Japanese ODA Loan

Ex-Ante Evaluation
1． ProjectCountry: People's Republic of Bangladesh
Name of the Project: Natural Gas Efficiency Project
Loan Agreement: June 16, 2014
Loan Amount: 23.598 billion yen
Borrower: The Government of the People’s Republic of Bangladesh
2． Background and Necessity of the Project(1) Current Status and Issues in the Energy Sector in Bangladesh
Natural gas is not only a primary energy source, but is also used as fuel for power
generation and as a raw material in fertilizers. About 50% of the energy used by thepopulation is generated by domestic natural gas. The power sector in particularconsumes more than half of the country’s natural gas, using it to generate about 70%
of its total power. The government set a policy of reducing its unbalanced dependency
on natural gas in the power sector by diversifying its energy sources. However, thedevelopment and importation of other energy sources has made little progress so far,making the stable supply and efficient use of domestic natural gas absolutely
essential for ensuring a reliable power supply and economic growth.
Prior to the 1990s natural gas supply in Bangladesh was more than its demand.
However, from the 21st century, the country has suffered from supply shortages torapid economic growth, which makes more gas demand due to the expanding power
and industrial sectors. On the other hand, delays in gas field development and aninsufficient gas pipeline network has hindered growth in natural gas supply. In 2013,
Bangladesh suffered from a serious energy shortage—supplying just 2,197 million
cubic feet/day (MMCFD) towards 2,543 MMCFD demand. To cover increased
demand in the immediate future, the country started importing oil as an alternative
energy source. As a mid and long-term solution, the government is making efforts toimport coal, LNG, and LPG in addition to oil; however, a lasting solution is not yet insight. By 2030, potential gas demand is expected to rise to around 3,900 MMCFD,
while supply will likely drop to just 1,800 MMCFD. Therefore, expanding the supply
capacity of existing gas fields, enhancing gas transportation capacity, and the more
efficient use of natural gas are considered as urgent issues.
As of December 2010, residual recoverable natural gas reserves were estimated ataround 18.6 trillion cubic feet (TCF). About half of the country's natural gas isproduced by a state-owned gas company. However, lack of investment for expansion
to supply capability has created a bottleneck that hinders increases in production.
Since 1998, although Bangladesh has been pushing for gas field exploration incoastal areas, the gas production has not been increased due to lack of attractive

environment for private investment.
Bangladesh cannot secure sufficient gas supply during peak usage times due to its
undeveloped gas pipelines and compressors which send natural gas from production
centers scattered across the northeastern area to other parts of the country. In orderto improve gas use efficiency, inefficient gas-fired power plant must be improved, as
well as people must be stopped wasting gas as a result of the flat-rate system which isinappropriate fee collection system. Therefore metered gas fee collection systemshould be introduced through installation of gas meters on homes is considered asurgent issues.
(2) Development Policies for the Energy Sector in Bangladesh and the Priority of theProject
The 6th Five-Year Plan (2011/2012–2015/2016) as the nation's top-ranked plan of
the National Development Strategy defines energy sector: (1) promote efficient gasuse; (2) action plan for exploring new gas fields; (3) accelerate bidding procedures
and the signing of agreements for offshore mining areas; (4) restrict gas supply tosectors that can use alternative energy sources; and (5) optimize gas prices tostrengthen the financial soundness in the gas sector.
(3) Japan and JICA’s Policy and Operations in the Energy Sector of Bangladesh
In JICA Country Analytical Work for Bangladesh (April 2013), a "stable power
supply" defined as a key issue. The Japan’s Country Assistance Program forBangladesh (June 2012) identified "accelerating inclusive economic growth" as apriority area. Electricity and energy shortfalls were defined as the greatest hindrance
to economic growth. As such, this project is consistent with Japan’s and JICA’s aid
policies. Major supports provided to the country's power/energy sector are listed
below:・Loan assistance projects: Bheramara Combined Cycle Power Plant DevelopmentProject (2013), New Haripur Power Plant Development Project (2007 and 2009),
Bakhrabad Natural Gas Development Project (1980 and 1994), and others
・Technical Cooperation projects: Dispatching Power Sector Adviser (2004–present),
Strengthening Management and Performance Standards in Power Sector ofBangladesh through Promotion of TQM (2006–2009), and others(4) Other Donors’ Activity
The Asian Development Bank (ADB) supports construction of gas-fired power
plants, strengthening natural gas production capacity, improving gas transportation
networks, and improving management/regulation systems. The World Bank supports
LNG imports related survey and power station performance improvements as a part ofits technical assistance for the power sector.
(5) Necessity of the Project
As noted above, this project contributes to stable gas supply and promotes theefficient use of gas in Bangladesh, a country that suffers from natural gas shortages

