Strategic Energy Collaboration: Enhancing US-Bangladesh Initiatives

US, a global leader in energy innovation, boasts cutting-edge technologies and expertise that perfectly complement Bangladesh’s ambitious renewable energy goals and diversification plans.

Bangladesh stands at an exciting crossroads. Its thriving economy and burgeoning population demand a robust energy sector, and the nation is poised for a dynamic shift towards a clean and secure energy future. A strategic energy collaboration with the United States presents a powerful catalyst for this transformation. The US, a global leader in energy innovation, boasts cutting-edge technologies and expertise that perfectly complement Bangladesh’s ambitious renewable energy goals and diversification plans. This paper explores the positive prospects of a US-Bangladesh strategic energy collaboration, highlighting key areas for cooperation that can unlock immense benefits for both nations.

Recently completed USAID projects up until June 2021 marked significant milestones in advancing renewable energy and clean energy sectors in Bangladesh. The Scaling up Renewable Energy (SURE) initiative focused on enhancing integrated resource planning, integrating variable renewable energy (VRE) and storage, and facilitating renewable energy (RE) procurement through auctions. Concurrently, the Wind Power Capacity Building project aimed to establish a competitive wind power market by bolstering private sector involvement and investment. The Bangladesh Clean Energy Sector Assessment explored opportunities and challenges for private sector engagement and regional energy integration, laying a foundation for future energy initiatives.

Following these achievements, USAID’s ongoing energy activities post-June 2021 include the Bangladesh Advancing Development and Growth through Energy (BADGE) program, which commenced with a new $17.2 million contract in June 2021. BADGE focuses on comprehensive energy development strategies to drive sustainable growth. The Reinforcing Advanced Energy Systems (RAES) initiative, in collaboration with the National Renewable Energy Laboratory (NREL), entered its third phase in May 2021, emphasizing advanced energy system enhancements. The Energy Research Activity (ERA), launched in February 2021, aims to advance innovative energy solutions through research and development. Additionally, the Energy Regulatory Partnership Program (ERPP) continues to build institutional capacity for the Bangladesh Energy Regulatory Commission (BERC), fostering effective governance and regulatory frameworks. In parallel, USAID remains actively engaged in regional and interagency energy programs across South Asia, collaborating on initiatives such as the South Asia Regional Initiative for Energy Integration (SARI/EI), South Asia Regional Energy Program (SAREP), South Asia Gas Enterprise (SAGE), and South Asia Regional Energy Hub (SAREH). These programs underscore USAID’s commitment to fostering regional energy cooperation and sustainable development. Furthermore, partnerships with entities like the US Department of State and regional offices like USAID/RDMA (Bangkok) contribute to broader initiatives such as the Asia Gas Partnership (AGP) and Power Sector Program, collectively shaping a resilient and integrated energy landscape in the region.

Progress in US-Bangladesh energy collaborations remains ongoing and multifaceted, with initiatives continuing to evolve beyond initial achievements. Future prospects include further enhancements through sustained partnerships and innovative strategies, ensuring continued advancement in energy security and sustainability.

U.S. companies have a significant impact on Bangladesh’s power and energy industry, supplying around 55 percent of the country’s domestic natural gas and being major investors in power projects as of July 2022. U.S.-made power turbines generate 80 percent of Bangladesh’s gas-fired power capacity. Opportunities for offshore gas exploration also exist, with 26 blocks in the Bay of Bengal (11 shallow and 15 deep-sea). In March 2020, Petrobangla awarded a contract to the U.S.-Norway joint venture TGS-NOPEC and Schlumberger to conduct a 2D seismic survey over these blocks. The 2019 amendment to the Model Production Sharing Contract (PSC) aims to attract more international interest by allowing the export of gas not purchased by Petrobangla. In 2021, Bangladesh, along with India’s ONGC Videsh Limited, began drilling a new block in the Bay of Bengal under a PSC.

To meet its growing fuel demands, Bangladesh has started importing liquefied natural gas (LNG). The first floating storage and regasification unit (FSRU) in Moheshkhali, developed and operated by a U.S. energy company, began operations in 2018 and will continue for 15 years. Currently, Bangladesh has two FSRUs with a combined capacity of 1,000 MMCFD. The government plans to add three new liquefied natural gas (LNG) terminals to the existing two, located in Moheshkhali and Matarbari in Cox’s Bazar, and Payra. Two will be floating, and one will be land-based. Additionally, the capacity of the current Floating Storage and Regasification Units (FSRU) will increase from 500mmcft to 630mmcft per day. Bangladesh has successfully installed over 4.2 million Solar Home Systems (SHS) nationwide.

