PROJECT PAPER ON

FORECASTING OF GAS DEMAND AND SYSTEM LOSS IN TITAS GAS TRANSMISSION AND DISTRIBUTION COMPANY LTD.

Prepared for
Dr. M. Sadiqul Islam Professor, Department of Finance University of Dhaka

Prepared by
Md. Anisur Rahman ID-20508010 8TH Batch Department of Finance University of Dhaka

Evening MBA Program Department of Finance University of Dhaka

June 5, 2007

Table of Content Page

Acknowledgement Executive Summary

Chapter 6-9
1.1 Background 6 1.2 Objectives 9 1.3 Rationale 9 1.4 Limitations 9

1:
and present of
of

Introduction
status the
the

of

gas

sector study
study

of

the

study

Chapter 10-20

2:

Gas

sector

of

Bangladesh
10

2.1.History of Petrobangla 2.2. Petrobangla and the govt

10
2..3. Short history of gas oil and mineral industry in Bangladesh 10- 11 12-13
14-20

2.4. Activities of Petrobangla 2.5Petrobangla companies

Chapter 3:
25

A brief about Titas Gas Transmission and Distribution Company Limited 21-23

21-

3.1. Marketing and operational performance

3.2. Development 24-26 3.3. Types of gas connection in Titas Gas Transmission and Gistribution Company Limited

activities 27

Chapter 4:
4.1. Regression analysis

Regression and Time Series analysis

30-35 30-31 32-35

4.2. 36

Time Series analysis and forecasting

Chapter

5:Methodology

Chapter
37

6:

Findings

and

analysis

of

the

study.

Chapter 7: CONCLUSION AND POLICY IMPLICATION

Appendix 38-

05 June,2007
Dr. M. Sadiqul Islam Professor, Department of Finance Faculty of Business Studies University of Dhaka Dhaka

Letter of Transmittal

Subject:
Dear Sir,

Submission of Project Paper on FORECASTING OF GAS DEMAND AND SYSTEM LOSS IN TITAS GAS TRANSMISSION AND DISTRIBUTION COMPANY LTD AND THE EVENTUAL IMPACT OF
GROWING GAS DEMAND ON RECOVERABLE GAS RESERVE AND CURRENT PRODUCTION LEVEL

I am pleased to submit this project paper on the topic the complete fulfillment of my EMBA program.

FORECASTING OF GAS DEMAND AND SYSTEM LOSS IN TITAS GAS TRANSMISSION AND DISTRIBUTION COMPANY LTD AND THE EVENTUAL IMPACT OF GROWING GAS DEMAND ON RECOVERABLE GAS RESERVE AND CURRENT PRODUCTION LEVEL.

which was assigned for

Writing this project paper plan has been an extremely challenging and interesting experience. It helped me to learn more about the real scenario of pharmaceutical business and its challenges and opportunities. Ive tried my label best to prepare this report and I do hope that I will be successful in meeting your expectation. I shall be very glad to furnish with any explanation on this report if necessary. Thanking You.

Sincerely yours, (Md. Anisur Rahman) Evening MBA Program Department of Finance , Unive ID # 20508010

ACKNOWLEDGEMENT
I express my heartiest regards, profound gratitude, deepest sense of appreciation & indebtedness to my respected project coordinator Dr. M. Sadiqul Islam, Professor, Department of Finance Faculty of Business Studies, University of Dhaka,for his constant guidance, active encouragement, keen interest, valuable criticism & inspiration to develop this report.

I would also like to thank him for providing me sufficient time and scope from his valuable time by initially providing with an outline and then through-out the making of this report. He has also encouraged me all the time and guided me continuously up to the final stage of this report.

I would also like to thank all those people who have taken time off from their valuable days and spent minutes to help me for preparing this pragmatic report.

EXECUTIVE SUMMARY Titas Gas Transmission and Distribution Company Ltd(TGTDCL),a subsidiary company of Bangladesh Oil, Gas and Mineral corporation(Petrobangla),is a pioneering organization in natural gas sector. B.Baria, greater Dhaka and Mymensingh districts comprises its franchise area. Titas gas provides about 72% of the total gas consumed in the country. Titas Gas supplies gas to a variety of customers such as industry, commercial etc. Natural Gas being non-renewable energy is limited but valuable resource of Bangladesh. Bangladesh economy especially the industrialization process largely depends on the smooth supply or natural gas. Noteworthy that the demand of gas for various categories of customers is on the increase. So it is important to forecast the demand of gas in the coming years. Not only that it is also important to analysis the gas reserve scenario, system loss, and production perspective of natural gas to cater to the requirement of natural gas in the coming years. Thus the objectives of the study have been set so. It is worth mentioning that system loss is the difference between the volume of natural gas purchased from producers and the volume of natural gas supplied to the customers. Time series analysis, which is based on regression analysis, is an important tool for forecasting any variable /economic data. Hence to meet the objectives of the study this tool has been employed to develop a suitable regression model with which to forecast the gas demand and system loss within Titas Gas T & D Co. Ltd, using relevant secondary data collected from this company and Petrobangla. Using this model forecasting of gas demand and system loss for next 15(fifteen) years is made. It is found that forecasted totas gas demand for the next 15(fifteen) years would be 4730490.243 million cubic feet which is 33.905% of the remaining gas reserve. This suggests that the remaining reserve will cater to the growing gas demand within Titas franchise area for more than 15(fifteen) years. It may be up to approximately 45 (forty five) years. And to face this need production of gas is to be enhanced 29.2265% per year. As to system loss analysis it is found that system loss of the company is on the decline. It is also found that system loss is not well explained by time alone. There might be other factor/factors to describe this.

It is imperative that the policy makers of the gas sector would think well ahead of time to explore and research for more natural gas resources and to increase the present production level to conform to the forecasted gas demand with a view to avoiding uncertainties in gas sector.

CHAPTER 01 INTRODUCTION 1.1. Background and present status of gas sector: Bangladesh is a land of some natural resources such as oil, gas, coal, hard rock, white clay, boulder etc. Bangladesh being the biggest delta in the world, serves as a good reservoir of Natural Gas. Exploration and production of Natural Gas is undertaken by Bangladesh Gas Fields Company Limited (BGFCL), Sylhet Gas Fields Limited (SGFL), Bangladesh Petroleum Exploration and Production Company Limited (BAPEX), Some International Oil Companies (IOC). They are producing natural gas from 12 fields. The average daily production of these gas fields in fiscal year 2005-2006 is 1500 MMSCF and yearly production is 540 BCF (Annual Report of Petrobangla 2005-2006). Gas Transmission Lines are handled by Gas Transmission Company Limited (GTCL). There are four separate distribution companies that are engaged in supplying Natural Gas to different types of customers in different regions. They construct and handle distribution lines and conduct marketing activities. A company named Rupantarita Prakritik Gas Company Limited (RPGCL) was organized to convert vehicles to Compressed Natural Gas (CNG) and to popularize the use of CNG. Barapukuria Coal Mine Company (BCMC) and Madhyapara Granite Mining Company Limited (MGMCL) are two companies that serve the purpose of mining of coal and hard rock respectively. A corporate body under the ministry of petroleum and mineral resources Petrobangla supervises all of the above companies in the country. Gas consumption arenas are Power plants, Fertilizer factories, Process plants, different types of Industries, Commercial and Domestic customers etc. The discovery of large reserve of natural gas has stimulated demand for this clean, costeffective energy source, resulting in rising investment and rapid expansion of transmission and distribution networks. Because of versatile use of natural gas in the industrialization process ( Natural gas is used as raw materials and environment friendly fuel of high calorific value) , its demand is increasing day by day. Thus it is necessary to forecast the demand of natural gas .

