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ADB, Bangladesh Sign US$230 Million Loan for Clean Energy Project

DHAKA, BANGLADESH (18 June 2006) – The Asian Development Bank (ADB) and the Government of Bangladesh today signed agreements for US$230 million in loans to help expand the natural gas infrastructure and delivery system in Bangladesh.

ERD Secretary Md Ismail Zabihullah signed for the Government while Hua Du, Country Director of ADB’s Resident Mission in Bangladesh, signed on behalf of ADB, at a simple ceremony at ERD, Sher-e-Bangla Nagar, Dhaka.

Wilhelm Wiig, First Secretary of the Norwegian Embassy Dhaka, was also present at the signing ceremony. Norway is providing $5 million in grant for capacity building component of the project.

Under the Gas Transmission and Development Project (GTDP), approved by ADB's Board of Directors in October 2005, four gas transmission pipelines will be constructed 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, GTDP 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. For the first time, gas compressor technology will be introduced to Bangladesh as part of the Project.

About 320 km of gas distribution pipelines will also be constructed to create a new distribution network in the Rajshahi area in western Bangladesh. In addition, the project will conduct a 3D seismic survey of five operational gas fields to provide updates on the estimated gas reserves in place and to determine the exact location for further drilling.

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. A $5 million loan from ADB's concessional Asian Development Fund will help finance the capacity building components.

"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 Energy Economist.

"By supporting the use of the much cleaner natural gas as a fuel for power generation, 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 Bangladesh has adequate gas reserves to meet its requirements. The country's gas infrastructure, however, is in poor condition due to a lack of commercial orientation and inadequate funding for maintenance and expansion. Low utilization of natural gas is serving as a constraint to commercial, industrial, and rural development.

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:

• Ashuganj-Manohardi-Dhanua-Elenga-Jamuna Bridge
• Hatikumrul-Ishwardi-Bheramara
• Bonpara-Rajshahi
• Bheramara-Khulna

ADB, based in Manila, is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 65 members - 47 from the region. In 2005, it approved loans and grants for projects totaling $6.95 billion, and technical assistance amounting to $198.8 million.

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