Bangladesh: Natural Gas Access Improvement Project (formerly Clean Fuel Development Project)

Sovereign Project | 38164-013

Summary

The objective of the Project is to increase access to, and reliability of, natural gas supply in Bangladesh through capacity expansion and efficiency improvements in natural gas production, transmission and distribution systems.

The Project comprises four components.

PART A: TRANSMISSION CAPACITY EXPANSION

Part A-1: construction of a 30-inch, approximately 61 kilometer gas transmission pipeline from Ashuganj to Bakhrabad, and the installation of interface metering and regulating stations at selected locations (Monohordi, Dewanbag, Kutumbupur, Febi and Barabkundu); and

Part A-2: installation of one compressor with throughput of approximately 1,500 MMCFD in Ashuganj and one compressor with throughput of approximately 500 MMCFD in Elenga.

PART B: SAFETY AND SUPPLY EFFICIENCY IMPROVEMENT OF TITAS GAS FIELD

Part B-1: detailed investigation, design and implementation of safety measures to control gas seepage at problematic wells

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Project Name Natural Gas Access Improvement Project (formerly Clean Fuel Development Project)
Project Number 38164-013
Country Bangladesh
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2622-BAN: Natural Gas Access Improvement Project (formerly Clean Fuel Development Project)
Ordinary capital resources US$ 261.00 million
Loan 2623-BAN: Natural Gas Access Improvement Project (formerly Clean Fuel Development Project)
Asian Development Fund US$ 5.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change
Sector / Subsector Energy - Conventional energy generation - Energy efficiency and conservation - Energy sector development and institutional reform - Oil and gas transmission and distribution
Gender Equity and Mainstreaming Some gender elements
Description

The objective of the Project is to increase access to, and reliability of, natural gas supply in Bangladesh through capacity expansion and efficiency improvements in natural gas production, transmission and distribution systems.

The Project comprises four components.

PART A: TRANSMISSION CAPACITY EXPANSION

Part A-1: construction of a 30-inch, approximately 61 kilometer gas transmission pipeline from Ashuganj to Bakhrabad, and the installation of interface metering and regulating stations at selected locations (Monohordi, Dewanbag, Kutumbupur, Febi and Barabkundu); and

Part A-2: installation of one compressor with throughput of approximately 1,500 MMCFD in Ashuganj and one compressor with throughput of approximately 500 MMCFD in Elenga.

PART B: SAFETY AND SUPPLY EFFICIENCY IMPROVEMENT OF TITAS GAS FIELD

Part B-1: detailed investigation, design and implementation of safety measures to control gas seepage at problematic wells

Part B-2: drill four appraisal cum development wells, and design and construction of related processing plants

PART C: ACCESS IMPROVEMENT IN SOUTH WESTERN REGION

Construction of approximately 845 kilometer 2 inch to 20 inch distribution pipelines in the Borrower's south western region, comprising the districts of Kushtia, Jhenidah, Jessore, Khulna and Bagerhat (including Mongla).

PART D: SUPPLY AND DEMAND MANAGEMENT

Pilot a remote sensing metering system for industrial consumers and a prepaid metering system for domestic consumers within TGTDCL's gas distribution franchise area. TGTDCL will develop a list of project proposals to stimulate investments in gas use efficiency among its consumers, particularly industrial consumers.

Project Rationale and Linkage to Country/Regional Strategy

Natural gas contributes 70% of primary energy supply in Bangladesh. It has dominated the power sector, fueling 85% of power generation. As the country is highly dependent on natural gas for its economic development, the sustainability of gas supplies is critical. Government policy in the gas sector since 1993 has been to attract private investments to upstream gas field development while improving the network coverage and operational efficiency of companies that produce and distribute natural gas. Bangladesh managed to attract significant investments from the private sector for gas exploration and increased gas production by over 100% since 1998. The share of gas production by international oil companies (IOCs) grew to almost 50% of the total supply in 2008.

Exponentially increasing demand for gas has introduced a supply deficit. To address the demand supply gap, national oil companies and IOCs have been investing in existing fields and new discoveries to increase production. By 2017, these interventions and the recently concluded 3rd round of bidding will increase the gas supply by 74% compared to supply in 2008. The government is currently examining several options to further improve supply: (i) additional investment in existing fields, (ii) initiating another round of bidding for exploration; and (iii) importing liquefied natural gas as a medium- to long-term measure. The transmission and distribution network is inadequate to meet the needs of industry, commerce, and households. The capacity of the state gas companies is insufficiently developed to access international financing. Therefore gas transmission and distribution continue to need public financing.

