The Asian Development Bank (ADB) said it has approved a US$480,000 technical assistance grant to assist in developing Bangladesh’s natural gas industry.

The study grant will analyse opportunities for the gas sector’s growth and review development plans prepared by the Bangladeshi government and its development partners. It will review existing policies and prepare reform measures to promote development and investment in the sector.

The grant will also review infrastructure development proposals and identify priority investments, as well as assess institutional development requirements for concerned government agencies.

“An improved gas sector has a large potential contribution to the development of the country’s economy,” said Piya Abeygunawardena, an ADB principal project economist.

“But it would have to be effectively managed to maximize its role in poverty reduction and ensure an equitable distribution of benefits.”

The key players in Bangladesh’s natural gas industry include the Bangladesh Oil, Gas and Mineral Corporation (Petrobangla), and its 11 subsidiary operating companies. Petrobangla is mandated to carry out oil and natural gas exploration, and the production and marketing of gas.

Natural gas accounts for almost 70% of Bangladesh’s commercial energy and provides the basis for about 90% of electricity generation. It will provide most of the country’s current and future energy requirements, and the gas market needs to be expanded to optimise the use of natural gas resources and to support economic development.

Although Bangladesh has been producing natural gas for more than three decades, all its major fields are underdeveloped and have not been properly delineated. Substantial natural gas reserves also remain underdeveloped or undiscovered.

The ADB said that the country’s natural gas remains underpriced in relation to the long-run marginal cost, which limits the sector’s performance, causing supply shortages and disrupting fertilizer production and power generation.

ADB has provided eight loans over the past 25 years totaling $446 million for Bangladesh’s energy sector. The planned outcome of this grant is a standby loan included in the 2004 country program for Bangladesh.

Petrobangla will execute the grant, which is due for completion in October 2004. The government will contribute $120,000 toward the grant’s total cost of $600,000.