Sundarban Gas Company: Latest scenario of activates and achievements

--Enger. Md. Khalequzzman

1. Khalekuzzaman

You all know that among all the mineral resources in Bangladesh, Natural Gas is the most important one. You also know that it is the main source of fuel for the production of electricity and main vehicle of industrialization. Besides, natural gas has been used as raw material for producing chemical fertilizer, alternative fuel to vehicles, and staple fuel for commercial and household works. Despite Khulna Division, the south-western region of the country, being one of the leading industrial areas, industrialization in this region is greatly hampered as the power houses and other industries of the region cannot go on with desired output due to non availability of natural gas. In order to solve the problem, the present government has taken initiatives to supply and distribute natural gas to the south west region of the county. The Sundarban Gas Company Limited (SGCL) was established in 2009 with a view to running gas distribution activities through establishing gas distribution networks in phases primarily in five districts (Kustia, Jhenidah, Jessore, Khulna and Bagerhat along with Mongla area) and then other 16 district towns of Khulna, Barisal and Dhaka Divisions.

To conduct the activities smoothly and implement the project, an office building has been set up at Boira, Khulna and an office at the 13th floor of Petrocentre, Dhaka, has been rented and, thus, all activities of the company are going on smoothly. Besides, the commercial activities of Bhola region are running in full swing at its own building of the SGCL handed over by BAPEX.

Capital structure and the Board of Directors

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The Memorandum and Articles of Association of the Sundarbans Gas Company Limited (SGCL) was registered on 23 November, 2009 at the Registrar of Joint Stock Companies and Firms (No-KHC-855/09). The authorized capital of the company was determined Tk. 300 crore. The present paid up capital is divided among seven shareholders whose each shareholder taken one share of Taka 100 has resulted the total paid up capital Taka 700.Seven officials including the Chairman of Petrobangla, directors and secretary are the subscribers in the Memorandum and Articles of Association of the Company and every member has been allocated 1 share. As per article 107 of the Memorandum and Articles of Association, the present Board of Directors comprises of 09 members including Board Chairman and one member from the Ministry of Power, Energy And Mineral Resources, three directors from Petrobangia, Director General of Bangladesh Petroleum Institute, one external director, Managing Director of Sylhet Gas Fields Ltd and Managing Director of Sundarban Gas Company Ltd are incorporated in the committee in order to run the activities of SGCL.

The ongoing and future activities of the company

SGCL has no provision for earning revenue although SGCL was established in 2009.Bhola region is an franchised area of SGCL, the Petrobangla decided to handover the Transmission and distribution pipe lines as well as infrastructure of BAPEX to the Sundarbans Gas Company Limited. In this regard the committee formed by Petrobangla recommended the transfer value of BAPEX installed transmission and distribution pipeline along with infrastructure to be handed to SGCL worth Tk. 21, 92, 36, 033.00!. Both the Boards of Directors’ of BAPEX and SGCL accorded consent to the recommendation. Taking the financial condition of SGCL into account, the board of directors also put together directions to request Petrobangla to grant SGCL at a worth of Tk.21,92,36,033.00/ as interest free loan/grant to pay BAPEX. Accordingly, as per request, the Petrobangla board after considering the decision of the Board of Directors’ of SGCL, granted a loan of Tk.21, 92,36,033.00/in favour of the Sundarbans Gas Company Limited at Tk.0.50% simple interest rate (the repayment period would get started after the expire 5 year grace period) for the payment of the transfer cost of the infrastructure including distribution pipe lines installed by BAPEX in Bhola. The said amount was paid to BAPEX with the approval of Board of SGCL and a Vendor Agreement was executed between BAPEX and the Sundarbans Gas Company Limited with effect from 01 .05.2013. As per the Vendor Agreement, the following land, installation and pipe line were handed over to the Sundarbans Gas Company Limited.