Operational performance in the gas sector has been affected by inadequate investment in all subsectors, compounded by uneconomic tariffs, inadequate investment resources, inefficient use of gas, and inadequate capacity in the state-owned gas companies and the government. The government's gas sector reform road map (GSRR) is designed to address many of these issues. The GSRR and Asian Development Bank (ADB) policy dialogue with the government includes time-bound actions to improve the policy and regulatory environment, sector planning, and corporate governance, as well as to implement structural and pricing reforms. Some of the key actions, such as approving the GSRR, operationalizing the Bangladesh Energy Regulatory Commission (BERC), licensing gas companies, and cabinet approval for the proposed gas act, are already accomplished. The government is committed to continuing the implementation of other measures identified in the GSRR.

The proposed physical investments are the most urgent components of the gas sector's priority investment program. The gas sector master plan provides the basis for investment planning by the Bangladesh Oil, Gas, and Mineral Corporation (Petrobangla) and its affiliates. The need to provide gas to Chittagong from fields in the northeast and the constraints on the national supply of gas have focused investment priorities on these areas. Removing bottlenecks in the transmission system has become critical to ensuring the efficient delivery of higher gas volumes. Safety and supply efficiency improvement at the Titas gas field is necessary to avoid a major accident and sustain the current level of production from the field in the long term. With the extension of the natural gas transmission pipeline to the Khulna Division under the Gas Transmission and Development Project (GTDP), improving the distribution network in the southwest is essential to making gas available to consumers in that region.

Impact Increased and more reliable access to natural gas for sustained economic growth
Project Outcome
Description of Outcome Expanded capacity and improved efficiency in natural gas production, transmission, and distribution systems
Progress Toward Outcome

The updated Project Framework clearly suggest that the Project interventions will contribute significantly to the socioeconomic development of the Project area especially in the southwest of Bangladesh, the least developed region of the country, by expanding sustainable gas supply. The impact of the Project will be increased and more reliable access to natural gas for sustained economic growth, achieved by reinforcing and augmenting natural gas supply and addressing policy and institutional constraints. The main outcome of the Project will be expanded capacity and improved efficiency in natural gas production, transmission, and distribution systems of the country.

The Project will add 845 km distribution network in the southwest of the country, covering the districts of Kushtia, Jhenaidah, Jessore, Khulna, and Bagerhat including the Mongla Sea Port areas; and supply gas to power stations in Khulna and Bheramara including industrial, commercial and domestic consumers of the region. More importantly, the Project will add four appraisal-cum-development wells and process plants to increase production of gas by 120 MMCFD. The Project, when completed, will improve and expand natural gas infrastructure and delivery system through an improved and expanded networks and field appraisal. The Project will also enhance financial performance, governance, and efficiency of gas sector entities through capacity building and implementation of the GSRR.

Implementation Progress
Description of Project Outputs

Ashuganj-Bakhrabad gas transmission loopline of about 61 km

Gas compressors at Ashuganj and Elenga

Controlled gas seepage in the Titas gas field and four wells developed

845 km of pipelines in the southwestern gas distribution network

Introduction of prepaid meters for domestic consumers and remote meters for industrial consumers

Feasibility studies for energy efficiency improvements

Capacity building in BGFCL, GTCL, SGCL, and TGTDCL

Status of Implementation Progress (Outputs, Activities, and Issues)

Recent overall implementation progress of the project is satisfactory. The loan closing date for Loan 2622 has recently been extended by two years to complete all activities under different project components.

Part A1: This component is funded by government and is expected to be completed by June 2015.

Part A2: Consultant commenced services in Jan 2012. EPC contractor was selected in Oct 2011. Work in progress and the commissioning is expected to be completed by end of Dec 2014. Recruitment of training management consulting firm for managing the implementation of international training courses for GTCL personnel is underway.

Part B: Both the contract for two large packages - drilling of 4 wells for $52 million and procurement of process plant' for an amount of $23 million - under BGFCL has already been awarded. Recruitment of training management consulting firm for managing the implementation of international training courses for BGFCL personnel is ongoing.

Part C: Procurement of all the packages completed. However, the installation of the pipelines is pending. Recruitment of training management consulting firm for managing the implementation of international training courses for SGCL personnel is ongoing.

