ADB Approves Second Cofinancing with AIIB to Boost Natural Gas Output, Transmission in Bangladesh

ADB

The project will expand natural gas transmission infrastructure and improve production efficiency at a key gas field in Bangladesh.

MANILA, PHILIPPINES (21 November 2016) — The Asian Development Bank (ADB) has approved a $167 million loan to promote sustainable economic growth and reduce poverty in Bangladesh by improving production efficiency at a key gas field north of the capital Dhaka and by expanding transmission infrastructure.

The Asian Infrastructure Investment Bank (AIIB) is expected to lend an additional $60 million, subject to board approval, which will be managed by ADB. It is the second project to be cofinanced by ADB and AIIB.

Bangladesh’s economy is growing fast. But domestic natural gas supplies cannot keep pace with soaring demand for energy, resulting in a rising dependence on oil and diesel-based power generation. With gas reserves depleting, the Government of Bangladesh is trying to meet the supply shortage by importing liquefied natural gas.

“The project will help the government address the country’s energy crisis by making available additional clean energy, particularly imported natural gas, through the transmission network,” said Hongwei Zhang, Finance Specialist (Energy) in ADB’s South Asia Department. “By addressing gas supply constraints and transmission bottlenecks, the project will increase the energy sector’s contribution to sustainable economic growth in Bangladesh.”

The project will install seven wellhead gas compressors to increase pumping pressure and ensure steady extraction at the Titas gas field, Bangladesh’s largest field. The project will also boost gas transmission by building 181 kilometers of transmission pipeline from Chittagong to Bakhrabad southeast of Dhaka.

The $453 million project is expected to be completed in late 2021. It will substitute the use of other fossil fuels, thereby reducing over 700,000 tons of carbon dioxide emissions per year over the ensuing 10 years. The Government of Bangladesh will provide $226 million for the project.

Natural gas is Bangladesh's main energy source and a major driver of economic growth, providing nearly 75% of total primary energy consumed. More than half of the natural gas produced is used to generate electricity. However, a widening gap between demand and supply has highlighted the urgent need to accelerate gas exploration and production, and to expand transmission infrastructure.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in Asia. It is owned by 67 members—48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.