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The BBC's Rageh Omaar
"Enough gas here to radically change Bangladesh"
 real 28k

Monday, 20 March, 2000, 17:20 GMT
Gas deals await US firms

Left wing students oppose Mr Clinton's planned visit
By David Chazan in Dhaka

The Bangladeshi government is hoping that President Clinton's visit could pave the way for natural gas deals with several American energy companies.

US and European energy companies say Bangladesh has substantial reserves of natural gas, estimated by Shell to be as big as those of Indonesia.

But they say the Bangladeshi domestic market is too small to provide a satisfactory return on their existing investment.

US firms

Unocal and Shell, which both operate natural gas fields in Bangladesh, are among the country's biggest foreign investors.

Unocal has spent about $350m and Shell about $450m on exploring, drilling and pumping Bangladeshi gas.



Bangladesh has vast reserves of gas
The deal Unocal expects to sign during Mr Clinton's visit will assert the company's claim to a promising new gas block.

But it will not commit it to any more exploration work for five years, unless the company decides that there would be a market for more gas if it were found.

Shell is believed to be close to signing a similar contract.

Exporting to India

Industry analysts said the contracts would allow the companies to walk away after five years if the Bangladeshi market is still small and the government does not allow them to export.

Not even the first visit to Bangladesh by a US president is seen as likely to persuade the government to agree to export gas, analysts say.

Opposition parties often accuse the government of selling out to India.

Despite intensive lobbying by the US government, foreign investors and aid donors, few expect a decision to be taken before next year's election.

Lobbying

As well as Unocal, which acquired Occidental's natural gas interests in Bangladesh last year, other companies including Texaco, Chevron and a small Irish company called Tullow also expect to sign contracts during Mr Clinton's visit.



Sheikh Hasina: Domestic market is a priority
The United States government has been trying to persuade Bangladesh to export gas for several years.

Energy Secretary Bill Richardson has come to Dhaka, and senior Department of Energy officials have lobbied the Bangladeshi authorities.

But Bangladeshi Prime Minister Sheikh Hasina and officials of the state-run energy company Petrobangla, say they want to be sure of the extent of Bangladesh's natural gas reserves before they decide to export.

The prime minister said recently that Bangladesh must take care of its domestic market first, and that only 15% of the population had electricity.

Vast reserves

The foreign companies, however, say they are already sitting on reserves which Bangladesh cannot use.

One of the poorest countries in the world, Bangladesh has to pay in hard currency for natural gas bought back from foreign companies which find the gas and drill wells to tap it.

The amount paid by Bangladesh decreases over the years as the companies recover their costs.

But industry sources say the companies have little confidence that they will be paid on time, or that they will achieve a good return within the next 5-10 years, unless the market for Bangladeshi gas is expanded.

They argue that Bangladesh could spend income from gas exports on developing its domestic gas network and industries, which might otherwise be difficult to fund.

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See also:

09 Mar 00 | South Asia
Anti-US protest in Bangladesh
16 Feb 00 | South Asia
Intense lobbying over Clinton visit
01 Feb 00 | South Asia
Clinton to visit India
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