First Shale Step Sees Growing Expectations Amid Supply Concerns

BMI View: Bangladesh's Ministry of Petroleum and Energy's Hydrocarbon Unit announced mid-July that it has contracted German company DMT GmbH to conduct an assessment of the country's shale gas potential. Bangladesh has been facing severe constraint s on its gas demand as it lacks sufficient production and gas import infrastructure, making shale gas a potentially significant upside for the country 's consumption . However, we stress that this remains at a very early stage and is unlikely to have any direct impact within the decade.

Bangladesh has been attempting to revive its energy supply in multiple ways over the recent years. The country's growing consumption of gas has been constrained by a lack of sufficient output and the absence of gas import infrastructure to meet demand, which in turn threatens to prevent the economy from expanding to its full capacity. Fuel consumption is also rapidly increasing, though Bangladesh has been able to import enough to meet demand despite the burdens it puts on the country's trade balance. We have seen developments in two areas which could ease constraint s on energy demand:

  • In April 2013, the government proposed to reform its production sharing contract (PSC) model in order to boost exploration interest in the market. This followed an announcement that Bangladesh 's latest biding round had only attracted two bids due to investors' dissatisfaction with the country's licensing terms (see ' Above Ground Competition Pushes Regulatory Overhaul ' , April 22) .

  • Bangladesh is also planning to develop a floating liquefied natural gas (LNG) import terminal by 2015. However, the government is still in negotiations with three of the short-listed companies, including India's Hiranandani Electricity, South Korea's Samsung C&T and Bermuda-based Golar LNG Energy, to finalise its construction.

Despite the strictures to Bangladesh's regulatory system have not stopped the interest of several IOCs in the hydrocarbon potential of the country's sector of the Bay of Bengal. Large deposits in both the Indian and Myanmar section of these waters - KG-D6 for the former and the Yetagun and Yadana fields for the latter - suggest that offshore Bangladesh could hold significant resources.

This view has been taken by ConocoPhillips, which will continue an extensive exploration campaign in late 2013. In June 2011, the US major signed a PSC with state-owned Petrobangla for stakes in deepwater gas blocks DS-08-10 and DS-08-11. Following promising 2D surveys conducted in 2012, the company is now planning further 2D and 3D seismic surveys along with the drilling of exploration wells.

Energy Constraints Dampen Consumption Growth
Bangladeshi Oil Production & Consumption (LHC) and Gas Production &Consumption (RHC)

Shale Dreams

Bangladesh has also been looking for upside to its gas prospects by encouraging unconventional resource assessments. In 2011, the country announced that the Hydrocarbon Unit (HCU) of the Ministry of Energy would organise such assessment s in the coming years. To this end, HCU contracted German firm DMT GmbH mid-July to conduct an assessment of Bangladesh 's shale gas potential by October 2013.

Expectedly, shale gas development remains very early stage and the results, which are to be published in late 2013 , are likely to be very specula tive as they will not give an accurate indication of what resources are actually recoverable. However, positive results could not only boost upstream interest in Bangladesh but could also turn industry attention towards India and Myanmar's shale gas potential.

This article is tagged to:
Sector: Oil & Gas
Geography: Bangladesh