1.2 . Objective of the study: a.To forecast the demand of gas in various category of gas connection within the Titas franchise area. b.To analyze and forecast the system loss that incurs within Titas franchise area in transmission and distribution of gas. c.To forecast the relationship between the remaining reserve of gas and the cumulative forecasted demand of gas after 15(fifteen) years from now. d.To forecast the growth in production scenario of gas. 1.3. Rationale of the study: This study may provide the decision makers of the NATURAL GAS sector with the basis of decision. This may give us an insight into the relationship amongst demand, supply/production and reserve scenario of natural gas. Natural gas being crucial sector of Bangladesh, knowledge surrounding this sector may enable us to avoid uncertainties. 1.4. Limitation of the study: In this study, forecasting of gas demand and system loss is carried out for Titas Gas T & D Co. Ltd only, which captures 72.52% of the total market share of Natural Gas. But total forecasted gas demand is compared with total remaining gas reserve. Analysis has been done based on secondary data.

CHAPTER 02 GAS SECTOR OF BANGLADESH 2.1.History of Petrobangla: Bangladesh Mineral, Oil & Gas Corporation (BMOGC) was created through the Presidential Order # 27 on 26 March 1972. The Minerals operation of the corporation was segregated and vested with a new organization, Bangladesh Mineral Exploration and Development Corporation (BMEDC) though the Presidential Order #120 of 27 September 1972. The reconstituted Bangladesh Oil & Gas Corporation (BOGC) was short-named Petrobangla through the Ordinance # 15 of 22 August 1974. Through the repeal Ordinance # LXX of 1974, Oil and Gas Development Corporation was abolished and all its asset and liabilities was vested to Petrobangla. On 13 November I976, through the Ordinance # 88, the importation, refining and marketing of crude and petroleum products was vested with the newly formed Bangladesh Petroleum Corporation (BPC). BOCC and BMEDC were merged into a single entity, Bangladesh Oil, Gas & Mineral Corporation (BOGMC) by the Ordinance # 21 of 11 April 1985. In a partial modification of the Ordinance by the Act # 11 of February 1989, the Corporation was short-named Petrobangla and given the authority to hold the shares of the companies dealing in oil, gas & minerals exploration and development. Mandate of Petrobangla: Bangladesh oil, Gas & Mineral Corporation ( Petrobangla), is empowered and entrusted of perform: Exploration and development of the Oil, Gas and Mineral Resources as per the policies of the Government of the Peoples Republic of Bangladesh. Coordinate, plan and supervise the activities of the subordinate companies. Overall control and coordination of the production, transmission and marketing of gas, condensate, oil and mineral resources produced in the country Conduct necessary research required in Oil, Gas and Mineral Exploration. Enter into Production Sharing Contracts (PSC) with International Oil Companies for exploration and development of Oil and Gas and to supervise, monitor and coordinate the activities under the signed PSCs. To implement important projects to develop the gas and mineral sector with the annual government fund and assistances provided by the friendly countries and international organizations. Any other functions and responsibilities as directed by the government from time to time.
2.2.OPETROBANGLA AND THE GOVERNMENT

Petrobangla operates as public sector statutory body under the ordinance of 1985. The Board of Directors is the policy making and managing body of the Corporation, with members from various Ministries The Corporation is under the administrative control of the Energy and Mineral Resources Division the Ministry of Power, Energy and Mineral Resources, The Corporation have also relationship, through the Ministry of Power, Energy and Mineral Resources, with Ministry of Finance and Ministry of Planning for its development programmes. There is also active relationship with numerous functional bodies such as, National Board of Revenue, Department of Explosives, and Department of Environment for specific work functions. The activities of the Corporation is reviewed and examined by the Public Accounts Committee and the Parliamentary Standing Committee on Power, and

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Mineral Resources.
2.3. SHORT HISTORY OF OIL, GAS & MINERAL INDUSTRY IN BANGLADESH

The beginning: up to 1947 The search of oil and gas in the area constituting Bangladesh began in the later part of the 19th century through some isolated geological mapping. The first serious attempt to find oil and gas was undertaken in Staked in 1908 by the Indian Petroleum Prospecting Company, 18 years after the first oil discovery in Digboi, Assam. During 1923-31 Burma Oil Company (BOC) drilled two shallow wells in Path aria. The wells were abandoned though there was a reported show of oil. A total of 6 exploratory wells were drilled, the deepest being 1047 meters. There was, however, no discovery and the Second World War disrupted further activities. The interim: 1947 to 1971 The promulgation of Pakistan Petroleum Act in 1948 infused interest of international oil companies in oil and gas exploration. The Standard Vacuum Oil Company (STANVAC) of USA, Pakistan Petroleum Ltd. (PPL)-a Burma Oil Company affiliate, and Pakistan Shell Oil Company (PSOC) took up concessions during early fifties and carried out exploration till the end of the sixties. STANVAC drilled 3 wells at Hazipur, Bogra and Kuchma in the northwestern part of the country without success. PPL drilled wells in Haripur; Patharia, Chhattak, Fenchuganj, Patiya and Lalmai and made the first gas discovery in Haripur in 1955, followed by Chhattak in 1959. PSOC was the most successful company and discovered the 5 gas fields of Titas, Habiganj, Rashidpur; Kailashtila and Bakhrabad. They also drilled the first offshore well Coxs bazar-1, which was dry. During this time Oil and Gas Development Corporation (OGDC) was established as the national organization in 1961 and the root of exploration for oil and gas were set up in the country. OGDC carried out geological and geophysical survey including gravity, magnetic and seismic and drilled wells in Jaldi and Semutang, discovering gas in Semutang in 1970. The way forward : 1971 onwards After the independence of Bangladesh, exploration activities by both national and international companies gathered pace. Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) continued its exploration efforts while the Bangladesh Petroleum Act was enacted in 1974 to facilitate international participation under PSC. The offshore area of Bangladesh was divided into 6 blocks, which were taken up by Ashland, ARCO, BODC (Japex), Union Oil, Canadian Superior Oil and Ina Naftaplin under production sharing contracts. These companies carried out gravity, magnetic and seismic surveys (about 32000 km) and drilled 7 wells. Of them, only Union Oil Company discovered an offshore gas field Kutubdia in 1977. This phase of PSC ended with relinquishment of the blocks by the PSC operators in 1978. The 1980s saw accelerated exploration activities by Petrobangla, which drilled 12 exploration wells in Muladi, Begumganj, Singra, Beanibazar; Atgram, Feni, Fenchuganj, Sitakund, Bogra, Kamta, Marichakandi (Meghna) and Belabo (Narshindi) and discovered 7 gas fields in Begumganj, Beanibazar, Feni, Fenchuganj, Kamta, Marichakandi (Meghna), and Belabor (Nearside). Among these, Fenchuganj-2 well remains the deepest drilled well in Bangladesh (4977m). Meanwhile a new milestone was achieved when Petrobangla discovered the first commercial oil pool in Sylhet-7 on December 23, 1986. Since 1989, after the formation of BAPEX as the national exploration company, BAPEX has continued exploration for

