The World Bank has called on Bangladesh to raise domestic natural gas prices after five years without an increase.
"The administered price of domestically produced natural gas is fixed at a level considerably below that of the international market," the bank said in its latest Bangladesh Development Update.
"Not only does this represent an opportunity cost for the government in lost revenues, but the lack of an appropriate price signal leads to inefficiencies in allocation and use and limited incentives for further exploration," the bank added.
Domestic natural gas prices in Bangladesh currently range from Taka 72.92/Mcf (93 cents/Mcf) to Taka 268.09/Mcf across residential, industrial, commercial and power generation sectors.
The country purchases natural gas from international oil companies operating in the country in the much higher range of $2-4.50/Mcf.
Bangladesh has not raised domestic natural gas prices since August 1, 2009, when tariffs for all types of consumers excluding CNG were raised 11%.
State-owned Petrobangla in 2012 sought to raise domestic natural gas prices by up to 103% to meet rising exploration and gas purchasing costs, but was asked to re-submit its proposal to energy regulator Bangladesh Energy Regulatory Commission via its marketing and distribution subsidiaries with more documentation to justify the request, which it has yet to do.
The five-year plateau in prices may have discouraged investment in oil and gas exploration and been a factor in why the country had a poor response from international oil companies to its latest shallow water bidding round in 2012, a senior energy ministry official told Platts Friday.
The country signed only three production sharing contracts for shallow water blocks with two joint ventures after receiving one bid for each of the three blocks, which were among nine on offer.
Blocks SS-04 and SS-09 were awarded to a joint venture between India's ONGC Videsh Limited and Oil India Limited, and SS-11 to a joint venture between Australia's Santos and Singapore's KrisEnergy.
US-based ConocoPhillips refused to ink a fourth PSC for block SS-07 seven months after signing an initial PSC for the block, saying after further evaluation it was no longer competitive in the company's portfolio.
Bangladesh also received single bids for all three deepwater blocks re-offered in a 2013 bidding round, from ConocoPhillips and Norwegian energy firm Statoil, which are currently under evaluation.
Bangladesh's natural gas production currently hovers around 2.3 Bcf/d, short of demand for 2.7-3 Bcf/d. It does not import gas.
Gas shortages have prompted Petrobangla to ration new connections to industries, fertilizer factories and power plants, hindering economic growth since June 2009.