Part D: Contract for pre-paid meters has recently been awarded. However the 2nd package for remote meters has been dropped. Recruitment of training management consulting firm for managing the implementation of international training courses for TGTDC personnel is underway.

Geographical Location Ashugani, Bakhrabad, Elenga, eastern and southwest region of Bangladesh.
Safeguard Categories
Environment B
Involuntary Resettlement A
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects

The government, through the executing agencies, will ensure that the design, construction and operation of all project facilities comply with the environmental laws and regulations of Bangladesh and ADB's environmental policies and regulations, specifically ADB's Environment Policy (2002) and environmental mitigating measures and the environmental management plans described in the IEEs and in the summary IEE conducted for the project.

The EAs have prepared initial environmental examination (IEEs) for all components of the Project. The IEEs will be updated and approved to be in line with the summary IEE (SIEE) that was initially prepared for the Project. The Project does not require a full environmental impact assessment (EIA); however before the commencement of construction, the IEEs with the environmental management plans (EMPs) for each component will be detailed in the project-specific context and included in construction contracts. GTCL submitted an IEE for its component (Part A2) in 2011, which needs to be updated. BGFCL has recently drafted an IEE including the EMPs for its component (Part B). It is recommended that SGCL and GTCL will prepare/update the IEEs with EMPs for their components (Part A and C) before the commencement of civil works and associated activities.

For Part B, BGFCL has submitted an IEE report to ADB. BGFCL has planned to carry out drilling of 4 wells in Titas gas field and installation of two gas process plants. The major anticipated environmental impacts of the works includes emission of greenhouse gases from combustion of fossil fuel, contamination of surface water, erosion and sedimentation during trenching, noise pollution during construction and drilling of gas wells, impacts on local biodiversity and wildlife due to noise and vibration, damages of crops due to drilling and earthwork, etc. There are also possibilities of health hazards during handling of equipment and fuel. As a part of IEE, EMP is also proposed and adequate mitigation measures will be in place to address the major environmental impacts of the project components. For safety of the workers and community, adequate occupational health and safety measures will be in place.

The final IEE requires to be posted in the ADB website and the SIEE to be disclosed in local language for ensuring transparency of the environmental safeguard measures. The Mission advised EAs to comply with the requirements at the earliest.

Involuntary Resettlement

Under part A, a full resettlement plan (RP) was prepared to mitigate the resettlement impact for the construction and installation of the 61 km of gas transmission pipeline from Ashuganj to Bakhrabad. This component required permanent acquisition of 50.65 hectares (ha) of land affecting 1,992 households and the temporary acquisition of 105.76 ha of land affecting 10,956 people. This part is being financed by the Government and GTCL ensures that civil works are completed during the dry season to avoid disrupting crops on the temporarily acquired land and the Government is committed to undertake efforts to minimize adverse impacts.

Under part B, initially two sites were identified at well no. 17 and 18 for drilling of four appraisal-cum-development wells in Titas gas field and RP was prepared for acquisition of 7.086 ha of agricultural land, affecting 178 households. These sites were found less feasible based on the 3-D seismic survey, and two new sites were selected at (i) Chhatian, Jangilsar, Malihata & Suhilpur mauzas under Sadar upazila (well no. 25, 26), and (ii) Sarail mauza under Sarail Upazila (Well no 23, 24). Both sites are under Brahmanbaria district. The Socio- Economic Survey (SES) of the project affected peoples (PAPs) for the new sites has already been conducted by a local consulting firm (Enviro Consultants Ltd), who is preparing the new RP for this component. The SES identified requirement of 15 acres of agricultural land, affecting 66 households with 322 persons only. The draft RP submitted by the consultant covers all mitigative measures related to Involuntary Resettlement (IR) safeguards, to compensate losses of (i) agricultural land, (ii) access by tenants/sharecroppers to agricultural land for crops production, (iii) income and livelihood, (iv) standing crops, (v) crop or access to agricultural land due to gas seepage, (vi) vulnerable groups, and (vii) unforeseen impact.