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Petrobangla, and drilled 3 exploratory wells discovering gas in Shahbazpur and Saldanadi. In 1981 Shei1 Oil Company was awarded the Chittagong Hill Tracts for petroleum exploration under PSC. Shell conducted geological and seismic survey and drilled the Sitapahar well which was dry, subsequently Shell undertook exploration in the extreme north west of the country and drilled the first well in the area - the Salbanhat well which was also dry. In 1988 Schimitar Exploration was awarded another PSC what is now block 13 in Surma basin. They failed to prove the extent of the oil discovery at Sylhet structure but discovered the Jalalabad gas field. Enactment National Energy Policy 1993 and adoption of a model production sharing contract document together with redefining the whole of Bangladesh territory into 23 exploration blocks ushered in a new phase of exploration and development of oil and gas in the country. In the first stage under the new arrangement, 8 blocks were awarded to 4 companies under PSC. Exploration and development activities in these blocks were rather limited; most of the blocks were moderately covered by seismic. So far in total 11 exploration wells were drilled and 3 gas fields were discovered in these blocks. These fields are Maulavibazar; Sangu and Babiyana. Three gas fields: previously discovered Jalalabad, newly discovered offshore Sangu and Maulavibazar were developed under PSC and are in production. The first 3D seismic survey of the country took place in Bibiyana during its appraisal. Bibiyana is expected to come under production by the end of 2006. Another PSC bidding round during the late nineties culminated in award of 4 more blocks. These were Shell/Cairn/Bapex in blocks-5 & 10, Unocal/Bapex in block-7and Tullow / Chevron / Bapex in block-9. Exploration activity in these blocks have only recently commenced. There have been substantial activity in block 9 only, where apart from seismic survey including 3D seismic, 3 exploration wells have been drilled. Even though exploration history of oil and gas in Bangladesh goes back almost a century, exploration density has remained very low. So far only about 69 exploration wells have been drilled, which resulted in discovery of 25 gas fields of sizes ranging from than 4 tcf to 25 bcf GIIP. This indicates the extremely low exploration density but high success rate of 1 in 3 exploration wells. Of the exploration wells, 13 are in the offshore with 2 discoveries and the rests 56 are on shore with 23 discoveries. Minerals: Petrobangla is also entrusted with mineral development in the country. While the exploration part of minerals activity falls under the charter of Geological Survey of Bangladesh (GSB), subsequent development of economic deposits are undertaken by Petrobangla. Mineral activities were part of the erstwhile Bangladesh Mineral Exploration & Development Corporation (BMEDC) till its merger. Petrobangla is developing two underground mines, one for coal at Barapukuria and the other for hard rock at Madhya Para, which are expected to be on full production by January 2007 and December 2006 respectively. Certain other extraction operation, like limestone, white clay and boulder, are controlled by the govt through the Bureau of Mineral Development (BMD). 2.4.ACTIVITIES OF PETROBANGLA The activities of the Petrobangla group encompasses the whole spectrum of the gas sector. The Companies under Peftobangla are involved in each of the stages from the drill bit to burner tips. Petrobangla, through its companies, conducts geological and geophysical exploration by its own crew, drills exploration and development wells by its own rig or by hired contractors, processes the raw gas to pipe line specification, transport the processed gas

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through an increasing network of high-pressure transmission lines and distributes gas to the customers, be it a large power plant or fertilizer factory or a single household. Value added LPG and liquid fuel is extracted from the gas derived NGL and promoting the growing CNG network for vehicle fuel are also its function. Furthermore, extraction of coal and granite are also conducted by Petrobangla. Exploration and Production Exploration and Production Exploration in the public sector is the responsibility of Petrobangla company, Bangladesh Petroleum Exploration and Production Company Ltd (BAPEX). BAPEX also undertakes production activities. The major public sector gas production companies, however, are Bangladesh Gas Fields Company Ltd. and Syihet Gas Fields Limited, which together account for about 70% of gas production during FY 2004-05. Transmission High pressure bulk transport of gas is carried out by the specialized Petrobangla company, Gas Transmission Company Limited (GTCL). It is the state monopoly for gas transport catering to both public sector and private sector gas producers. Transmission system built by other companies before GTCL was formed is being rationalised by integrating them with the GTCL system. A modern SCADA system, fully commissioned recently, provides integrated supervision and monitoring. Distribution Marketing gas to the customers ranging from large power and fertilizer plants to small households and business is the responsibility of four marketing companies under Petrobangla. These companies, namely Titas Gas T&D Co., Bakhrahad Gas Systems Ltd., Jalalabad Gas T&D System Ltd. and Pashimanchal Gas Co. Ltd., each have their own marketing franchise covered by a fairly extensive distribution system Expansion of gas marketing to the western part of the county is now a major priority. CNG and LPG As some of the gas fields of Bangladesh contain high percentage of liquid, optimized extraction of this liquid, especially value added LPG is becoming a growing activity. Popularization of use of CNG as vehicle fuel is carried out under Petrobangla, and over the last few years this has accelerated considerably. Use of CNGV has resulted in significant improvement of the urban air quality. Private sector participation in LPG and CNG is actively encouraged by Petrobangla. Mining Petrobangla has also a mining interest in the country.As the pioneer in subsurface mining in the country, Petrobangia has developed the mines at Barapukuria for coal extraction and at Madhyapara for granite mining. Production Sharing Contracta (PSC) A major activity of Petrobangla is administering the PSCs. Under the Patrobangla Ordinance, Petrobangla administers and supervises the PSCs signed with IOCs. Currently, blocks awarded under two rounds of PSC are operational. Under the 1993/94 awards blocks 12,13 and 14 were awarded to Occidental, blocks 15 and 16 to Cairn Energy, blocks 17 and 18 to Redwood/ Okland and block 22 to UMC. The share holding operator of these blocks have since undergone several changes. Under these PSCs the respective operators have conducted varying amount of exploration and

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development works. In the blocks 12,13 & 14 a total of 5 exploratory wells were drilled and 2 discoveries were made. There was however a massive blowout in one well resulting in loss of hydrocarbon and other surface assets. The previously discovered Jalalabad field was developed and is in production since 1998. In blocks 15 & 16 the operator drilled 6 exploratory wells including 4 offshore wells, resulting in discovery of offshore Sangu field. This field is in production since 1997. In blocks 17 & 18 a single offshore well drilled was found dry. There was practically no exploration work in block 22. Significant parts or whole of these blocks are now relinquished as per contract. Under the second bidding rounds, four blocks have been awarded. Unocal Bangladesh was awarded block 7, Shell/ Cairn JV was awarded blocks 5 and 10 with a 10% carried stake for BAPEX, and Tullow,/ Chevron/ Texaco JV was awarded block 9 with a 10% carried stake for BAPEX. Among these blocks, some seismic survey have been carried out in block 10, while in block 9 major seismic survey including a 3D survey have been completed followed by 3 exp1oration wells. An appraisal program is currently underway in block 9 after encountering significant gas in Bangora-Lalmai. There has been some restructuring of the holdings in the PSC during the last year. Shell Bangladesh has handed over their major stake to Cairn Energy, while Chevron Texaco has transferred their stake in block 9 to Niko Resources. Cairn produced about 47.36 bcf gas and 19,900 bbls condensate from the Sangu field during 2004-05, while Unocal produced 68.88 bcf gas & 663,133 bbls condensate from Jalalabad field and 7.32 bcf gas & 5,511 bbls condensate from Maulavi Bazar field. Subsequently, all block holdings & operation of Unocal has been taken over by Chevron as part of their global acquisition of Unocal. Niko is operating the Feni field in a JV with Bapex produced 6.98 bcf gas during this period. Production for July to December 2005 were Cairn 29.33 bcf, Unocal 49.21 bcf and Niko 5.10 bcf. 2.5.PETROBANGLA COMPANIES Over the years, the activities of Petrobangla has expanded and diversified to a great extent. To manage these activities, Petrobangla has created specialized companies to perform specific operations. Currently, there are eleven companies operating under Petrobangla, dealing in oil and gas exploration, production, transmission, distribution, conversion as well as development and marketing of coal and hard rock.

