Project Background
Summary of the project
Power Cell, Power Division, Ministry of Power, Energy & Mineral Resources intends to select a potential sponsor to develop a gas-fired base-load 330-450 MW combined cycle power plant at Bibiyana on a site that will be owned by the Bangladesh Power Development Board. The Project will be implemented on Build, Own and Operate (“BOO”) basis pursuant to a 22-year Implementation Agreement. The Project Sponsor will be selected through an international competitive bidding process from a pool of pre-qualified applicants. The selected Project Sponsor will be required to arrange the necessary financing and to executive the key project documents for the Project.
The site for this new Independent Power Producer (“IPP”) project is in the northeast of Bangladesh, 180 km north-east of Dhaka, adjacent to the north pad of the Bibiyana gas field. The site is on the Kushiyara River. There is sufficient land to build a 330-450 MW power plant. A good supply of fuel is immediately available, and there is adequate water for a closed cooling system at the site. Even though there is no existing transmission facility for the evacuation of power, plans have been made to expand the 230 kV system to Sylhet, which will put 230 kV in the vicinity of the Bibiyana site. A double circuit 230 kV line would certainly be adequate for evacuating 330-450 MW.
The Power Division of the Ministry of Power, Energy & Mineral Resources is responsible for the State's ownership, policy-making, unbundling, IPP program and regulation functions in the Bangladesh electricity sector. Currently, Bangladesh will maintain the single buyer model, the single buyer model will be a public entity, and initially, BPDB will act as the single buyer.
Bangladesh has had significant success in IPP procurement in the late 1990s. The projects of note are: (1) Meghnaghat 450 MW combined cycle power plat, and (2) Haripur 360 MW combined cycle power plant. Multilateral institutions and international commercial banks participated in the financing of these IPPs. The projects have been operating satisfactorily despite changes in ownership.
Energy situation
Over the last ten years, Bangladesh has experienced a net energy demand growth in the order of 8% per annum. This has been accompanied over the same period with an economic growth rate of 5% per annum. Peak electricity demand in Bangladesh is 5,000 MW. There has been a high correlation of electricity demand with GDP growth. The Government of Bangladesh has produced GDP forecasts and the base case for GDP growth produces a net energy demand growth of 7.9 percent through 2025.
Installed electricity generation capacity in Bangladesh is 5,275 MW. Electricity generation per head is among the lowest in the world, at about 165 kWh per year. Present generation capability is 4,200 MW and peak demand is around 5,000 MW, and is insufficient to satisfy current demand, so that load shedding during peak hours is a regular occurrence. The largest load center is Dhaka, with 47 percent of the country’s load , and the second largest load center is Chittagong.
To address the deficit of generating capacity, GOB has developed a Power Sector System Master Plan that considers the addition of 17,700 MW of generating capacity by 2025.
Electricity tariffs remained unchanged in Bangladesh between September 2003 and March 2007 despite significant increases in global fuel costs. This resulted in substantial financial losses for BPDB. The March 2007 increase of 5 percent on urban electricity retail supply, 10 percent on bulk supply and recent budgetary transfers from GOB are expected to provide some improvement in BPDB’s financial situation.
Energy sources
Natural gas is the primary energy source for Bangladesh with approximately 85% of existing and nearly all planned power generation being gas-based. The remainder comes from hydroelectricity and some fuel oil. As of June 2005, proved remaining reserves currently are 9.2 trillion cubic feet (“Tcf”) , proved + probable remaining reserves are estimated at 14.4 Tcf, and proved + probable + possible remaining reserves are estimated at 22.2 Tcf. Yet-To-Find (“YTF”) reserves are the reserves that still have to be discovered. The gas demand significantly increased over the last 10 years reaching 1.3 billion cubic feet per day (“bcfd”) in 2004 -2005. Wood Mackenzie, in their January 2006 Petrobangla Gas Master Plan report estimate that Bangladesh demand for gas will continue to grow and will reach a level of 5.6 bcfd by 2025 provided all the new gas-fired power plants envisioned by the Power System Development Plan are built. This will require YTF reserves of 24 Tcf to fill the supply of gas in 2024-25 if all the present probable reserves can be converted to proven reserve.
The Bibiyana gas field, Bangladesh’s second-largest gas field, which is located onshore in Block 12, in the Habiganj district, 180 km North East of Dhaka, started trial production in March 2007. It is currently operated by a private international oil company under a production-sharing contract (“PSC”) with the state owned oil and gas company, Petrobangla. The initial proven and probable reserve estimate of this field is 2.4 Tcf using a 76% recovery factor. The field might have a total potential of 5.5 Tcf gas considering proven, probable and possible reserves according to DeGolyer and McNaughton (D&M), an international consulting firm. The field is currently producing at 300-350 million cubic feet of natural gas per day (mmcfd), and the gas plant’s full capacity of 600 mmcfd is scheduled to be available by late 2007. From the current trend, Petrobangla estimates that a 500-600 production from Bibiyana will be required by 2008.