A general introduction to oil and gas law in Bangladesh
Bangladesh has evolved to become one of Asia’s most remarkable success stories in recent years.2 Oil and gas can be considered one of the most critical natural resources crucial to economic development and national strategies. The correlation between economic growth and the Human Development Index with energy consumption is an established phenomenon.3 Frequently cited as the emerging ‘Asian Tiger’, Bangladesh has experienced rapidly rising energy consumption over the past decade. This trend will only intensify further in the coming years as Bangladesh is projected to become the 24th largest economy by 20334 and a developed country by 2041. Therefore, energy security will be critical if Bangladesh is to retain its high growth and development.
Natural gas accounts for 41 per cent of Bangladesh’s total primary energy of 54.60 million tonnes of oil equivalent while oil accounts for 16 per cent.5 Despite being a relatively small country, Bangladesh is notably rich in natural gas reserves. The total gas reserve of the country, including proven recoverable reserves (P1) and recoverable probable (P2) of 27 fields, has been estimated to be at 28 trillion cubic feet (Tcf).6 In August 2021, the discovery of Bangladesh’s 28th gas field with a possible reserve of 68 billion cubic feet (Bcf) was announced. Assessments on the amount of undiscovered gas in the country undertaken by the United States Geological Survey (USGS) and the Norwegian Petroleum Directorate (NDP) jointly with Bangladeshi counterparts in 2001 and 2002 found a 50 per cent probability of finding 32 Tcf and 40 Tcf, respectively.
7 An earlier study undertaken by the Shell Oil Company in 1999 suggested a total undiscovered resource potential ranging between 20 and 40 Tcf.8 During the past decade, gas production in the country has been reported to have risen to about 2,650 million standard cubic feet per day (MMSCFD) from 1,744 MMSCFD9 although reports suggest that production rate may experience a slow decline unless new gas fields are discovered to supplement known reserves.
10 With a view to meeting the ever-increasing demand for energy, two floating storage and regasification units (FSRUs) with a capacity of 500 MMSCFD each have been installed at Moheskhali, which are adding R-LNG to the national gas grid. Moreover, steps are being taken to install a land-based iquified natural gas (LNG) terminal at Matarbai, Cox’s Bazar having a capacity of 1,000 MMSCFD.11 Furthermore, long-term contracts have been executed with Qatar Gas and Oman Trading International (OTI) alongside other renowned LNG suppliers and traders to supply LNG.
Bangladesh lags far behind when it comes to oil reserve and exploration, reportedly holding only 30 million barrels12 of provable reserve and a production capacity of 4,105 barrels per day.13 Bangladesh is still largely dependent on refined petroleum imported from abroad. As of 2018, only 1.2 to 1.3 million tonnes of petroleum oil comes from local sources out of the then-existing local demand for 5.89 million tonnes. The rest are imported. As per the 2019 statistics from the Hydrocarbon Unit, Energy and Mineral Resources Division, Bangladesh imports about 1.36 million metric tonnes (MT) of crude oil and approximately 6.7 million MT of refined petroleum product per annum. Abu Dhabi National Oil Company (ADNOC) and Saudi Aramco are the two major suppliers for crude that the Bangladesh Petroleum Corporation imports. On the other hand, finished products are imported mainly from 13 national oil companies (NOCs) of different countries.
The government of Bangladesh (the government) has concentrated mainly on the exploration and production of gas. However, because of a lack of technical expertise and strategic plan, Bangladesh primarily relies upon international oil companies (IOCs), especially for exploration and production in the offshore areas. In the financial year 2018–2019, the state-owned local gas production companies produced 39.12 per cent of the total production of gas, whereas the remaining 60.88 per cent was produced by IOCs.14 Chevron alone is responsible for the production of over 50 per cent of all gas and 80 per cent of all condensates produced in Bangladesh.
Considering the importance of energy in socio-economic development, the government adopted the National Energy Policy 2004 (NEP 2004) to ensure proper exploration, production, distribution and rational use of energy sources. This is to meet the growing energy demand and to cope with the rapid change of global as well as domestic situations. The NEP 2004 aims at encouraging foreign and local entrepreneurs to invest in exploration for petroleum in the country, awarding special incentives in connection with exploration and production of Oil and Gas Law, giving special consideration to application or production sharing contracts (PSCs) in offshore areas, exempting duty on machinery, equipment and consumables imported for petroleum operation during the exploration, development or production stage as well as exemption of tax under the terms of the PSC.
Very recently, the Ministry of Power, Energy and Mineral Resources (MPEMR) has adopted the Ingenious Natural Oil/Gas Exploration Policy, 2019, to reduce dependency on the import of Oil and Gas Law by adopting and utilising modern and technology-based exploration methods. The said policy requires the state-owned Oil and Gas exploration and production companies (Petroleum Exploration Company Limited (BAPEX), Bangladesh Gas Fields Company Limited (BGFCL) and Sylhet Gas Fields Limited (SGFL)) to implement their standard operating procedure or standard exploration procedure and observe the same throughout the exploration process.