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2.5.1.Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) BAPEX is the lone public sector company conducting exploration for oil and gas in the country. It was formed by separating the erstwhile exploration directorate of Petrobangla. The company has the capability of conducting seismic survey and drilling by using its own manpower and equipment. The company also has laboratory and computer processing facilities. So far BAPEX has discovered-two gas fields, Shahbazpur (1996) and Saldanadi (1997). Since 1998, BAPEX has been converted to an Exploration and Production Company and owns Saldanadi, Shahbazpur and Fenchuganj gas fields. BAPEX started drilling the exploration well in Srikail in 2004 and completed drilling in 2005 where gas was encountered. It is now under evaluation. As part of developing the Shahbazpur and Fenchuganj gas fields, BAPEX has undertake the work over of well no.1 and drilling of well no. 2 of the Shahbazpur gas field under Shahbazpur gas field development project. The well no. 3 in Fenchuganj was completed and put on production. BAPEX had also undertaken the drilling of 2 development wells in Titas gas field on behalf of BGFCL and completed the drilling of well no 15. It has completed an appraisal 2D survey over Narshingdi field for BGFCL. Under the second bidding rounds BAPEX holds 10% shares in the blocks 5,7,9 and 10. BAPEX also has a joint venture with NIKO to develop two marginal gas fields. In a major breakthrough for the company, it was awarded the Block 8 and 11 for exploration and development; as part of the programmed BAPEX has conducted 252 km geological survey in the block 11 during this year. The two producing gas fields under BAPEX, Saldanadi and Fenchuganj Gas Field, produced about 17.47 bcf gas and 8,206 bbls of condensate during 2004-05 (up to end June 2005) The production of gas and condensate for the period from July to December 2005 were 11.00 bcf and 5,079) bbls respectively. 2.5.2.Bangladesh Gas Fields Company Limited (BGFCL) BGFCL originated as a Shell subsidiary in early sixties operating on a small scale in Titas and Habiganj gas fields. After the independence of Bangladesh, the Government bought out the stake and BGFCL became a national company. Today, BGFCL is the largest gas production company of the country and operates Titas, Habiganj, Bakhrabad, Meghna and Narshingdi gas fields. It also operated Feni and Kamta gas fields prior to suspension of production from these gas fields. With the rapid growth of gas consumption in the country, BGFCL has kept up its relentless effort to ensure uninterrupted gas supply and implements major projects. As part of the development activities, BGFCL is drilling two development wells in Titas gas field with its own resources, one of which (Titas 15) was completed during the financial year. An appraisal seismic programme has been completed by BAPEX on its behalf and based on the results, a new well be drilled in Narshingdi gas field. Another new well in Habiganj gas field and several walkovers will also be undertaken finaced by the company itself. A major 3D appraisal seismic programme over Titas and Bakhrabad gas field is also being processed with ADB assistance. During the financial year 2004-2005, BGFCL produced 276.32 bcf gas and 453,097 bbls of gas derived liquids from its 30 flowing wells; this averages about 757.04 million cubic feet gas per day. This was an improvement on the 265.14 bcf gas produced during the

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previous year when the daily average was about 726 million cubic feet gas per day. Production for the period from July to December 2005 is 136.38 bcf gas, which indicates the continuous growth in gas production. 2.5.3.Sylhet Gas Fields Limited (SGFL) SGFL was originally owned by Burmah Oil Company. The company was abandoned by BOC and after the independence of Bangladesh, taken over by the Government. The company currently operates Sylhet, Kailashtila, Rashidpur and Beanibazar gas fields, and is the second largest gas producer in the country. The company is implementing a two well programme for the Kailashtila field to augment and sustain production level. In addition new projects have been taken up to install 2nd MSTE plant, a condensate fractionation plant and a 3D seismic survey. During the financial year 2004-2005, SGFL produced 62.31 bcf gas and 531,997 bbls of gas derived liquids from its 14 flowing wells; this averages about 170.7 million cubic feet gas per day. The previous years production was 71.45 bcf gas and 532,795 bbls of gas derived liquids when the daily average was about 196 million cubic feel gas per day. Production for the period from July to December 2005 is 31.95 bcf. The decline in production is attributed to problems in some wells and depletion of pressure. 2.5.4. Gas Transmission Company Limited (GTCL) Gas Transmission Company Limited (GTCL) was incorporated on 14th December 1993 under the Companys Act with the aim to separate the high-pressure gas transmission operation and management from that of gas marketing companies in the country and eventually form the national gas grid for centralized control. The company commenced its business with the operation of 175 kilometer 24 inches diameter North-South gas transmission pipe line and the 6 inches parallel pipe line in order to mitigate the gas demand /supply to the central and south-eastern region of the country and to carry condensate to Ashuganj. Later the company implemented the Ashuganj-Bakhrabad pipeline (30 inches 59 km) which connected the national gas grid. The company has implemented a national gas grid SCADA for effective and central control. The company also completed construction of a gas pipe line to the western zone over the Jamuna Bridge, carrying natural gas to the western part of the country for the first-time. This pipe line was extended to Baghabari where gas is supplied to Baghabari power station of PDB and IPP power station of Westmont. GTCL has taken over physical possession of several transmission pipelines from marketing companies.The Company has since implemented the Ashuganj-Habiganj stage (30 inches 54 km) of the Ashuganj-Kailashtila loop. The second stage extending from Habiganj to Rashidpur (30 inches 28 km) has been successfully completed. It has also completed the 30 inches/20 inches 60 km Nalka-Bogra pipeline during 2004-05. Two other projects : 20 inches 60 km Gazipur-Savar pipeline under Dhaka-Clean Fuel and 30 inches 37 km Ashuganj-Manohardi pipeline are fast nearing completion. The Company had under its operation a network of 833.87 km. high pressure pipe lines up to December 2005. The Company has transported 7722.32 million meter gas during the FY 2004-05 which is 16.96% higher than the previous year. During this period the Company has transported 123.239 million liters condensate, which is 9.5% more than the previous year.

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2.5.5. Titas Gas Transmission and Distribution Company Limited (TGTDCL) This is the premier gas marketing company of the country,with a franchise area extending over the east of the Jamuna-Padma river system, excluding the Sylhet and Chittagong divisions but including Brahmanbaria. By the end of December 2005 the company had under its operation a network of 9352.81 km pipeline, which included about 612.74 km transmission, 509.33 km distribution, 7563.69 feeder mains and service lines and under customer financing 667.05km. At the end of the fiscal year 2004 - 2005, TGTDCL had customer base of about 1041,732 ; this has further increased to about 1081,091 by December 2005. Among the bulk customers of TGTDCL are 21 power and 4 fertilizer plants. During 2004-2005 financial year TGTDCL sold 322.0 bcf gas to its customers, of which power and fertilizer plants consumed about 152.13 bcf and 51.26 bcf respectively. The domestic consumer base of TGTDCL accounted for about 36.81 bcf gas. During the financial year 2005-2006, the average system loss of the company was 6.47% and at the end of December 2005 it was 7.18%. Bakrabad Gas Systems Limited (BGSL ) :The Company was originally established with the three-fold responsibilities of production, transmission and distribution, with the Bakhrabad gas field as its source. Later, it was transformed into a transmission and distribution company with the transfer of the Bakhrabad and Feni field to BGFCL. The Company is responsible for gas supply in the Chittagong Division area excluding Brahmanbaria district. Recently gas supply however been extended to Kasha and Bancharampur Upazillas of Brahmanbaria district which are outside its franchise area,as decision of the Government. The two main transmission pipe lines of the company, the 24 inches 110 km Bakhrabad-Chittagong and the 20 inches 69 km Bakhrabad-Derma gas transmission pipe lines have been handed over to GTCL as a part of the plan of the Government to bring in all transmission lines under GTCL. As a result, BGSL is now engaged with gas marketing activities only. By December 2005, the network of BGSL totaled about 5338.62 km pipe lines which includes 67.46 km transmission pipe lines, 266.64 km lateral pipe lines and 5004.52 km distribution network pipe lines. By the end of the fiscal year 2004-2005 BGSL had a customer base of about 325,089 which increased to 340,925 by the end of December 2005. Among the bulk customer of BGSL are five power and three fertilizer plants. During this year BGSL sold about 89.44 bcf gas to its customers, of which power and fertilizer plants consumed about 26.08 bcf and 36.74 bcf respectively. The domestic customer base of BGSL accounted for about 12.37 bcf gas. During the financial year 2004-2005 the average system loss of the company was 2.33% and at the end of December 2005 it was 1.64%.

