and an interest charge of 1% per annum during the grace period and 1.5% thereafter.
The Government of Norway is considering giving a $5 million grant for the capacity building component, and the Government of Bangladesh will provide the balance of $178 million.
Petrobangla and four of the state-owned gas companies under it will serve as the executing agencies for the project's various components. The project is due for completion around June 2010.
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