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(a)        49.81 acre of land (for transmission pipe line)

(b)        2.75 acre of land for Regulating Metering Station (RMS)

(c)        1.72 acre of land for District Regulating Station (DRS)

(d)       A two storied building (3950 measuring square feet)

(e)        33 km  (1 0”diametre) transmission pipe lines.

(f)        20 km  distribution pipe lines.

On 1 May 2013 BAPEX handed over a 33 km transmission pipe line of 10” diameter stretching over Shahbazpur gas field to Bhola, a 20 km distribution pipe line of 2”-l 0” diameter through the main roads of Bhola town, DRS and RMS along with some other installations to Sundarban Gas Company Limited. Energy And Mineral Resources Division of Power, Energy And Mineral Resources Ministry of the People’s Republic of Bangladesh issued a letter on 8 May 2013 (letter no jakhasabi/U2/Gas-9!2009) deciding to establish gas connections gradually in domestic sectors in the regions under the control of concerned distribution company. Accordingly it was presented to the company Board Meeting and the Board of Directors assented to it. Besides, since Shahbazpur Gas Field is not connected to the National Gas Grid, the Board of Directors instructed to send a proposal to Petrobangla to obtain approval from the government to supply gas in Bhola region to industrial, commercial, CNG

stations and other classes of users. Finally, the proposal was approved regarding gas supply to the above noted users.

Since the inauguration of the gas distribution system in Bhola town on 28 August 2013 a total of 9.256 mmcfd gas supply has been made as of 0.256 MMCFD to 2573 domestic connections and 9.00 MMCFD to Rental Power Plant. Gas consumption will be effective from January 2015 subject to commissioning of 225 M.W. (combined cycle) power plant. It is apprehended that gas consumption may increase to 35mmcfd in March 2015 during the power generation of this power plant. A letter has been approved for supplying gas to an industrial undertaking. Moreover, consent of gas connection has been given to 2 CNG stations. The gas demand of these concerns is around 2.35 MMCFD.

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Extension of Gas Distribution Network in Bhola and New Network at Borhanuddin is under process to distribute gas through pipeline construction/extension in Bhola and Borhanuddin. After the implementation of the project in next 20 years another extra gas supply will be required at the rate of 0.600 MMCFD. Nevertheless, in normal course, in next 20 years it is estimated that 10.000 MMCFD of gas would be required for domestic, commercial and small and medium (enterprises) users, CNG stations and other categories of customers. In this scenario, the present and near future gas demand as well as the projected gas demand in next 20 years in Bhola district would be total (0.256+9.000+35.000+2.350+0.600 +10.000) = 57.206 or 58.000MMCFD. As per the statistics, another around 12 MMCFD gas demand could be catered from the surplus gas deposit.

As per the project proposal, the project duration of the said project noted in 3.04 has been fixed up to June 2016. After the implementation of the project, the projected domestic consumers would further increase up to 2678 households in next 20 years. Moreover, gas supply will be possible in a seasonal brick field and another CNG station as included in the project profile. For this, around 6.17 MMSCM gas would be consumed annually.

BAPEX team engaged in gas production has reported that, the gas production from Shabazpur gas fields of production Well No-2 and developed Well No-3 &4 will be approximately 80 MMCFD but the capacity of the process plant is 70 MMCFD. After production of said quantity of gas, Industrial, Commercial, CNG stations along with other categories of customers could be supplied with gas in Bhola region.

A 3D seismic survey has been conducted by BAPEX this year. A detailed idea about the quality and reserve of gas would be evident after having complete survey report. As a result, the door of economic and social development activities as well as comprehensive employment opportunities will be opened through increased supply of gas in different regions of Bhola. It is expected that after beginning operation of generation from near to completion of 225MW power plant in Bhola, the financial scenario of the company would developed.