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DRS/CGS OF TITAS GAS TRANSMISSION AND DISTRIBUTION COMPANY LTD.

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2.5.6. Jalalabad Gas Transmission & Distribution System Limited (JGTDSL) Jalalabad Gas System supplies gas to the customers in its franchise area consisting of the customers Syihet division. By the end of December 2005 the company had a network of 2508.95 km pipelines including 383.52 km transmission lines, 1112.02 km distribution, 696.56 km feeder main & service lines and 316.85 km others (customer financing). At the end of the financial year 2004-2005, JGTDSL had a customer base of 90,501 including three power and a fertilizer plant, which expanded to 94,329 by December 2005. Gas sales by JGTDSL during the year 2004-05 totalled about 24.43 bcf, the major consumer being power plants, accounting for 11 .59 bcf. The sales performance of the company was static. The Company incurred no system loss during this year, rather it attained 0.60% system gain though at the end of December 2005 the Company incurred 0.51% system loss . 2.5.7.Pashchimanchal Gas Company Limited (PGCL) This is the fourth and newest gas marketing company under Petrobangla, set-up with the objective to market gas in the areas west of the Jamuna River covering the North Westregion. This new company is now in its 6th year of operation. By the end of December 2005 the Company had constructed a network of 795.20 km pipelines which included 84.75 km distribution and 710.45 km feeder main & service lines. At the end of the fiscal year 2004-05 the Company had a customer base of 7,684 which increased to13,757 by the end of December, 2005. Gas marketed by PGCL amounted to about 21.80 bcf in 2004-2005. Most of the gas marketed by PGCL is consumed by three power plants in its franchise area. Among 21.80 bcf of total sales, 21.22 bcf consumed by the power plants. PGCL incurred no system loss from the very beginning and was able to maintain the trend during 2004-05. The Company attained 0.40% system gain during this period. As part of expansion of company activity as well as expanding gas network in north west region, PGCL has established distribution networks in Sirajganj, Pabna and Ishwardi towns. A new project undertaken for gas supply to the Bogra town was completed within 2005. To further expand its operation, PGCL is now initiating a programme to set-up a distribution network in Rajshahi town. 2.5.8.Rupantarita Prakritik Gas Company Limited (RPGCL) Repatriate Prakritik Gas Company Limited (RPGCL) started its activity as a company of Petrobangla from 1st January 1987. RPGCL was organized as a company to convert vehicles to Compressed Natural Gas (CNG) and to popularize the use of CNG. Later, the company was also given the responsibility of production of LPG, Petrol and Diesel from NGL produced in the gas field. With gradual shift of CNG conversion and CNG retailing activity to private sector, RPGCL is now concentrating more on evolving necessary code and standards, providing advisory services and act as a supervisory entity in the CNG sector. Over the last year vehicle, especially petrol driven vehicle conversion has seen tremendous response. During the financial year 2004-2005, RPGCL through its own CNG workshop converted 657 petrol and diesel driven vehicle into CNGV. The Company has converted

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a total of 3732 petrol and diesel driven vehicle into CNGV up to December 2005. Due to encouragement and assistance provided through RPGCL to private investors, CNG related industry has seen tremendous growth. At present there are 106 CNG refueling stations and 67 conversion workshops in the country. Out of 106 stations, 77 in Dhaka, 9 in Chittagong, 4 in Sylhet, 6 at Gazipur and 9 at different areas. Currently, the number of CNG converted vehicles are 33,028 and CNG driven vehicles are 44,534. The NGL fractionation plant of RPGCL at Kailashtila produced and supplied 7857 metric ton of LPG and 121.59 million liters of motor spirit during 2004-2005. The Company is now installing another NGL fractionation plant at Kailashtila and is entrusted with implementing a part of Dhaka Clean Fuel project under which it will expand its conversion activity and facilitate import of CNG dedicated buses for the private sector. 2.5.8.Barapukuria Coal Mining Company Limited (BCMCL) This is a new Company formed to operate the coal mine constructed at Barapukuria in Dinajpur district. This mine has a capacity to produce about 1 million tons of coal per year. The mine started partial production from 14th April 2002. Commercial Production and Maintenance Services (M&P) Contract Commercial production under a Management, commenced on 10th September 2005. Under the M&Pcontract, coal extraction from two Long wall Faces 1101 and 1106 have successfully been completed. It produced 87142.840 metric tons coal during 2004-2005 and 77520.820 metric tons during July to December 2005. The produced coal is being delivered to the Barapukuria Coal based Thermal Power Station of PDB. Development works of the next Long wall Coal Face 1109 is underway. After completion of the development works, production from the next Long well is expected to commence in January 2007. .

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CHAPTER 03

A BRIEF ABOUT TITAS GAS TRANSMISSION AND DISTRIBUTION COMPANY LIMITED 3.1.MARKETING AND OPERATIONAL PERFORMANCE: Gas Purchases-Sales: Based on gas demand and according to allocation of Petrobangla the target for purchase and sale of gas was set at 10649.02 MMCM and 10181.98 MMCM respectively for the financial year 2005-2006. The actual figures of gas purchases and sales during the year were 10,875.80 MMCM & 10,164.52 MMCM respectively. It is mentionable that the growth rate of gas purchase and sales was 10.77% and 11.47% respectively. Measures taken for improving gas supply: With the gradual expansion of Dhaka City, the number of customers have also increased. As a result, some times, gas could not be supplied in some areas as per demand with the existing pipeline network. In some areas, low pressure problems have been solved by constructing link lines such as Tejgaon, Palton, Segunbagicha, Fakirerpul, Santinagar, Postagola, Hazaribagh, Mirpur etc. Under Dhaka clean fuel project 92 KM x16" pipeline has been constructed till November 2006 in and around Dhaka City to solve the low pressure problems in distribution system & to supply gas to CNG filling stations. Besides a total of 4 DRS/TBS have already been constructed and modification work of 5 DRS/TBS has been completed. Construction of 16"x140 PSIGx12.O km Rajendrapur-Jaydebpur main pipeline from existing offtake valve in Rajendrapur area to supply more gas distribution area in Jaydebpur, area. Construction of 4"-12"diax2700 meter distribution line and connection with existing network in different places to solve low pressure problems in Pager Bscic area and industrial area of Satas,Tongi.