Under part C, the Project sites were selected and the components were designed to minimize impacts by avoiding involuntary land acquisition and displacement and by confining the Project to land already available to the government or the GTCL. The short RP prepared for part C, in consultation with affected people and communities, identified only nine households (five in Khulna and four in Jessore) comprising 52 people (mainly squatters), with temporary effect of income loss for maximum 1 week. SGCL is not aware of the RP, whereas a new requirement of acquiring 4.958 acres of land evolved for construction of 12 metering stations (DRS) and 5 office buildings. Although the PIU has started the land acquisition (LA) procedures through the office of the Deputy Commissioners, these LA items associated with the displaced persons from those lands must be incorporated in the revised RP. There is no DPP provision for IR, which requires to be incorporated in the revised DPP, for smooth implementation of the RP.

All revised RPs require to be posted in the ADB website and the summary to be disclosed in local language among the PAPs, for ensuring transparency of the social safeguards measures. The Mission advised EAs to comply with the requirements at the earliest.

Indigenous Peoples As 100% of the affected people were surveyed and no indigenous households will be affected by the project, the project was classified category C, and no indigenous peoples development plan is required.
Stakeholder Communication, Participation, and Consultation
During Project Design To ensure proper community participation, various stakeholders representatives of vulnerable groups, local leaders, and mayors were consulted during the project preparation. The gas companies undertook consultations with local officials and village leaders in the project area. These consultations played a vital role in raising awareness, gaining local support, and enabling affected people to voice their opinions and suggestions on project design and implementation. The poor and women have been carefully considered in conducting participatory activities. As part of the social assessment, stakeholders' consultations were carried out in the project areas with the broad objective of ensuring the extensive participation of all stakeholders. The participatory approach will be continued during implementation.
During Project Implementation During project implementation stakeholders' consultation will be carried out as and when will require.
Business Opportunities
Consulting Services For project components under Parts A and B, consulting services to technically assist EAs to implement the Project will be required. Consulting services for the project component under Part C will not be required. Part D will need consulting services for the subproject on developing a portfolio of projects on energy efficiency improvement. EAs will select and engage consulting firms in accordance with the ADB's Guidelines on the Use of Consultants using the quality and cost based selection method and full technical proposal. Individual experts may also be recruited based on bio-date submitted in response to specific terms of reference for assignments.
Procurement All procurement to be financed under the ADB loan will be carried out in accordance with ADB's Guidelines on Procurement 2007 (as amended from time to time).
Responsible ADB Officer Ali Kausar Muhammad Firoz
Responsible ADB Department South Asia Department
Responsible ADB Division Bangladesh Resident Mission
Executing Agencies
Titas Gas Transmission & Distribution Co. Ltd.*Mr. Md. Abdul Aziz Khanmdtgas@dbn-bd.net, pdslrp@dbn-bd.net105, Kazi Nazrul Islam Avenue, Kawran Bazar Commerical Area, Dhaka - 1215, Bangladesh
Bangladesh Gas Fields Company Ltd.*Mr. Md. Nurul Islammdbgfcl@yahoo.com, gsc.bgfcl@yahoo.comBirashar, Brahmanbaria - 3400, Bangladesh
Sundarban Gas Company Limited (SGCL)*A.B.M. Nazmul Hasansundarbangas@yahoo.comPetrocenter, 13th Floor, 3, Kawran Bazar Commercial Area, Dhaka - 1215, Bangladesh
Gas Transmission Company Ltd.*Mr. Md. Aminur Rahmangtclmd@citech.net, gtcl@citech.netRed Crescent-Borak Tower, Level 6, 71-72, Old Elephant Road (Eskaton), Dhaka - 1213, Bangladesh
Timetable
Concept Clearance 06 May 2009
Fact Finding 11 May 2009 to 20 May 2009
MRM 08 Dec 2009
Approval 26 Mar 2010
Last Review Mission -
PDS Creation Date 18 Jan 2010
Last PDS Update 23 Mar 2015

Loan 2622-BAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
26 Mar 2010 03 Jun 2010 16 Mar 2011 30 Sep 2015 30 Sep 2017 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 537.00 Cumulative Contract Awards
ADB 261.00 26 Mar 2010 222.30 0.00 85%
Counterpart 276.00 Cumulative Disbursements
Cofinancing 0.00 26 Mar 2010 128.47 0.00 49%

Loan 2623-BAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
26 Mar 2010 03 Jun 2010 16 Mar 2011 30 Sep 2015 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 5.00 Cumulative Contract Awards
ADB 5.00 26 Mar 2010 1.54 0.00 97%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 26 Mar 2010 1.20 0.00 75%

Evaluation Documents

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