stemming from rapid economic growth. The project also contributes to a reduction inelectricity shortfalls by supplying gas and improving efficiency in gas usage. Therefore,
the aim of the project satisfies the issues and development policies of Bangladesh
government as well as the assitance policies of the Government of Japan and JICA.
Consequently, the necessity and relevancy to implement of this project are high.
3． Project Description(1) Project Objectives
This project aims to address growing natural gas demand as well as ensure a stableand efficient gas supply by providing equipment and improving facilities to increase
both the natural gas supply and efficiency of gas usage, thereby making a contribution
to the economic growth of the country.
(2) Project Site/Target Area
Dhaka Division (Dhaka District, Narsingdi District, Tangail District, Gazipur District,
Mymensingh District), Chittagong Division (Chittagong District, Brahmanbaria
District), Rajshahi Division (Sirajganj District)(3) Project Components
1) Gas compressor improvement (3 units × 1 location)2) Gas transmission improvement3) Gas meter installation (260,000 units)
4) Consultation services (e.g. detailed design, bidding support, supervision ofconstruction work, promotion of implementation, enhancing maintenancemanagement, and supporting educational activities for local residents)(4) Total Project Cost
37,318 billion yen (including Yen Loan Amount: 23,598 billion yen)
(5) Project Implementation Schedule
From June 2014 to March 2022 (total of 94 months). The project will be completed
when all the facilities start operation (March 2021).
(6) Project Implementation Structure1) Borrower: The Government of the People’s Republic of Bangladesh
2) Executing Agency:i.
Gas compressor improvement: Bangladesh Gas Fields Company
Limited (BGFCL)ii.
Gas transmission improvement: Gas Transmission Company Limited(GTCL)iii.
Gas meter installation: Titas Gas Transmission and Distribution
Company Limited (TGTDCL) and Karnaphuli Gas Distribution
Company Limited (KGDCL)
3) Operation and Maintenance System: The same as the executing agencyabove.

(7) Environmental and Social Considerations, Poverty Reduction, and Social
Development
1) Environmental and Social Considerationsi.
Category: Bii.
Reason for Categorization: The Project is classified category B in
accordance with JICA Guidelines for Environmental and Social
Considerations (April 2010). There is no significant negativeenvironmental and social impact caused by the Project both during theconstruction and operation phases.
iii.
Environmental Permits: The Environmental Impact Assessment (EIA)
Report for gas pipeline improvement required under Bangladeshi
environmental laws and ordinances will be approved by the Department ofEnvironment before civil engineering work begins.
iv.
Anti-Pollution Measures: Measures (e.g. such as water sprinkling,acoustic insulators, and sand basins) will be taken to avoid or mitigating
expected impacts on air, drainage water, and noise during construction inorder to meet domestic and international standards.
v.
Natural Environment: The project site is not located in or around sensitive
areas such as national parks, and adverse impact on the naturalenvironment is assumed to be minimal.
vi.
Social Environment: The project will involve land acquisition of 120
hectares for pipeline construction and involuntary resettlement of 140persons, both of which will be carried out in accordance with the nation’s
domestic procedures and the simplified resettlement action program.
vii.
Other/Monitoring: Execution agencies will monitor air quality, noise, andwater quality during construction and after starting use of facilities.
2) Promotion of Poverty Reduction: N/A3) Promotion of Social Development (e.g. Gender Perspective, Measures toPrevent Infectious Diseases Including AIDS, Participatory Development,
Consideration for the Handicapped, etc.): N/A(8) Collaboration with Other Schemes and Donors
Prior to full-fledged introduction of gas meters under this project, 200 gas meters
were introduced on a trial basis under a Private Sector for Disseminating JapaneseTechnology project entitled “Survey on installing prepaid gas meters in generalhouseholds”. The pilot project is designed to verify the extent to which gas meters
installed in households limit gas usage. Based on the outcomes and lessons learned
from this project, support will be provided for designing legal systems to spread gas
meters throughout the country in the future by the Technical Assistance Related toODA Loan and related educational activities.
(9) Other Important Issues: N/A4． Project Benefits(1) Quantitative benefits
1) Evaluation Indicators (Operation and Effect Indicators)
Sub-projects