Safety Position of High Pressure Praline: Regular patrolling system is essential for maintaining safety of transmission pipeline. But the number of Companys Patrolmen is inadequate.Therefore, private security service has been engaged for safety of high pressure pipeline and regular supervision to prevent accident. The task of replacing the old pipeline by phases has also been taken up to improve safety measures and avoid operational hazards. Program for environmental safety improvement have also been taken up. System Loss: Effective efforts have been undertaken to reduce system loss. The premises of the Industrial & disconnected customers have been inspected by the special teams. In the financial year under review due to sincere efforts put in by Titas Management under the direction of Titas Board, Petrobangla and Ministry, positive result could be achieved from February-06 and system loss could be brought down to 6.47% during the year. System loss has come down to 6.47% compared to 7.06% in the previous year. Necessary steps have

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been taken to bring down system loss to 5%. System loss Reduction Programme: The Company has been implementing different action plans to reduce overall system loss/unaccounted for gas by maintaining areawise input-output & fixing responsibilies, RMS sealing, calibration and replacement of old meters, intensive vigilance, disconnection of unauthoried gas connection by task force, speedy disposal of court cases, electronic volume corrector(EVC), flow/pressure logging device etc. Necessary steps are being taken to prepare proper gas bill of all industrial customers through collection of meter reading by computerised remote-metering system for reduction of system loss. Necessary measures have been taken to reduce the present system loss at Narayanganj, Sonargaon Tongi, Narsingdi, Ashuganj and Brahmanbaria and metro sales zone (Ind. & Com. 1,4.). A target oriented programme is being implemented by assigning officers to collect meter reading through frequent visit of the customer premises. Meter Sealing and testing Programme is being completed Properly and timely. Despite the best efforts made by the Company and better congenial working atmosphere, reduction of system loss at a desired level could not be achieved due to shortage of efficient manpower, construction of unauthorised by-pass line by the dishonest customers, injunction order of the Honorable Court in favour of defaulter customers, Illegal re-connection from disconnected risers, unauthorised use of additional appliances/gas load, excess gas consumption by the unmetered domestic customers, interference on RMS and meter tampering etc. During the year 2005-2006 the figures for net gas purchases and sales stood at I 0,875.80 MMCM and10164.52 MMCM respectively. The sales figures for Bulk and Non Bulk customers stood at 6133.88 MMCM and 4030.64 MMCM respectively. If system loss is not counted in the Bulk sector, then the total system loss will be 14.87%. On the other hand revenue loss of all kinds of customers including Bulk customers stood at Tk 23611 crore and system loss is 6.47%. To reduce system loss and to collect arrear gas bills as per direction often higher authority, the ompanyformed 19 teams to inspect all the industrial customers premises to find out the illegal use of gas by dishonest customers. The special teams have inspected 3349 industrial customers from 11 December 2005 to 29 January 2006 . Among those customers 249 have been disconnected for illegal use of gas. As per application, the disconnected customers have been reconnected according to gas marketing policy 2004 and TK 10 corers have been realised as additional bill and penalty. The company has given a special opportunity for domestic Customers to regularizes their illegal connections without penalty from 11-2-2006 to 15-5-2006. A total of 51200 unauthorised connections were regularized. It has contributed additional TK. 1.88 crore monthly and 22.50 crore yearly to the companys sales revenue.

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Emergency Service: The Company has emergency Control Rooms at Dhaka Cantonment, Postogola, Mirpur and the 24 hours central emergency control room at Motijheel. In FY 2005-2006 a total number of 3121 emergency calls were attended including fire 146 ,80 fault of regulator407,water logging due to rain water 174, stoppage of gas supply 460, fault of lock wing cock 543, fault of meter 119, house line repair 272 and others 220 calls. All the calls. were promptly attended to ensure safe and smooth supply of gas to the customers and to avoid possible accident and loss. FINANCIAL ACTIVITIES: A brief account of the financial activities during the financial year is as follows. Sales Revenue:During FY 2005-2006 a total of 10164.52 MMCM (Million Cubic Meter) of gas was sold to various customers add a sales revenue of Tk.3408.00 crore was earned compared to previous years revenue of Tk.2991.36 crore. the growth rate in sales revenue for the year under review 13 93%. Arrear Revenue: lnspite of the Company`s increased efforts to collect arrear gas bills during the year, due to unsatisfactory realizations of arrears from the disconnected, litigant and Govt/ Semi-Govt customers arrear revenue stood at Tk. 1328.78 crore which is equivalent to 4.42 months gas bills (Gove 5.36 mo nets and private 3.99 months ) excluding bad debt. During 2004-2005 it was 1344.14 crore which was equivalent to 4.99 months gas bills (Govt 5.69 months and private 4.60 months) .Steps have been taken to reduce arrear revenue of the Govt Customers and to bring down the arrear.revenue of the private customers to 3(three) months average gas bill ; Pre-Profit: Pre-Tax Profit of the year 2005-2006 was Tk. 304.21 crore as against Tk.239.25 crore for the year 2004-2005. Net Profit: The Companys net profit for FY 2005-2006 was Tk. 206.40 crore. In the year 2004-2005 the net profit of the Company was Tk.149.53 crore. Rate Return: The annual rate of return of the year under review was 25.40% as against 19.81% in the year 2004-2005. Payment to Government Exchequer: 2005-2006 Corporate Tax CD/VAT Ad-Interim Dividend DSL Total

96.68 Crore 12.45 Crore 75.04 Crore 66.42 Crore 250.59 Crore

During the year2005-2006 the Board of Directors has recommended a dividend of 1k 75.04 crore which was paid in advance as ad-interim dividend. During the

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year 2004-2005 the amount of declared dividend was Tk. 68.19 crore. 3.2.DEVELOPMENT ACTIVITIES An al Development Programme: The Company has expanded its network implementation of new pipeline projects under the Annual Development Programme. During FY 2005-2006 an amount of Taka 77.48 crore has been spent of which Tk. 2.38 crore for the Greater Titas Franchise Area Pipeline project (phase-4) was financed from own sources and Tk. 19.54 crore for Dhaka Clean Fue Project (Titas part) was with the financing of GOB and ADB. At present, pipe line network of the company extends over greater Dhaka, greater Mymensingh and Brahmanbaria District. During the FY 2005-2006 620.86 kilometer pipeline has been laid. As on June 30, 2006 the length of pipeline under TGTDCL stood at 9816.29 kilometer which include 61 3.11 kilometer transmission pipe line and 9061.18 kilometer distribution line. Dhaka clean Fuel Project (Titas Part): With a view to saving valuable foreign currency on import of energy and to prevent environmental pollution as per Government policy the Company has undertaken a productive & pragmatic programme to convert all the motor vehicles into CNG fuelled. This project has been taken in order to extend the use of natural gas by conversion of petrol driven motor vehicles into environment friendly CNG fuelled ones specially to make the capital Dhaka a pollution free city. PP of the project was approved on 10.06.2003 by ECNEC. Construction cost of the project as per approved PP is Taka 10 313.55 lac of which Tk 5762 .25 lack is from project aided fund and Tk. 4551.30 lac is from local currency. It may be mentioned that the revised PP of the project after approval by Titas Board has been sent to Ministry through Petrobangla for further necessary action. The proposed cost of the project in the revised PP is Tk. 10894.00 lac of which Tk. 4996.00 Lac is in local currency and Tk. 5898.00 Lac is in foreign Currency. The proposed time limit of the completion of the project is December 2006. The following works are being carried out under this project :a. Construction of 16" x 99 KM Pipeline; b. 16 dia x 0.50 KM x 2 nos River Crossing. c. Construction of 5 new TBS/DRS and modification of 5 TBS/DRS. On completion of the project it would be possible to supply gas to 500 new CNG stations of greater Dhaka area within 10 years. Rest of the gas will be used to meet the increased demand of gas in Dhaka city. It is expected that the low pressure situation of the Dhaka city would be mitigated to a great extent with the implementation of the project. of 92 km pipeline has been installed under Dhaka Clean Fuel Project. Out of 5 DRS/TBS, 4 DRS/TBS have already been installed and modification work of 5 TBS/DRS has been completed. The rest one DRS