Description of the ongoing projects of the company

The Development Project Proposal (DPP) of the “South-West Gas Distribution Network Project”, financed byADB loan and Government of Bangladesh, for setting up gas distribution pipe line for distributing gas in five south-western districts of Bangladesh-Kustia, Jhenidah, Jessore, khulna and Bagerhat along with Mongla, was approved in 2010. The revised DPP of the project (ADB’s contribution is Tk.285.00 crore and GOB’s contribution is Tk. 315.00 crore) comprises of total Tk. 600 crore was approved on 12 June 2013. The implementation period of the project is upto September 2015 as per the revised DPP. It may be mention that after the implementation of the project, it will be possible to supply gas to 150 MW Power Plant in Khulna and 360 MW Power Plant in Veramara. It is anticipated that gas supply will be available to different categories of customers by 2015. For this, the company is providing all out supports in all activities of the project.

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The procurement process of around 95% of pipe line and different equipments! elements of the project have been completed in 2 packages through inviting International Tender. Under package-i,in 6 groups; line pipe, tape and primer, thermo electric generator, catholic protection materials, seamless pipe, etc have been purchased and preserved in different yards/ depots

Under package -2, the materials/ equipment procurement process of 5 groups out of 8 has been completed. As per ADB’s consultation for the procurement of materials in 3 groups (group-B, Group-F and Group-G) was converted to 2 lots (lot-i & lot-2) titled package-4 and an international Tender was invited to procure under this package. Tender was received on 28 April 2014, evaluation done and approval got from company Board of Directors and ADB also consented. Now it is going for further actions.

Under Package-3, a contract has been signed with the EPC contractor M/S punj Lloyd Ltd. India, on September 2013 for setting up 20” dia pipe line under the river Rupsha on turnkey basis. As per contract it is hoped that the work shall be completed by April2015.

 

For the development of working efficiency of the Sundarban Gas Company personnel, under SouthWest Gas Distribution Network project, an EOl was invited inADB website as perADB advice (Recruitment of training Management Consulting firm for Managing the Implementation of International Training Courses for SGCL personnel) for the engagement of training management consultant for SGCL personnel under package-S. A total of 11 firms responded to EOl within the deadline of 20 September 2014. Currently, evaluation of EOI and preparation of RFP is under way following ADB guide line.

For the construction of Company head office in Khulna, 2 bighas (40 kathas) of land have been allotted from the office of Deputy Commissioner. Moreover, at Aron-gghata, Jogipol and Labongchara of Khulna along with Nowa para of Jessore for District Regulating Station (DRS), 10 kathas of land at each area have also been allotted. Land acquisition process for 15 Kathas and 4 bighas 12 kathas of land respectively is going on for the construction of valve station at Rupsha area and at Jabusa for valve station along with pipe line construction work. Nevertheless, for the construction of DRS and valve station, 30 kathas and 20 kathas of land respectively in Jessore and Jhenidah have been acquired. Land development for the construction of office building and other buildings the consulting firm engagement work is going on under the project.

A detailed route survey for setting up a total 845 km pipe line network in five districts e.g. Kustia, Jhinedah, Jessore, khulna and Bagerhat along with Mongla is under process. The shortage of manpower is delaying the progress as expected.

