Abstract

It is crucially important to minimize natural gas use inefficiency-induced rampant wastage of natural gas amongst the non-metered domestic and metered industrial end-users which include boiler-using industries, steel re-rolling industries, lime industries and captive power users in Bangladesh. At this context this research is aimed to assess the existing gas utilization inefficiency,estimate costsand benefitsand carry out a cost-benefit analysis(CBA)of ensuring efficient utilization of natural gas in these natural gas utilization sectors of Bangladesh.Both qualilative (Here,Key Informant Interview (KII) & In-depth Interview) and quantitative design approaches have been adopted for the study.Secondary Data sets from different published sources have been used for this. Avariety of valuable internal data of Titas Gas and Petrobanglahave also been applied.The study has critically assessed natural gas utililization inefficiency for the stated five sectorsto be 57%, 6.88%,20%, 30% and 19.63% respectively.The study has adoptedsevenscenarios of natural gas pricing for estimating benefitsof the savedgas and applied appropriate discount ratesin CBA.Instruments applied for CBA are NPV, IRR and BCR. From these analyses threshold hurdle rates(required rate of return)and natural gas prices,for which domestic,industrial (boiler-using, re-rolling and lime industries) and captive power end-users get incentivized for the investmentsin the efficiency improvement measures and these are worth justifying,have beenestimated.The findings have revealedthatefficiency improvement measures for domestic users of Bangladeshis financially acceptable at the price of natural gas,effective from 1stJune,2022,Tk 18.00per cubicmeter. Similarly efficiency improvement measures for boiler-using and steel re-rolling industries are also found to be financially lucrative at thenatural gas price,effective from 1st June,2022,for industrialcategory of Tk.11.78per cubicmeter.Also thesemeasures for captive power users at the price of Tk.16.00per cubicmeter for this categoryis estimated to be financially worthwhile ,while for the lime industryat the natural gas price for thisindustrial category,Tk.11.78per cubicmeter,isnot found financiallyacceptable.Thepresent natural gas price for industrialand captivepower category,effective from Feb, 2023,Tk.30.00 per cubicmeter, isfar greater than the priceof natural gasfor these categories,effective from 1stJune,2022. Hence the statedefficiency improvement measuresare financially far more acceptableat the present price .The study has estimatedthat the threshold hurdle rate or discount rate to be 9.76% for the natural gas prices effective from 1st June,2022 and 47.42% for the natural gas prices effective fromFeb,2023.The price scenario for which the stated efficiency improvement measures are financially worthwhile is Tk.12.86 per cubicmeter of natural gas.Power generationpotential of the saved gas, 19558 MW and the estimated carbon dioxide (CO2) emissions reduction potential of these measures,about 62.26 million metric tons, are expected to enjoy a positive impact on climate change variability and low carbon future.

Keywords:Efficiency, Natural gas, Gas savings, Gas pricing, Financial analysis, NPV, IRR, and CBA.