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Non Commercial Energy Commercial Energy

TOTAL ENERGY USAGE SCENRIO OF BANGLADESH

would be constructed after allotment of land from the ministry of works. The National Board of Revenue has given approval of duty/tax to be paid by the contractor for the import of RIG. Steps have been taken by the contractor to bring the RIG to the site. Greater Franchise Area Pipe Line Project (Phase-4): A project was taken up to construct in total 610 km distribution line at a cost of Tk 47.73 crore (Tk. 33.37 crore in local currency and Tk. 14.36 crore in foreign currency) during the period from July 2001 to June 2006 in Dhaka, Narsingdi, Brahmanbaria, Narayanganj, Munshiganj, Managing, and Tangail, Gasport and greater Mymensingh area. The PCP of the project was approved on 03.07.2001 by the ECNEC and PP by the Energy & Mineral Resources Division on 29.12.2001. Revised project has been sent to the Ministry after approval by the Titas Board & Petrobangla Board due to increase of the price of steel products in the international market & the price of NTL pipes. DPP of the project has been approved by the Ministry on 29-9-05. Revised cost of the project as per approved DPP is Tk 55.95 crore of which 50.48 crore as local currency & 5.57 crore as foreign currency. A total of 405.00 KM pipeline has been constructed of which 1" - X"113.41 KM at Saver, Narayanganj and Murapara area in the FY2001-2002 and 1- 8X 183.95 KM in Dhaka Metro area, Kernigan, Zinnia, Shubuta, Mymensingh sadar, Tangail, Mirzapur and Karatia in the FY2002-2003 and 1-8X108.2OKM distribution pipeline has been completed as extension work at Narsingdi sadar, Shipper, Mashed, Ghorashal, Palash and its surrounding area in FY 2003-2004 . A total of 540.82 KM pipeline has been completed in the FY 2004-2005 including 135.26 KM in Gazipur district, different district and up zeal under greater Mymensingh district . It is expected that 1 - 6 X 69.18

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km pipeline would be completed at Brahmanbaria & Managing district in 2005-2006 of which is at final stage. Gas Supply to Power Plants Project: During the year,2005-2006 the Company started to supplying gas to 10 MW Unique Power Plant (unit-2), 10 MW Partex Power Ltd & 25 MW REB Madhabdi Power Plant (unit-2) Participation in the field of CNG: To reduce the dependence on import of energy and to prevent environmental pollution as per Government policy the Company has been supplying gas to 95 CNG Stations. All the vehicals, which are [possible to convert, have been converted to CNG & new vehicles are being purchase with CNG conversion kit. Tk. 1.53 crore has been spent as fuel cost during the year. 2005-06 which was Tk. 1 .63 crore in the previous year.

3.3.TYPES OF GAS CONNECTION IN TITAS GAS TRANSMISSION AND DISTRIBUTION COMPANY LIMITED: Titas Gas Transmission and Distribution classifies its customers into following types. a. Domestic: House/Buildings used as residence, flats/colonies of various govt/semigovt/autonomous organizations, and on-trading students hostels/laboratories/canteen/hospital/mess/orphanage/ many other charitable organizations belong to this class. b. Commercial: Various trading organizations, small and cottage industries, which are not mechanized and many other service organization. c. Industrial: Mechanized small and cottage industries located in BSCIC industrial area, mechanized producers of brick , ceramic refratories, sanitaries, electrical goods and many other goods , mechanized service industries and large industrial enterprises. d. Seasonal: Organization that does not use gas all the year round but use gas seasonally (less than six month). Seasonal brickfields (not mechanized), the process of tobacco leaves, and processing industries of sugar, fruit and fruit juice. e. Captive power: The customers, whatever class they belong to, that use gas for generating electricity for their own purpose. f. Power (Govt): State-owned power stations using natural gas as fuel. g. Power(Private): Private power stations that uses natural gas as fuel. h. Fertilizer: State-owned and private fertilizer industries that use natural gas as feedstock.

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CATEGORY-WISE GAS CONSUMPTION DURING 2005-2006(IN MMCM) CATEGORY CONSUMPTION % CNG 154.5 1.52 CAPTIVE 1150.43 11.32 DOMESTIC 1122.07 11.03 COMMERCIAL 93.96 0.93 INDUSTRIAL 1509.67 14.85 FERTILIZER 1379.17 13.57 POWER 4754.7 46.78 SEASONAL 0 0 TOTAL 10164.52

CNG CAPTIVE DOMESTIC COMMERCIAL INDUSTRIAL FERTILIZER POWER SEASONAL

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MARKET SHARE OF 4 COMPANIES UNDER PETROBANGLA IN 2005-2006 ON THE BASIS OF GAS SALES(MMCM) Name of the company TITAS GAS TRANSMISSION AND DISTRIBUTION CO.LTD.(TGTDCL) BAKRABAD GAS SYSTEM LIMITED.(BGSL) PASHCHIMANCHAL GAS COMPANY LIMITED.(PGCL) Gas sales 10164.52 2650 504.139

JALALABAD GAS TRANSMISSION AND DISTRIBUTION SYSTEM LTD.(PGCL)

697.982

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CHAPTER 05
TIME SERIES ANALYSIS AND FORECASTING

5.1.TIME SERIES AND FORCASTING: Forecasting or predicting is an essential tool in any decision making process. Its uses vary from determining inventory requirements for a local shoe store to estimating the annual sales of video games. The quality of the Forecasts management can make is strongly related to the information that can be extracted and used from past data. Time-series analysis is one quantitative method we use to determine patterns in data collected over time. Time-series analysis is used to detect patterns of change in statistical information over regular intervals of time. We project these patterns to arrive at an estimate for the future. Thus, time-series analysis helps us cope with uncertainty about the future. Variations in Time Series: We use the term time series to refer to any group of statistical information accumulated at regular internals. There are four kinds of change, or variation. involved in time-series analysis: a. Secular trend b. Cyclical fluctuation c. Seasonal variation. d. Irregular variation Secular trend: With the first type of change, secular trend, the value of the variable tends to increase or decrease over a long period of time. The steady increase in the cost of living recorded by the Consumer Price Index is an example of secular trend. From year to individual year, the cost of living varies a great deal, but if we examine a long-term period, we see that the trend is toward a steady increase. Cyclical fluctuation: The second type of variation seen in a time series is cyclical fluctuation. The most common example of cyclical. fluctuation is the business cycle. Over time, there are years when the business cycle hits a peak above the trend line. At other times, business activity is likely to slump, hitting a low point below the trend line. The time between hitting peaks or falling to low points is at least 1 year, and it can be as many as 15 or 20 years. Seasonal variation: The third kind of change in time-series data is seasonal variation. As we might expect form the name, seasonal variation involves patterns of change within a year that tend to be repeated from year to year. For example, a physician can expect a substantial increase in the number of flu cases every winter and of poison ivy every summer. Because these are regular patterns, they are useful in forecasting the future.

