Exploration History of Natural Gas of Bangladesh

The exploration action of petroleum products is over 100 years old in Bangladesh. The first exploration activity started with some topographic maps of Chittagong Hill Tracts and some simplified surveys were done. The first exploration started from 1914 to 1933 by Burma Oil Company (BOC). The second of phase petroleum exploration began after partition of Indian subcontinent. Three international oil companies and the state owned oil company (OGDC) were active in different part of the country. During phase II, Shell Oil discovered the most successful drilling operation; Rashidpur, Kailashtila,  Titas,  Habigonj  and  Bakhrabad  gas fields were discovered. 

After the independence of Bangladesh in 1971, the petroleum exploration gathered pace. In this period, the first offshore gas field, Kutubdia was discovered. The country was first divided into 23 major blocks including offshore area. During 1995-2000, the  foreign companies Fig.2 drilled 10 exploratory wells and discovered 1 offshore gas field (Sangu in 1996 by Cairns Energy) and two onshore gas fields (Bibyana in 1997 and Moulovibazar in 1998). After some more successful drilling by Tullow Oil, Bangura gas field was discovered in 2004.

BAPEX, (Petrobangla exploratory subsidiary) drilled two wells and discovered two gas fields, i.e. Shahbazpur in 1995 and Saldanadi in 1996. BAPEX drilled one well in late 2004 and announced discovery of Srikail gas field in Comilla in January 2005. It is very interesting data that the national oil companies of Bangladesh have a discovery success rate over 80% Fig.3 compared to the multinational oil companies. Digital multi fold seismic data acquisition started in 1977, when Prakla was engaged under the German technical Assistance Program. In 1978 Petrobangla started acquiring multi fold analog seismic data, Fig.4 but in 1979 it moved into the digital domain. During 1986-87 Shell recorded over 1,500 km of multi fold data and these are available in BAPEX Data Center.

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History of Natural Gas in USA

The ancient peoples of Greece, Persia, and Indian subcontinent discovered natural gas many centuries ago. The people were mystified by the burning springs created when natural gas seeping from cracks in the ground was ignited by lightning. They built temples around these perpetual lames so they could worship the mysterious fire.

But, about 2,500 years ago, the Chinese civilization recognized that natural gas can be used to work. The Chinese pipe the gas from shallow wells and burned it under large pans to evaporate seawater for the salt.

But it is a matter of fun that only few years ago like 1816, natural gas was first used in America to illuminate the streets of Baltimore with gas lamps. Lamplighters walked the streets at dusk to fight the lamps. Soon after, in 1821, William Hart dug the first successful American natural gas well in Fredonia, NY. His well was 27 feet deep, quite shallow compared to today’s wells. The Fredonia Gas Light Company opened its doors in 1858 as the nation’s first natural gas company. By 1900, natural gas had been discovered in 17 states. In the past 40 years, the use of natural gas has grown.

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Characteristics of Natural Gas Market in Bangladesh

The nature of the natural gas market is like to other competitive product markets: prices reflect the ability of supply to meet up demand at any one time. The economics of producing gas are moderately straight forward. Like any other goods, the price of natural gas is mostly a function of demand and the supply of the product.

When demand for gas is rising, and prices rise accordingly, producers will respond by increasing their exploration and production capabilities. As a consequence, production will over time tend to increase to match the stronger demand. However, unlike many products, where production can be increased and sustained in a matter of hours or days, increases in natural gas production involve much longer lead times. It takes time to acquire leases, secure required government permits, do exploratory seismic work, drill wells and connect wells to pipelines; this can take as little as 6 months, and in some cases up to ten years. There is also uncertainty about the geologic productivity of existing wells and planned new wells. Existing wells will naturally decline at some point of their productive life and the production profile over time is not known with certainty. Thus, it takes time to adjust supplies in the face of increasing demand and rising prices.

In an environment of falling gas prices, the converse will be true. Producers will respond to lower natural gas prices over time by reducing their expenditures for new exploration and production. Production decline in existing wells will decrease productive capacity. At the same time, the lower prices will increase the demand for natural gas. This, in turn, will ultimately result in upward pressure on gas prices. This relationship between changes in the price of natural gas and variations in the supply of and demand for natural gas is sometimes referred to as the "natural gas market cycle."  In the short term, and in relation to existing producing wells, the supply of natural gas is relatively inelastic in response to changes in the price of natural gas. Contrary to some views, producers do not routinely shut in wells when natural gas prices are low. 

There are many Characteristics of Natural Gas Market. This are-

First, if production is halted from a natural gas well it may not be possible to restore the well's production due to reservoir and well bore characteristics.

Second, the net present value of recapturing production in the future may be negative relative to producing the gas today -- i.e., it may be better to produce gas today than to wait until the future to produce the gas. If a producer likes not to operate a well, the lost production cannot be recovered the next month but is instead is deferred potentially years in the future. There are no guarantees that the prices for gas in the future are going to be higher than prices today. 

Third, some gas is produced in association with oil, and in order to stop the flow of natural gas, the oil production must be stopped as well, which may not be economic.

