The Asian Development Bank (ADB) has signed an agreement with the government of Bangladesh to provide $266 million in loans to help the country address its natural gas supply constraints, and thus spur economic growth and reduce poverty, reports UNB.
Economic Relations Division (ERD) Secretary M Musharraf Hossain Bhuiyan and ADB country director for Bangladesh Thevakumar Kandiah signed the loan agreement on behalf of the two sides at a ceremony at NEC-2 on Thursday.
The loan assistance under the ''Bangladesh Natural Gas Access Improvement Project'' will be used to build new gas transmission and distribution pipelines to meet growing demand and expand coverage to less developed areas in the southwest. The main objective of the project is to expand capacity and improve efficiency in natural gas production, transmission, and distribution systems.
The project will install compressors and metering systems to boost reliability, improve safety and strengthen the management of gas supply and demand. The project will also help improve supply efficiency by developing four new wells and installing gas processing plants at the Titas gas field to increase gas production by 120 million cubic feet per day (mmcfd).
The state-owned Petrobangla and some of its companies including Gas Transm-ission Company Ltd (GTCL), Bangladesh Gas Fields Company Ltd (BGFC), Sundarban Distribution Company Ltd (SDC) and Titas Gas Transmission and Distribution Company Ltd under the Energy Division will implement the project tenured from 2010 to 2015.
Around 200,000 new households in the southwest, along with 1,400 industrial and commercial establishments will receive gas as a result of the expanded distribution network.
Of the total estimated project cost of US $ 542 million, ADB will extend US $ 266 million ($261 million as Ordinary Capital Resources loan & $5 million concessional loan (ADF) to Bangladesh. In addition, the government of Korea (Export Import Bank of Korea) is expected to provide $45 million. The government of Bangladesh will provide the remaining amount of $231 million in equity and loans.
Among the schemes, the ADB will provide US$ 173 million for implementing the Ashuganj and Elenga compressor projects, key elements in the gas sector which are expected to boost gas flow across the country and provide some relief to the industry and power sectors in particular.
The officials said that for the last couple of years, the drop in pressure of the gas supply has been a major problem for different industries as well as power plants in different areas of the country.
Many industries and power plants in Dhaka, Narayanganj, Gazipur, Narsingdi, Sylhet, Baghabari and Chittagong have complained that the pressure of the gas supply is not adequate, and that has allowed them to utilize as little as only half their production capacities.
The Petrobangla officials said the pressure in gas transmission dropped at different points for lack of compressors. Even many fields, which are capable of enhancing production, could not utilize their capacities due to compressor-related limitations.
"When all the three gas compressors will be installed, the pressure will improve to 1000 pounds per square inch (PPI) and finally, this will improve the overall gas supply situation," said one Petrobangla official. This will facilitate an additional 300 MMCFD gas from different fields, he added.
Originally, a project was undertaken three years back to install three compressors at Muchai, Ashuganj and Elenga. For the three compressors, the government had sought $150 million from ADB, but initially the lending agency agreed to provide only $55 million. But after protracted negotiations, the donor agency finally agreed to raise the loan amount for the compressor project, a key component of the whole package.
One of the three compressors is now being installed at Muchai with the financial support of the US oil company Chevron under the framework of its production sharing contract (PSC) with the government.
The ADB loan has a maturity of 32 years, including a grace period of 8 years, with an interest rate of 1 percent during the grace period and 1.5 percent thereafter. On the other hand, the interest rate for the OCR loan is LIBOR (the London Inter-Bank Offered Rate, a daily
reference based on the interest rates at which banks borrow unsecured
funds from other banks) + 0.60 percent and in the case commitment charge is 0.15 percent.
Speaking on the occasion, ADB country director Kandiah said that two basic features of the project are improving the efficiency of the existing gas transmission network and also improving the supply of gas.
Sundarban Gas Co Ltd. a newly formed distribution affiliate of state-owned Petrobangla will enter into contracts with private firms for the operation, maintenance, metering and billing of gas supplied to consumers in the southwest from 2012.
It may be mentioned that ADB''s total of loans sanctioned to Bangladesh stands at over $10 billion. The development assistance of ADB mainly focus on the power, energy, local government, transport, education, agriculture, water resources and governance sectors of Bangladesh.
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