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Hunting in the Bay

  • Published at 09:53 pm May 13th, 2018
  • Last updated at 09:55 pm May 13th, 2018
Hunting at Bay

It’s time for Bangladesh to invest in deep-water hydrocarbon exploration

The prospect of exploring oil and gas reserve in the seabed has been underplayed in South Asia, while concentration on import dependence or development of expensive LNG infrastructure have been overplayed. Uninterrupted availability of mineral resources (oil and natural gas for South Asia) is a prerequisite to the healthy growth of power and energy sector; however, in both counts the region significantly falls short of its true potentials.

The region is yet to unearth its true prospects of natural gas and crude oil. As the existing onshore energy is depleting, and renewables are still in infancy, it is high time we concentrated on the true potential of deep-sea oil and gas reserves in the Indian Ocean Region.

With eight countries and 1.7 billion people, South Asia is already one of the most energy-starved regions in the world. The need for massive energy consumption becomes even more critical as the region recently emerged as the fastest growing economic region if the world at 7.06% GDP growth. However, the lack of central energy hub and well-coordinated energy trading and cooperation has led to weak trade trajectory in the region (only 5% intra-regional trade) and one of the least economically integrated regions in the world.

While demand of energy is growing at 4.6%+, the region has only 707kWh (2014) of per capita electricity consumption, as opposed to the world average of 3,128kWh. Total energy consumption in 2013 was 928.4mtoe against the domestic production of only 641.7mtoe, leading to a massive 286.7mtoe of energy gap in the region. This gap is filled in by importing LNG bases and transporting it via tedious routes across half of the world. But a concerted effort to make the full realization of power trading within the neighboruing countries and exploring the indigenous O&G mother lodes in the IOR and Bay of Bengal still remain unrealized.

Opportunities in the Indian Ocean

Importing around 75% of its hydrocarbons requirement, India is the fourth largest consumer and fifth largest importer of O&G in the world. Other than renewables and alternative energy source, hydrocarbons meet around 40% of energy requirement in India. The country houses 20% of the world population, but only 3.3% of its energy. As a result, more than 85% of O&G domestic demand is met through imports. This massive demand-supply gap is resulting as domestic production and exploration activities are not marching with the growing demand for energy.

Gastropods at the Bay of Bengal

Bangladesh is currently dependent on onshore fields for gas output, with production hovering around 2,700MMCFD against a demand for over 3,300MMCFD (S&P Global Platts, 2015). To meet the growing energy demand and depleting onshore energy reserve, the country lately but recently has concentrated on exploring O&G reserve in the Bay of Bengal.

The Bay of Bengal is the least explored area for O&G potential. The western part (India) and the eastern part (Myanmar) of the Bay have discovered significant natural gas reserves in the past decade. Geological studies and interpretations suggest that Bangladesh can have significant gas resources in the onshore and offshore belts which are yet to be discovered. The seabed of Bay of Bengal is home to a rich core of solidified natural gas known as: “Diamond” or “gas hydrates.” However, Bangladesh has not matured its technology to extract the petroleum at such depth or run the feasibility study.

At the Bay, Bangladesh has 11 blocks for O&G exploration at the India and Myanmar border. Among these, six prospective blocks are at Myanmar border. However, out of these six blocks, only one (DS Gas Block 12) was assigned to South Korean Posco Daewoo International Corporation, an IOC also involved at the Shwe gas field in Rakhine state, Myanmar. The Shwe project first came into operation at the Mya field in July 2013 and the gastropod offered 500mmscfd by the end of 2014.

Under its assignment, Daewoo would be investing $60-120 million from 2017-2021 to conduct 2D and 3D seismic surveys in the block 12. In the continuation, the government intended to award the next offshore block and its multi-client seismic survey in 2018. But much to the citizen’s dismay, the Energy Division recently cancelled the decision to conduct the non-exclusive 2D multi-client survey.

The exclusivity of the gastropods in the bay is unique enough for our goevernment to start immediate exploration and operation in the Bay of Bengal. Myanmar hit the Shwe gas field in 2004 and started exploring since 2014, which is adjacent to the recently cancelled DS block 12.

Even deeper

There will always remain challenges to new initiatives, but it is the first baby steps that initiate the desired changes. Despite the presumed roadblocks, South Asia can reap the benefit of intra-regional connectivity through proper exploration of the energy reserves in the IOR. To start with, the concern governments need to adopt integrated policy frameworks that will encourage and invite the private sector to the drilling activities both for offshore and onshore fields.

Country like Bangladesh that is about to enter into the game, should split its deep-water territory into a number of smaller O&G blocks to accommodate an increased number of IOCs in offshore hydrocarbon mining.

The member states should also setup research taskforces on various climate change and environment risks that is mandatory for exploration of offshore energy. In this regard, TVET programs should be initiated and institutional capabilities should be expanded. At the same time, the region needs to develop expertise and adequate skilled manpower for carrying out the challenging operations in both the fields to develop self-sufficiency in the energy sector.

New innovations of deep or ultra-deep O&G mining technology, and new geologic findings of potential gas and oil reserve at great depths would be just wishful ideas and images on paper if there is no delivery mechanism for the market. For South Asia, the depleting energy reserves will challenge the economic development unless the recent discovery of huge gas reserves at the Bay fails to be an eye-opener for the authorities to go all-out for deep-sea exploration.

Riasat Noor leads national and international power and energy projects and has authored several publications on energy connectivity and digitization, and appeared in flagship platforms such as UNIDO, GSCASS, ESI - NUS, and II Eurasian Forum (YES-Forum) and advocates for energy security.