Fourth and finally, a producer may be financially or contractually bound to produce specific volumes of natural gas. Producers and consumers react rationally to changes in prices. While the price of the natural gas commodity fluctuates, it is this inherent volatility that provides the signals (and incentives) to both suppliers and consumers to ensure a constant movement towards supply and demand quality.

Because the natural gas market is so heavily dependent on the interaction of supply and demand, it is important to have knowledge of the factors that affect these two components.

Natural gas in Bangladesh remains under priced in relation to the long-run marginal cost. This has led to significant resource shift by some sectors and consumer groups. The average tariff or all users was 78% of total sales in 1999/2000, implying an average subsidy of 22%. The under pricing of household gas use leads to a high opportunity cost in terms of foregone resources that could have been mobilized to support investment within and outside the sector, especially given the country’s massive development financing needs. 

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Chevron in Bangladesh

Chevron is one of the largest foreign investors in Bangladesh, providing employment and supplying nearly 50 percent of the country's natural gas consumption.

The two-year startup of the Bibiyana Field demonstrated our ability to handle complex projects involving many technical, environmental and workforce challenges. To bring the field into production in 2007, Chevron recruited about 2,300 Bangladesh citizens to work on the project.

Chevron also produces natural gas from the Jalalabad and Moulavi Bazar fields.

Chevron supports Bangladesh's goal of maximizing the nation's energy potential by actively investing in projects that deliver more gas to Petrobangla, the national oil company. We have developed natural gas production in three fields: Jalalabad, Moulavi Bazar and Bibiyana. In 2011, total daily production averaged 915 million cubic feet of natural gas (434 million net) and 4,000 barrels of condensate (2,000 net). Condensate is liquid hydrocarbon produced with natural gas.

In 2011, the Muchai compression project reached mechanical completion. Startup is expected in the second quarter of 2012. The project supports additional production from the Bibiyana, Jalalabad and Moulavi Bazar natural gas fields.

Chevron operates the Jalalabad gas field in northeastern Bangladesh under a production-sharing contract with Petrobangla, to whom the processed natural gas is sold. Condensate from the field is used to make products such as gasoline and diesel fuel. Since its inception in 1999, Jalalabad has doubled its production to meet the growing energy demand in the country. The field is one of the most cost-effective sources of energy for Bangladesh and has been in production since 2001.

Chevron produces natural gas from the Moulavi Bazar Field in Block 14, in northeastern Bangladesh, under a production-sharing contract with Petrobangla. The field has operated since 2005.

The Bibiyana Expansion Project began front-end engineering and design work in July 2011. The project is expected to include a gas plant expansion, new development wells and an enhanced liquids recovery unit, with an estimated total maximum daily production of 57,000 barrels of oil-equivalent. A final investment decision is expected in mid-2012.

Discovered in 1998, the field is one of the most significant natural gas discoveries in Bangladesh, in both quality and size of the reserve. Chevron signed a gas purchase and sales agreement with Petrobangla in 2004. The original development program included a natural gas processing plant with a capacity of 600 million cubic feet per day and a natural gas pipeline to connect the field to the national natural gas transmission grid. Bibiyana began producing natural gas in 2007.

 In 2009, an independent reserve redetermination study conducted by petroleum industry consultants DeGolyer and McNaughton concluded that the field contains a much larger reserve than originally thought. In 2011, Chevron relinquished its interest in Block 7 following the completion of an unsuccessful exploratory well.

In areas where we operate, Chevron Bangladesh invests in activities and programs that focus primarily on education, health care, small business development and the environment. We also provide resources that help people gain the skills needed to improve their standard of living while preserving their culture.

Chevron carries out most of these projects in partnership with leading nongovernmental organizations (NGOs). Our employees also play key roles in community development projects by regularly participating in projects. In 2011 alone, our health, education, business development and environmental stewardship initiatives affected the lives of approximately 30,000 families in Bangladesh.

Many of our social investments in Bangladesh focus on improving the quality of life and economic opportunities available to people in the communities where we work. In 2011, more than 3,000 families living in 62 villages near Chevron's Bibiyana, Moulavi Bazar and Jalalabad fields received training and resources to start new businesses through the Alternative Livelihood Program. The program is run by our NGO partners the Institute of Development Affairs, Prochesta and the Center for Natural Resource Studies (CNRS). Another CNRS program offers about 500 families in two villages near the Moulavi Bazar Field education and skills training in work such as animal rearing and home gardening, which could lead to higher income. Households and schools in two villages near the Moulavi Bazar Field received improved cooking stoves, solar photovoltaic panels and biogas plants (small facilities that produce energy from organic waste). In 2012, this project was expanded to 500 families in two villages near the Bibiyana natural gas field.

Working with the U.S. Agency for International Development and the Smiling Sun Franchise Program, we have helped create three Smiling Sun clinics. These facilities provide health care to an average of 6,000 villagers per month near the Bibiyana and Moulavi Bazar natural gas fields. Our partner, the Jalalabad Rotary Club, organizes free annual eye care clinics where patients receive checkups, free eyeglasses and cataract treatment. In 2011, about 1,200 people attended these free clinics.