Indicators (unit)
Downtime due to malfunction(hours)Downtime due to human error

Gas
compressor
improvement(hours)Baseline(2014 actual)

Target (2023)
two years after
completion

N/A

0

N/A

020,100

Increased

105,190

Increased

400

550

N/A

099

72

N/A

0.1

Cumulative gas production at theNarsingdi gas field(MMSCF/two-year period)
Cumulative gas production at theTitas-C gas field(MMSCF/two-year period)

Gas

Gas inlet flow (MMSCFD)

transmission

Suspended gas transfers due toimprovement

equipment problems (hours)

Gas meter
installation

Average gas used in homes(m3/month)
Percentage of failed meters (%)2) Internal Rate of Return (IRR)
Based on the conditions below, the Economic Internal Rate of Return (EIRR) for
this project was calculated at 21.18%, while the Financial Internal Rate of Return(FIRR) was 9.35%.
EIRR:
Cost: Project costs (excluding taxes)
Benefits: Economic effects brought by stabilized gas supply and balance between
imported LNG and domestic natural gas
Project Life: 30 years
FIRR:
Cost: Project cost
Benefits: Profits from the sale of natural gas
Project Life: 30 years(2) Qualitative benefits
Economic growth of Bangladesh

5． External Risk Factors and Risk Control
Delay in civil engineering work due to natural disasters such as floods
6． Evaluation Results and Lessons Learned from Past Projects(1) Evaluation results in similar projects
The ex-post evaluation results for India's Bombay Offshore Oil Field Development
Project demonstrate that performing appropriate maintenance on devices such ascompressors and gas meters is essential to eliminating obstacles to a stable gas
supply. The ex-post evaluation results for Bangladesh's Bakhrabad Natural Gas
Development Project demonstrate that conducting surveys on the production status ofeach ore chute is essential to achieving stable production throughout the gas field asa whole and to extending the production life of the ore chutes.
(2) Lessons for the ProjectThis project plans to install gas compressors, gas pipelines, and gas meters. Basedon the lessons learned from previous projects, the project will include
capacity-building for executing agencies that maintain devices and equipment and will
evaluate production status of ore chutes covered by this project while receiving
consultation services.
7． Plans for Future Evaluation(1) Indicators for Future Evaluation:
1) Downtime due to malfunction (hours)
2) Downtime due to human error (hours)
3) Cumulative gas production at the Narsingdi gas field (MMSCF/two-year period)4) Cumulative gas production at the Titas-C gas field (MMSCF/two-year period)5) Gas inlet flow (MMSCFD)6) Suspended gas transfers due to equipment problems (hours)
7) Average gas used in homes (m3/month)8) Percentage of failed meters (%)9) Economic Internal Rate of Return (EIRR) (%)10) Financial Internal Rate of Return (FIRR) (%)(2) Timing of Next Evaluation: Two years after completion