WINDOW ON ASIA
Fuels for Growth
According to reports published in The Daily Star (dated 11 January, 1999), petroleum reserves worldwide rose to 140.6 billion tons by 1998 although consumption have been increasing, particularly in developing countries, at a very rapid rate. In fact, commercially exploitable oil reserves can be increased to 5.5 trillion tons provided prices are higher and expected future discoveries as well as technologies come on stream for extracting oil from shale and sand. It may be noted that due to discovery of new oil deposits and improvement in exploration and production technologies, known reserves are 45 per cent higher today than 95 billion tons recorded in 1985.
At present, world oil market is suffering from a situation of excess supply. As a result, prices of crude oil today is two-thirds of what it was one year ago. The 33 per cent decline in prices took place in spite of rising consumption. It is expected that the present rend of both rising supply and demand (but supply more than demand) may continue.
At the same time, higher consumption of oil remains a fact of life in developing countries. India, for example, is looking forward to oil and gas demand increasing at the sustained rate of about 8 per cent a year compared to the world average growth in petroleum demand at 1.5 per cent per annum.
It is true that developed countries are the major consumers of petroleum and there the demand is hardly growing; in fact decreasing at many places due to fuel efficient technologies and shift to industries, for example, information industry which consumes very little energy. The real danger to fossil fuel market is going to be new technologies for utilizing new and renewable sources of energy, solar power and nitrogen from atmosphere in particular. Solar powered cars are already at an advanced stage of development and the big car companies are planning to market such cars by 2,000. Research on super conductivity will reduce loss of electricity from 15 per cent to almost zero. Lastly, nitrogen as a source of fuel is available in atmosphere in limitless quantity.
If its use become economic then demand for petroleum products to run transport or generate electricity may drastically collapse.
In Europe and the USA, it is no longer economic to operate the coal mines. Petroleum is cheaper. But time may very soon come when drilling for oil and gas would no longer be profitable. The question is what do we do then with our huge natural gas reserves whose potential estimates, as experts suggest, may go up to 40 trillion cubic feet (TCF) or beyond, after proper survey, exploration and drilling have been carried out.
Already, the proven reserves exceed 15 TCF which we ourselves may fail to consume in the long run if solar power and hydrogen technologies fundamentally alters the world energy consumption patterns within the next 20 years. We know what happened to our golden fiber - jute.
Do we want that our gas reserves should meet the same fate? This is because we may not be dealing with 15 TCF. The gas reserves are likely to go up to 40 TCF or more. Its total value is still quite attractive but we must exploit the reserves as our capital for development TODAY. Time is running out for traditional fossil fuels.
I know of a young Bangladeshi MBA from the United States whose parents decided in early 1980s to sell the small piece of land they owned in Dhaka in order to finance the education of their eldest son.
If they had waited, the land would have fetched a much higher price today. However, it would not have enabled not only the education of one son but the future of all their children since all of them eventually secured American education, citizenship and employment.
Therefore, it was not the price but timing of the sale was of much more critical importance to the family.
The sale in early 1980s at a price much lower than what it is today, enabled the investment in human capital development and attainment of American middle class living standards within few years.
With our natural gas reserves, we face exactly the same situation on a national scale. The energy resources, deep underground, constitute our capital for development.
These vital resources should be exploited for generating investment funds for building the infrastructure of roads, bridges, irrigation canals, schools, hospitals and numerous other facilities costing billions of dollars which 100 years of donors assistance will never cover. Unless we export gas, we do not generate finds for investment in development and in not-too-distant future, we may not find the market to export and our natural gas meet the same fate as coal mines of Europe today.
Our over cautious experts have pronounced, times without number, that we possess limited reserves which we need for our own consumption. Export of natural gas should be totally ruled out. It is true that if the proven reserves of 15 TCF is all that we will ever have then the experts are correct in their pronouncement. However, proven reserves is a function of the volume of investment we are able to mobilize for exploration of natural gas. In 1997, the proven reserves were 11 TCF and very limited exploration increased those reserves by more than one-third to 15 TCF.
Further exploration has now practically stopped since proposed blocks are not being allocated to interested oil companies. The interest of multinationals firmly establish the fact that the potential reserves claimed to be as high as 80 TCF may be an overestimate but at least half of that should prove to be the total recoverable gas reserve if the desired level of exploration activities are undertaken.
I would urge all concerned to consider that let us not be over-concerned with possible exhaustion of our energy resources. At the present rate of consumption, our existing reserves should last over 80 years. Since consumption will increase, even then it should last for at least the next 30 years. That should be good enough. Therefore, any further addition to the existing proven reserves of 15 TCF may be allocated to export.
What are the consequences of the decision to export natural gas? We have to find a market outside the borders of Bangladesh and the best way to market is to transport gas through a pipeline and deliver it to the user's point of consumption. We should consider ourselves extremely lucky since potentially a huge market for gas exists in India - our next door neighbour.
The negotiations with oil companies are difficult to proceed further unless export of gas to India is allowed through a pipeline to be constructed for the purpose where all the investment costs will be borne by oil companies. Gas exploration and drilling is an expensive business and once the reserves are discovered, investors are immediately interested to sell the gas and Bangladesh does not offer an unlimited market. On the other hand, the potential market in India is huge.
For example, export of 500 million cft of gas per day to India for the next 20 years would involve 3.65 TCF which we may find from only one single discovery, provided exploration and drilling are pursued in right earnest. The alternative is to convert natural gas into various petrochemical products for export. This calls for billions of dollars worth of investment which oil companies are reluctant to make since there are surplus capacities elsewhere in the world. Please remember that the existing supply of energy-based products are facing a shrinking market. Its only because of the rapidly growing demand of India that there is a unique as well as a rare opportunity to develop gas fields of Bangladesh.
Pakistan fought three wars with India during the last 50 years. Yet the plan to export electricity to India is already off the ground. What is our problem with India? Nothing, unless it is the determination of politicians to deny the nation of the critical investment resources and we remain poor everafter.
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