Bangladesh: Natural Gas Production and Transmission Development Investment Program

Sovereign Project | 45203-003

Summary

Excessive reliance on gas as one single primary energy source is problematic. Bangladesh, gas exploration and production have not kept pace with demand growth. From the supply side, gas is finite resource that will be depleted gradually. The complexity, advanced technology, long lead time from exploration to production, and large capital investment constrain the exploitation of gas resources. Importing liquefied natural gas (LNG) can be one of the options that help alleviate the gas reserve constraint. However, the high cost of gas infrastructure construction, e.g. LNG receiving terminals and pipelines, is one of the major market entry barriers. From the demand side, lack of systematic gas allocation among sectors and inadequate gas pricing has caused inefficient use of gas. In 2010, about 55% of gas resources were allocated to power sector, 16% to industry, 12% to fertilizer production, and 11% to households.

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Project Name Natural Gas Production and Transmission Development Investment Program
Project Number 45203-003
Country Bangladesh
Project Status Proposed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
MFF Facility Concept: Gas Production and Transmission Development Investment Program
Ordinary capital resources US$ 500.00 million
Strategic Agendas
Drivers of Change
Sector / Subsector

Energy - Conventional energy generation

Gender Equity and Mainstreaming
Description Excessive reliance on gas as one single primary energy source is problematic. Bangladesh, gas exploration and production have not kept pace with demand growth. From the supply side, gas is finite resource that will be depleted gradually. The complexity, advanced technology, long lead time from exploration to production, and large capital investment constrain the exploitation of gas resources. Importing liquefied natural gas (LNG) can be one of the options that help alleviate the gas reserve constraint. However, the high cost of gas infrastructure construction, e.g. LNG receiving terminals and pipelines, is one of the major market entry barriers. From the demand side, lack of systematic gas allocation among sectors and inadequate gas pricing has caused inefficient use of gas. In 2010, about 55% of gas resources were allocated to power sector, 16% to industry, 12% to fertilizer production, and 11% to households. However, gas prices offered to electric power plants were only two fifths of the gas price in Pakistan and were less than 10% of the gas price in Singapore. The non-cost-reflective gas pricing not only deteriorates the financial health of Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) and its subsidiary companies, but also prevents private sector from investing in gas sector. System losses in gas transmission and distribution remain a major problem. Huge investments in rehabilitation of existing inefficient pipelines and facilities are deemed urgent and necessary and considered as the least-cost technical solutions to reduce system loss.
Project Rationale and Linkage to Country/Regional Strategy In response to the government's request, and also in alignment with the Asian Development Bank's (ADB) strategy for gas sector and the prevailing Bangladesh Country Partner Strategy (2011-2015), ADB plans to assist the government in achieving its national objectives through a multi-tranche financing facility (MFF), which will focus on (i) expansion of gas transmission pipeline and distribution network, (ii) increase gas supply by facilitating LNG development, (iii) enhancement of efficiency in gas use through rehabilitation of existing facilities and reduction of system losses.
Impact Increased access to gas for sustainable economic growth
Outcome Increased capacity in gas transmission pipelines and efficiency in distribution network
Outputs

1. Gas transmission pipelines built

2. Gas distribution network rehabilitated

3. Gas use efficiency improved and system losses reduced

4. Policy Dialogue with the government strengthened

5. Rules and regulations for private sector participation in gas distribution activities developed

6. Institutional capacity of EAs improved

7. Project Management System in place

Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects B
Involuntary Resettlement B
Indigenous Peoples C
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services A total of 55 person-months of consulting service inputs will be required for the preparation of the PPTA, among which 24 person-months from international consultants and 31 person-months from national consultants. The consultants will be recruited in accordance with the Guidelines on the Use of Consultants (2013, as amended from time to time). All procurement to be financed under the MFF will be carried out in accordance with ADB's Procurement Guidelines (2013, as amended from time to time).
Responsible ADB Officer Hongwei Zhang
Responsible ADB Department South Asia Department
Responsible ADB Division Energy Division, SARD
Executing Agencies
Gas Transmission Company Ltd.House #39, Road #3
Sector #3, Uttara Model Town
Dhaka-1230
Titas Gas Transmission & Distribution Co. Ltd."Tita Gas Bhaban", 105, Kazi Nazrul
Islam Avenue, Kawran Bazar Commercial
Area, Dhaka-1215, Bangladesh
Timetable
Concept Clearance 04 Oct 2013
Fact Finding 07 Apr 2014 to 21 Apr 2014
MRM 16 Jun 2014
Approval 18 Sep 2014
Last Review Mission -
Last PDS Update 31 Mar 2015

Safeguard Documents

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