Gas Regulations of Bangladesh

The Gas Act, 2010 (“the Gas Act” or “the Act”) has been passed to regulate the transmission, distribution, marketing, supply and storage of natural gas and liquid hydrocarbon in the land territory of Bangladesh and in its determined sea boundaries and economic zones. The Act has been enacted in Bangla language and no official English translation is available yet. The objective, according to the preamble to the Act, is to ensure the proper and appropriate use of the regulated substance. The exploration and production of natural gas and the related resources are not regulated by the Gas Act.

The authority that has been empowered to apply the provisions of the Gas Act is the Bangladesh Energy Regulatory Commission (BERC), which has been established pursuant to the Bangladesh Energy Regulatory Commission Act, 2003.

The term “gas” is defined in the Gas Act to include Natural Gas, Natural Gas Liquid (NGL), Liquefied Natural Gas (LNG), Compressed Natural Gas (CNG), Synthetic Natural Gas (SNG), Liquefied Petroleum Gas (LPG), Coal Bed Methane (CBM), Underground Coal Gasification (UCG), or such natural mixture of hydrocarbon which is formed by the transformation into gaseous elements due to normal temperature and pressure.

According to the Gas Act, a licence from the BERC is required for conducting the following activities:

  1. transmission, marketing and distribution, supply, storage, delivery to various classes of customers,  transportation, sale or transfer by any other approved method of gas and other commodities prepared by processing of gas or other associated substance;
  2. any survey, test or research and development activities related to transmission, marketing and distribution, supply and storage of gas or related to any other work which is supplemental, relevant or is a consequence of the same.
  3. construction of  pipelines for transmission, distribution, supply and storage of gas; and
  4. establishment and operation of a CNG refuelling station, a factory to convert vehicles to CNG-driven vehicles, a business in LPG or LNG.

The Gas Act sets out the following obligations that a distributor of gas must adhere to:

  1. maintaining the quality, pressure, environment and safety of gas in accordance with the methods determined by the BERC;
  2. following the principle of non-discrimination between customers of the same class;
  3. installing meters for measuring gas quantity;
  4. ensuring appropriate maintenance and repair of distribution pipeline, and regulating and metering stations (RMS); and
  5.  installing distribution pipelines to connect consumers to the main pipeline and increasing the capacity of existing distribution pipelines;

The Act provides that the licensee would have the power to limit or suspend or disconnect gas supply if:

  1. the lives and properties of the people of the area concerned are in danger;
  2. an operational defect is discovered in the gas network;
  3. there is a gas crisis at a national level;
  4. unpaid arrears are not settled;
  5. illegal use of gas is taking place;
  6. gas meter is tampered or gas is used through a bypassed line;
  7. need arises to establish priority between gas users; or
  8. gas is used in such a manner that the efficiency of gas use prescribed by the Government or BERC is not satisfied.

As gas crisis is common in Bangladesh from time to time, and particularly during the winter season, the gas distribution companies (which are wholly state-owned) invoke this provision to limit or suspend gas supply to industrial customers.

Regarding the business of supply and storage of gas, the Gas Act provides that except for supply and storage of gas under a Production Sharing Contract (PSC), the price for supply and storage of gas will be determined by the BERC in accordance with the provisions of the Bangladesh Energy Regulatory Commission Act, 2003.

The Gas Act provides that the following factors must be considered before constructing or installation of a gas pipeline:

  1. an evaluation of the demand for gas of different classes of consumers;
  2. the need to construct the proposed pipeline;
  3. whether sufficient gas can be supplied;
  4. the location of the proposed pipeline in relation to the consumers;
  5. the timeline for construction of the pipeline;
  6. a plan/design of how the final consumer will connect to the gas network;
  7. the financial implications of installing the gas connection;
  8. practical plans with regard to the cost of resettlement in case of acquisition of land, environmental aspects and matters related to security;
    (i) the technology and technical skills required;
    (j) the total cost of the project and details of the source of financing;
  9. a loan repayment schedule; and
    (l) matters related to socio-economic development.

The Gas Act has created certain offences, which are punishable by imprisonment and fine. The maximum period of imprisonment under the Act may be up to 10 years and the maximum fine may be up to Taka one million. A person, who is not the principal offender, but who has aided or abetted in the commission of an offence may also be punished under the Act.

The offences created under the Act include:

  • using gas by bypassing the meter and creating a direct line between the supply line and the internal line;
  • tampering with the meter so as to show underuse of the gas;
  • using gas by using unauthorized supply line;
  • installing, without the written consent of the licensee, any line for the purpose of extracting gas or accepting such a gas connection, using the gas connection for a purpose other than that for which the gas connection was given, exceeding the stipulated monthly load of gas prescribed at the time of taking the connection or stealing condensate in any way from a condensate pipeline;
  • establishing, without a licence, a CNG refuelling station or a CNG conversion workshop; exceeding, on the part of a CNG refuelling station, the pressure of gas specified by the Government or selling gas by tampering with the meter;
  • destroying or sabotaging a condensate, CNG or LPG establishment or a gas system management business or a gas industry business;
  • refusing entry to or restricting access to a representative of a gas distribution or supply authority in the performance of his duty, to the place where the gas connection is installed or to its equipment or confining him beyond the entrance;
  • stealing a pipeline, meter, regulator or any other object which belongs to an establishment that transmits, distributes or supplies gas, or intentionally causing harm to such objects;
  • buying or selling gas pipeline, meter, regulator or any such object.

A person or organisation, even if convicted and punished for any offence under the Gas Act, will not be relieved of the debt owed to a gas distributor or supplier.

Prior to the Gas Act, there was no statute specifically regulating transmission, distribution, marketing, supply and storage of natural gas and liquid hydrocarbon. These matters used to be regulated under the generally applicable petroleum laws and regulations. With the new gas regulations, it remains to be seen how they are applied by the regulator and how they impact the efficiency, governance and sustainability of the gas sector.

Sharif Bhuiyan

Sharif Bhuiyan

Email: sbhuiyan@khossain.com
Tel: +88 02 955 2946

Practice Areas: Admiralty; Arbitration; Aviation; Banking; Competition; Corporate & Commercial; Employment; Energy; Intellectual Property; Securities; Taxation; Technology; Telecommunication; World Trade Organization

Tanim Hussain Shawon

Tanim Hussain Shawon

Senior Associate at Dr. Kamal Hossain & Associates

Email: tshawon@khossain.com
Tel: +88 02 955 2946

Practice Areas: Admiralty; Arbitration; Banking; Competition; Corporate & Commercial; Constitutional & Administrative; Employment; Energy; Intellectual Property; Telecommunication

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About Sharif Bhuiyan

Email: sbhuiyan@khossain.com
Tel: +88 02 955 2946
Practice Areas: Admiralty; Arbitration; Aviation; Banking; Competition; Corporate & Commercial; Employment; Energy; Intellectual Property; Securities; Taxation; Technology; Telecommunication; World Trade Organization