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Irregular variation: Irregular variation is the fourth type of change in time-series analysis. In many situations, the value of a variable may be completely unpredictable, changing in a random manner. Irregular variations describe such movements. The effects of the Middle East conflict in 1973, the Iranian situation in 1979-1981,the collapse of OPEC in l986, end the Iraqi situation in 1990 on gasoline prices in the United States are examples of irregular variation. Time-series variations: Thus far, we have referred to a time series exhibiting one or another of these four types of variation. In most instances, however, a time series will contain several of these components. Thus, we can describe the overall variation in a single time series in terms of these four different kinds of variation. In the following sections, the four components and the ways in which we measure each are examined. Trend Analysis Two methods of fitting a trend line: Of the four components of a time series, secular represents the long-term direction of the series. One way to describe the trend component is to fit a line visually to a set of points on a graph. Any given graph, however, is subject to slightly different interpretations by different individuals. We can also fit a trend line by the least squares. Here emphasis will be given on the method of least squares because visually fitting a line to a time series is not a completely dependable process. Reasons for Studying Trends There arc three reasons why it is useful to study secular trends: a. The study of secular trends allows us to describe a historical Pattern. There are many instances when we can use a past trend to evaluate the success of a previous policy. For example, a university may evaluate the effectiveness of a recruiting program by examining its past enrollment trends. b. Studying secular trends permits us to project past patterns, or trends, into the future. Knowledge of the past can tell us a great deal about the future. Examining the growth rate of the worlds population, for example, can help us estimate the population for some future time. c.In many situations, studying the secular trend of a time series allows us to eliminate the trend component from the series. This makes it easier for us to study the other three components of the time series. If we want to determine the seasonal variation in ski sales, for example, eliminating the trend component gives us a more accurate idea of the seasonal component. Trend Lines Take Different Forms: Trends can be linear or curvilinear. Before we examine the linear, or straight-line, method of describing trends, we should remember that some relationships do not take that form. A common example of a curvilinear relationship is the life cycle of a new business product. When a new product is introduced, its sales volume is low. As the product gains recognition and success, unit sales grow at an increasingly rapid rate. After the product is firmly established, its unit sales grow at a stable rate. Finally, as the product reaches the end of its life cycle, unit sales begin to decrease.

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Trend by the Least-Squares Method Besides trends that can be described by a curved line, there are others that are described by a straight line. These are called linear trends. Before developing the equation for a linear trend, it is necessary to review the general equation for estimating a straight line . Equation for estimating a straight line Y =a + bX Where Y estimated value of the dependent variable X = independent variable (Time in trend analysis) a = Y-intercept (the value of Y when X=0) b = slope of the trend line Finding the Best-fitting Trend Line : We can describe the general trend of many time series using a straight line. But we are faced with the problem of finding the best-fitting line. we can use the least-squares method to calculate the best-fitting line, or equation. In this method Bestfitting Trend Line is determined as follows: Slope of the Best-Fitting Regression Line, b=(XY-nXY)/(X2-nX2) Y-Intercept of the Best-Fitting Regression Line a=Y- bx where, Y= values of the dependent variable X= values of the independent variable Y= mean of the values of the dependent variable X= mean of the values of the independent variable n = number of data points in the time series a = Y-intercept b = slope Use of a Second-Degree Trend in a Time Series : Handling time series that are described by curves So far, we have described the method of fitting a straight line to a time series. But many time series are best described by curves, not straight lines. In these instances, the linear trend model does not adequately describe the change in the variable as time changes. To overcome this problem, we often use a parabolic curve, which is described mathematically by a second-degree equation. The general form for an estimated Seconddegree equation is: Y=a+b.x+cx2 100 Where, Y= estimate of the dependent variable a, b, and c = numerical constants x = Coded values of the time variable Finding the values for a, b, and c: again we use the least-squares method to determine the second-degree equation to describe the best fit. However, we can determine the value of the numerical constants (a, b. arid C) from

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the following three equations: Least-squares coefficient for a Second degree Trend Y=an+cx2.i
x2Y=a+cx4 ii b=xY/x2.iii

When we find the values of a, b, and c by solving Equations i, ii and iii and simultaneously, we substitute these values into the second-degree equation, Equation 100. As in describing a linear relationship, we transform the independent variable, time (X), into a coded form (x) to simplify the calculation.

Time-Series Analysis in Forecasting

We have already examined all four components of a time series. We have described the process of projecting past trend and seasonal variation into the future, while taking into consideration the inherent inaccuracies of this analysis. In addition, we noted that although the irregular and cyclical components do affect the future, they are erratic and difficult to use in forecasting. Limitations of Time-Series analysis: We must realize that the mechanical approach of time-series analysis is subject to considerable error and change. It is necessary for management to combine these simple procedures with knowledge of other factors, in order to develop workable forecasts, Analysts arc constantly revising, updating. and discarding their forecasts. If we wish to cope successfully with the future we must do the same. When using the procedures of Time Series analysis, we should pay particular attention to two problems: 1. In forecasting, we project past trend and seasonal variation into the future. We must ask, How regular and lasting were the past trends? What are the chances that these patterns are changing? 2. How accurate are the historical data we use in time series analysis? If a company has changed from a FIFO (first-in, first out) to a LIFO (last-in, first-out) inventory accounting system in a period during the time under consideration, the data (such as quarterly profits) before and after the change are not comparable and not very useful for forecasting.

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CHAPTER 06 FINDINGS AND ANALYSIS OF THE STUDY.CONCLUSION AND POLICY IMPLICATION 6.1. FINDINGS: Present recoverable gas reserve of Bangladesh is 13.952(as of November/2005) TCF. It is worth mentioning that in US unit 1(one) TCF = 1000000000000 cubic feet. So this gas reserve stands to 13.952x1000000000000 cubic feet. Using time series analysis ( by means of Least Square Method of curve fitting of model Y= a +bx t model) we find that total forecasted gas demand for 15(fifteen) years in various category of gas use within Titas Gas T & D franchise area is 7839530.124 million cubic feet (MMCF), which is 56.189% of the entire gas reserve. This indicates that the remaining reserve will cater to the growing gas demand within Titas Franchise area for than 15(fifteen) years. It may be up to approximately 30(thirty) years. This also indicates that production of gas is to be enhanced to the extent of 40.92%. Using time series analysis ( by means of Least Square method of curve fitting of model Y= a +bxt + cxt2 model) we find that total forecasted gas demand for 15(fifteen) years in various category of gas use within Titas Gas T & D franchise area is 23424129.83 million cubic feet(MMCF) which is 167% of the entire gas reserve. This also indicates that the production of gas is to be increased at an average rate of 262.135%. System loss is measured as the percentage of the difference between gas purchase and gas sales. Mention-worthy that for 1% of system loss the company incurs revenue loss of Tk.2 crore per month i.e. 24 crore per year. Employing time series analysis ( by means of Least Square method of curve fitting of model Y= a +bx t model) we find that forecasted system loss would be arrested from 7.03%(December/2006) to 4.54%(December/2015), preventing revenue of about 2 crore per month. Using time series analysis ( by means of Least Square method of curve fitting of model Y= a +bx t + cx t2 model), we find that forecasted system loss would be enhanced from 7.03%(December/2006) to 21.59% (December/2015), enhancing revenue loss of about 0.0945 crore per month.

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6.2. ANALYSIS:

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CHAPTER 07 CONCLUSION AND POLICY IMPLICATION According to our findings there might be a significant gap between forecasted gas demand and our production capacity, it is imperative to explore and discover more gas resources so that more recoverable gas reserve is added to the remaining reserve. Production of gas is to be enhanced. This would not be enough. The government of Bangladesh should employ more resources in research and exploration of natural gas. The government of Bangladesh should promote adequate skills and expertise among the personnel employed in the entire gas sector to ensure efficiency and farsightedness in the management of the gas sector. All-out endeavors should be undertaken to combat system loss by all the people concerned, chalking out appropriate plans and course of action. As this fossil fuel is not endless, there should be vigorous research for non-renewable source of energy.

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