Administrative activities of the company

After the establishment of the company, a well disciplined and efficient administrative management has been formed following the various principles of the government and those followed at Petrobangla to conduct all the activities smoothly. The officers and staff of the company and projects are properly implementing all the activities of the company. All the projects are being implemented by dexterous hands under the SGCL excellent administrative management. It is mentionable here that the board of Directors approved on the 15” February 2012 in its 12th board meeting a organogram of total 63 officers and 70 workers in total 133 personnel at various levels considering the present and future activities of the company. On the other hand, in the 14th Board meeting, the Board of Directors approved the service rules and employment and promotion procedures. The Board of Directors has directed the management to propound a full organogram at the company level (under the company approved organogram structure) identifying required manpower at Bhola regional distribution office and regional offices of Khulna, Bagerhat, Jessore, Kustia and Jhenidah. Considering the necessity of organogram rearrangement and in congruence with company’s operational and development activities, in the 26th board meeting on 29 May 2013 a committee was formed comprising of 3 respected members of the Board of Directors. The committee approved by the Board submitted a report propounding total 633 personnel for the organogram of the company of which 289 are officers and 344 are staff. After presentation of the report in the 33rd board meeting on the 13th February 2014, the Board of Directors directed for re-assessment and further analysis of the proposed organogram. Later, on 19 April 2014 in the 34th board meeting, the Board of Directors approved the organogram submitted by the committee discussed with and instructed by the Board of Directors keeping a provision of a manpower of 635 personnel for the organogram of SGCL of which 289 are officers and 344 are staff (194 first class officers, 103 second class officers, 92 regular staff, 246 outsource staff and it was decided that the organogram will remain effective for the next 7 years. The Board of Directors imparted instructions to the Managing Director in the 35th board meeting ensuring the 34th board meeting minutes to send the organogram for final approval to concerned board of Directors i.e. Petrobangla, the state owned concerns organogram changing/elaborating/correcting power lies with them. Consequently, as per instruction of the Board of Directors, SGCL organogram along with TO & F was sent to Petrobangla for final approval on 9 July 2014 through letter no 03.01.68/23. It is anticipated that the final approval will be obtained soon.

At present Petrobangla and its subordinate companies, Managing Director, General Manager(Planning and Development), General Manager (Operation and Marketing), Company Secretary, Deputy General Manager (administration), are appointed on deputation and 07 officers including 03 managers and 02 regular permanent officers are appointed from Petrobangla staffs recruitment panel. Besides the aforesaid officers, at present 29 employees are employed on daily/temporary basis, 53 employees are through outsourcing and another 17 are on ‘no work no pay’ basis. As per approval of the directors’ ~ 4’~ board meeting, advertisements was published in newspapers on 04.05.2013 for recruitment of 15 manpower at 6 different branches/categorizes such as Assistant Manager (Administration)-02 Assistant Manager- (Accounts)-02, Assistant Manager (civil/mechanical/electrical)O3~ Sub-Assistant Engineer-03, Assistant Coordinating Officers-03 and surveyor-02. Consequently, on 22 October 2014 total 08 officers at various posts (Assistant Manager (Administration)-01, Assistant Manager- (Accounts)-01, Assistant Manager (Technical)-02, Sub-Assistant Engineer-02, Assistant Coordinating Officers (ACO)-02 )joined SGCL and are serving here. This is worthwhile to mention that as per decision of Petrobangla/ the board of the company, the salaries, financial and fringe benefits of the employees on deputation -all are paid from the main institution. Next these are refunded from SGCL against the debit notes of the respective organizations companies.

Human Resource Development

Training has been arranged in this fiscal year with a view to developing human resources. Besides, officers have participated in seminars organized by Petrobangla and other institutions. Specialized trainings will be arranged for the officers and employees to enhance their skill and capacity. Under the SGCL well administered management, all staff of all stages with their own experience, skill, tempo and responsibilities are contributing comprehensively to the development of the newly formed company. It can be mentioned that the companies own manpower is developing. 7 officers in revenue sector on deputation from Petrobangla and its subordinate bodies and 10 regular permanent officers are working here in the company. They have attained experiences and skills for serving for a long time in the company.

Recently, 2 officers have received training on ‘Administration and Human Resources” and “Financial Management” in Bangkok, Thailand organized by Continuing Education Centre (CEC), Mahidol University, Thailand under foreign training program. it is expected that through participation in these programs, outstanding contribution would be made in respective fields.

Financial Condition of the company

Since the formation of SGCL on 23 November 2009 to April 2013, it did not have any income. Company’s income source was created after handing over Bhola Transmission and Distribution line by BAPEX to SGCL in may 2013. Company’s income in the fiscal year was 2012-2013 was 1k. 321 .65 lac from selling of 11.406mmcm gas to Rental Power Plant sector, Tk.72.17 ac from North-West Gas Generation Co.Ltd for the consultancy services of RMS Construction and TK 59.88 lac from bank interest accrued. In the said fiscal year, company’s net income before tax was 1k. 53.47 lac after disbursing 1k. 259.49 lac in gas purchase sector and 1k. 137.93 lac for distribution and operational expenses. The company expenditures in the said year were limited within the approved company budget. It is mentionable that the income-expenditure statement of the company was not prepared as per auditor recommendation since there was no earning source upto FY 2011-2012 of the company. In those periods all revenue expenditures were directly shown in the balance sheet as Unallocated Development Expenditure.

