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CHITTAGONG, Bangladesh: An acute gas supply crunch caused by lack of hydrocarbon exploration is threatening to derail Bangladesh's record industrial expansion, officials say.
The South Asian nation's economy has been growing by more than six percent annually over the last four years - its strongest pace since independence in 1971 - thanks to unprecedented double-digit manufacturing growth.
But industrialists say trouble looms as a severe gas crisis has left scores of big factories without power and halted some of the impoverished country's most ambitious industrial projects.
"The gas crisis has become our biggest concern," the chief of the garments manufacturers' association Anwar-ul Alam Chowdhury Parvez told AFP.
Some 500 factories were now on the verge of closure due to the crisis, he added.
Garment shipments, which accounted for 76 percent of the country's 14.1-billion-dollars worth of exports in the financial year to June 2008, have been the key driver of Bangladesh's strong economic showing.
Now this performance is at risk, industrialists say.
Bangladeshi factories have been installing gas-fired generators and small power plants at a furious rate as the state-owned power company can meet only 60 percent of the nation's daily electricity needs.
In the nine months to March, at least 211 manufacturers installed gas-fired generators, up from 35 in the previous 12 months, said Jalal Ahmed, chairman of state-owned gas supply monopoly Petrobangla.
As a result of increased industrial use, the country is experiencing a shortfall of around 250 million cubic feet of gas a day with overall daily demand of two billion cubic feet, Ahmed said.
Hydrocarbon-rich Bangladesh had proven gas reserves of 15.37 trillion cubic feet, an amount which the government had considered enough to last until 2025.
But with the manufacturing sector logging annual growth of around 10 percent since 2005, more than half the gas reserves have been consumed, Ahmed said.
"If the trend continues at this rate, gas supply will decline rapidly from 2011 before drying up by 2019," he warned.
With the supply crunch getting severe, the government has suspended supply to scores of new factories and started rationing.
"The authorities have said no new gas connections will be given to industry in Chittagong before 2011," said Mahbub Alam, vice-president of the Chittagong Chamber of Commerce of Industry.
The southeastern port city of Chittagong is Bangladesh's main economic hub.
"More than 50 new plants here could not start operations due to gas crisis despite investing hundreds of millions of dollars," he said.
Among the most high-profile casualties of the gas shortage have been massive investment plans by India's Tata Group. Unable to get assurance of gas supplies, Tata suspended in July plans to invest three billion dollars in steel, power, fertiliser and mining projects.
It would have been the biggest foreign investment in Bangladesh's history.
The gas supply crunch also halted a 550-million-dollar joint venture steel plant deal between Indian group Essar and four Bangladeshi conglomerates and has delayed the opening of the country's biggest special economic zone, developed to house hundreds of factories.
Officials blamed lack of exploration for the crisis.
"All studies and surveys indicate that Bangladesh has rich gas reserves," a senior official of a multinational oil company told AFP, speaking anonymously as he is not allowed to talk to the press.
"But lack of demand till 2005 meant the country remained under explored and suddenly we're confronting a situation for which no one was prepared," he said.
Ahmed of Petrobangla said demand had outstripped new finds.
"In the last decade we discovered only one gas field, yet our demand has more than tripled," Ahmed said.
To improve the situation, the government has scaled up drilling and development of some smaller gasfields to increase supply.
From July, it has also announced a seven-year 300-million-dollar plan to conduct new exploration by state-owned oil company Bapex.
Petrobangla invited bids for offshore exploration and last month all but assured US giant ConocoPhilips and Irish Tullow of exploration rights in the hydrocarbon-rich Bay of Bengal.
Experts have forecast major reserves in the Bay of Bengal after huge discoveries were made by Myanmar and India. But the Petrobangla chief said even if new discoveries were made, it would take at least six to seven years to supply gas from offshore fields.
- AFP/yt
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