Chevron is committed to improving the quality and availability of education for students in Bangladesh. In 2011, we provided additional teacher support at three schools and funded more than 1,000 scholarships for disadvantaged students. We also are helping to fund a five-year program that offers scholarships to students from across Asia and the Middle East who attend the Asian University for Women. And we worked with Save the Children to support a pre-primary program that served 440 students in 15 schools in the Bibiyana area. We also support programs to improve children's learning experiences. We helped establish computer learning centers in two schools near the Bibiyana and Moulavi Bazar Fields, contributing five desktop computers to each school. We also support an education endowment fund that helps pay for school uniforms, sports equipment and school furniture.

Chevron employees are active members of the community. In 2011, nearly 600 employees donated blood in Chevron's annual World Blood Donor Day. Also in 2011, Chevron employees helped plant nearly 21,000 saplings on roadsides and at schools and clinics near Chevron's Bibiyana, Jalalabad and Moulavi Bazar fields. And each year, our volunteers help Habitat for Humanity International build low-cost, durable homes for people in need.

During our time in Bangladesh, Chevron has worked to expand the country’s ability to produce energy and has done so in a responsible manner. Chevron has developed three natural gas fields in Bangladesh. The Jalalabad Field was discovered in 1989 and went into production in 1999. The Moulavi Bazar Field was discovered in 1999 and came on line in 2005. The largest producing field in Bangladesh, the Bibiyana Field, was discovered in 1998 and came on line in 2007.

Chevron works with our partners in the government of Bangladesh and with Petrobangla to develop the country’s energy resources in a safe, environmentally responsible manner. To protect the environment, Chevron uses the latest technologies, and strict inspection procedures ensure safe operations.

Chevron Bangladesh has earned 14 consecutive Zero Is Attainable awards from the company for its remarkable safety record. As of early 2012, our employees had achieved more than 30 million work hours without a single day away from work due to an injury. 

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Brief History about Gas Industries of Bangladesh

The search for oil and gas in the country began in the later part of the 19th century, through some isolated geological mapping. The first serious attempt to find oil and gas was undertaken in Sitakund in 1908 by the Indian Petroleum Prospecting Company. During 1923−1932 Burmah Oil Company drilled two shallow wells in Patharia. A total of six exploratory wells were drilled. There was, however, no discovery and the World War II disrupted further activity.

The promulgation of the Pakistan Petroleum Act in 1948 infused the interest of international oil companies (IOCs) in oil and gas exploration in what was then East Pakistan. The Standard Vacuum Oil Company of the US, Pakistan Petroleum Ltd., and Pakistan Shell Oil Company took up concessions during the early 1950s and carried out exploration till the end of the 1960s. The first gas discovery was made in Haripur in 1955 followed by Chhattack in 1959. Five gas fields, Titas, Habiganj, Rashidpur, Kailashtila, and Bakhrabad, which appeared as major producers in the country, were discovered during this period.

In 1961 the Oil and Gas Development Corporation was established in the national sector and the root of exploration for oil and gas was set up in the country. The company discovered the Semutang gas field. Between 1947 and 1971 a total of 28 exploratory wells were drilled and eight gas fields were discovered.

After the liberation of Bangladesh, exploration activities gathered momentum both by national and international companies. Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) continued its exploration efforts while the Bangladesh Petroleum Act was enacted in 1974 to facilitate participation of IOCs under production sharing contract blocks (PSCs). Ashland, ARCO, BODC (Japex), Union Oil, Canadian Superior Oil and Ina Naftaplin, under PSCs, carried out gravity, magnetic and seismic surveys (about 32,000 km) and drilled seven wells. However, only Union Oil Company discovered an offshore gas field, Kutubdia, in 1977. This phase of PSCs ended with relinquishments by 1978.

The 1980s saw accelerated exploration activities by Petrobangla, which drilled 12 exploration wells and discovered seven gas fields in Begumganj, Beanibazar, Feni, Fenchuganj, Kamta, Marichakandi (Meghna), and Belabo (Narshingdi). Meanwhile, a new milestone was achieved when the company discovered the first commercial oil pool in Sylhet on 23 December 1986. From 1989, BAPEX has continued exploration and drilled three exploratory wells, discovering gas in Shahbazpur and Saldanadi.

In 1988 Scimitar Exploration was awarded what is now block 13 in the Burma basin. However, they failed to prove the extent of the oil find at Sylhet structure while on the other hand, discovered the Jalalabad gas field. In the early 1990s, eight blocks were awarded to four companies under PSCs. In total 11 exploration wells were drilled and three gas fields were discovered. Two gas fields, previously discovered Jalalabad and newly discovered offshore Sangu, were developed under PSCs and are currently in production.

Between 1972 and the present, a total of 42 exploratory wells have been drilled by the national and international companies, which resulted in the discovery of 16 gas fields. Since the drilling of the first exploration well in 1908 a total of 142 wells have been drilled in Bangladesh.

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