In the following reflection of the Auditor’s Reports up to 30 June 2013, a gist of company financial status is described.

Company Capital, Loan and Liability

Capital: Capital increased to Tk. 93.33 ac on June 30 2013 in comparison to previous years. In the said fiscal year unallocated profit was Tk. 33.42 ac and increased ADP allocation of Tk. 59.92 in equity account have increased fund in the capital account.

Loan received from Petrobangla: A payment of Tk. 400.00 ac spent to meet urgent expenditures of works of the project upto receiving full amount of ADP project allocation. As a result on 30 June, 2013 the loan received from Petrobangla has increased up to 1k. 2592.36 ac.

GOB loan: As on 30 June 2013 the GOB loan increased to Tk.  89.88 Lac compared to previous years. The said loan increased as 60% of ADP allocation to project was accounted to GOB loan account.

Foreign Loan: In the FY 2012-2013 Tk.. 13120.39 ac was given by Asian Development Bank (ADB) against project imported goods, so, this amount is shown as loan in foreign account.

Current Liabilities: The current total liabilities Tk.. 337.39 lac’s are far more than Tk.  266.07 lac of previous year. Mainly such current liabilities increased as increased accounts payable of 1k. 259.49 lac for gas purchase which was accounted in current liability account.

Company Fixed and Current Asset:

Fixed Asset: On 30 June 2013, Capital asset increased to Tk.. 2131.28 lac compared to previous year. Due to inclusion of Tk. 2192.36 lac for Bhola Transmission and Distribution gas network as well as inclusion of Tk.7.96 lac against furniture-fixture, telecom-computer. Tube well-water pump etc. mainly increased this capital asset account.

Work in Progress: work in progress has increased to Tk.. 13519.18 lac in 2012-2013 in comparison to last year. The expenses of Tk.13453.25 lac in revenue and capital expenditure of the project has been accounted to work in progress. Moreover, Tk.  65.93 lac has been transferred from company capital asset account to work in progress account as per auditors’ recommendation and this enhancement occurred.

Unallocated Development Expenditure

Here, the increased amount yielded after adjustment of Tk.  1 .72 lac in the FY  2012-2013 in Unallocated Development Expenditure account.

Fixed Deposit: This account has reduced due to encashment of fixed deposit account of 1k. 102.82 lac with interest in the FY 2012-2013  FY  to meet revenue expense.

Current Asset: On 30 June 2013 amount of current assets has increased to 1k. 612.67 lac compared to that of last year. The rationality of increase of this account is mainly the increased amount of accounts receivables received from PDB in May 2013 and June 2013 against gas sales included in Trade Debtors, undisbursed encased money from fixed deposits have increased bank deposit and 1k. 200.00 lac loan received for project from Petrobangla has not been deposited on 30 June 2013 in project bank account and this has also increased current account.

The activities of South-Western Gas Distribution network project under the implementation of the company are going on. Under the government’s Annual development Program in the FY 2012-2013 Tk. 150.00 lac (one crore fifty lac) has been received against Tk.  550.00 allocation. From this allocation Tk. 149.80 lac has been disbursed in various areas of the project. Since in the said fiscal year, the full amount of ADP allocation has not been received, Tk. 183.06 lao has been received as loan assistance for the urgent works of the project from the company (Petrobangla granted loan). Besides, for various foreign purchases Tk.  13120.39 lao has been aid through ADB as per contact. Total Tk.. 13453.25 lao has been spent in the fiscal year 2012-2013 against different sectors of the project (Revenue account Tk.  108.19 lao and fixed asset account Tk.  13345.06 lac).