Back in 2000, Bangladesh and the United States signed an agreement to establish a new energy partnership focusing on electric utilities and regulation. The U.S. Energy Association (USEA) and the Power Grid Company of Bangladesh (PGCB) formalized the agreement, funded by the U.S. Agency for International Development (USAID). This collaboration marks the first such agreement with Bangladesh and stems from President Bill Clinton’s visit to the country, according to Grant William Anderson, director of USAID’s Office of East and South Asia. Anderson expressed optimism that this historic partnership would lead to further cooperative efforts. The USEA’s Energy Partnership Program, which began in 1990 with initiatives in Eastern Europe, now encompasses around 65 projects aimed at helping developing countries manage their utilities and regulatory agencies. The new partnership with PGCB aims to adapt effective practices to Bangladesh’s context and bolster local companies involved in electricity generation, transmission, and distribution. PGCB, established in 1994, oversees Bangladesh’s transmission system and is working to attract foreign investment to meet the country’s substantial electricity needs. USAID has also focused on rural electrification and developing natural gas resources to promote sustainable economic growth in Bangladesh. USAID launched the South Asia Regional Energy Initiative to facilitate regional cooperation in power generation, transmission, and distribution, with PGCB being a crucial partner in these national and regional efforts.

Till February 2024, Several US companies are showing significant interest in exploring offshore oil and gas reserves in Bangladesh. ExxonMobil, a prominent US-based multinational oil and gas corporation, has been considering participation in a bidding round to lease 15 deep-sea blocks since last year. Additionally, Chevron, another US company, recently expressed interest in exploring the Bay of Bengal. Chevron Bangladesh is already engaged in extracting natural gas from onshore areas in the Sylhet region.

According to Energy Division sources, Petrobangla is currently reviewing proposals from Chevron and ExxonMobil. However, no deals will be finalized without an international tender process. Petrobangla plans to hold an international bidding round in March for offshore oil and gas blocks, with a maximum of four blocks to be allocated to any single company, as per officials. If the bidding rounds commenced in March, International Oil Companies (IOCs) would have six months to submit their proposals. Despite the planned international bidding rounds, Petrobangla officials have indicated that US companies ExxonMobil and Chevron are almost certain to secure offshore oil and gas exploration projects in Bangladesh. A high-ranking Petrobangla official, speaking anonymously, confirmed that both Chevron and ExxonMobil are expected to participate in the tender, with no other companies currently showing interest.

ExxonMobil proposed to Petrobangla last March to conduct oil and gas exploration in the Bay of Bengal, expressing interest in leasing the entire deep-sea area of 15 blocks. In a letter sent on July 16, ExxonMobil outlined plans to invest $40 to $50 million in a two-dimensional seismic survey and potentially $50 to $100 million more for three-dimensional surveys if initial findings are positive. The company plans to invest $80 million in developing each well, with total investments potentially ranging from $10 to $30 billion for deep-sea exploration. Successful exploration could save Bangladesh $3 billion annually on liquefied natural gas (LNG) imports. ExxonMobil representatives met with State Minister for Power, Energy, and Mineral Resources Nasrul Hamid on February 20 to discuss their interest and willingness to proceed with the necessary surveys. On the other hand, Chevron has been involved in onshore gas exploration in the Sylhet region for the past 25 years and currently supplies 60 percent of Bangladesh’s gas. Previously, the gas supply reached up to 1,400 million cubic feet per day. Currently, production has fallen to 1,100 million cubic feet and is expected to decline further. However, projections indicate that production will rise by 2027, eventually returning to 1,400 million cubic feet by 2031. On February 18, Chevron officials expressed interest in offshore exploration in the Bay of Bengal. Chevron Bangladesh President Eric Waker confirmed the company’s participation in the offshore bidding round in March, citing more attractive terms in the new production sharing contracts (PSCs).

Petrobangla Chairman Janendra Nath Sarker announced that international tenders would be invited in March to allocate 26 blocks in the Bay of Bengal, with 11 shallow and 15 deep-sea blocks. Despite past attempts to attract international tenders with limited success, the new Model PSC finalized last year aims to offer more attractive terms. The 2019 PSC set gas prices for shallow and deep-sea at $5.6 and $7.25 per MMBTU, respectively, with Bangladesh retaining 50 to 80 percent of offshore gas shares. The 2023 Model PSC proposes gas shares of 40 to 65 percent in deep-sea and 35 to 60 percent in shallow sea, including provisions for gas export.

However, USAID and NREL are providing technical support to the Bangladeshi government to advance renewable energy initiatives, aiming to stimulate private sector investment, drive economic growth, and meet increasing energy demands through domestic resources. Building on previous efforts, the Reinforcing Advanced Energy Systems project was launched in May 2021 to offer premier technical support for scaling and deploying advanced energy systems, aiding Bangladesh’s shift to a sustainable, secure, and market-driven energy future. Key activities, developed with input from Bangladeshi stakeholders, include enhancing data-driven decision-making for energy policies, promoting best practices in energy planning, and strengthening local analytical capabilities. The project focuses on renewable energy development in economic zones, grid modernization, distributed energy resource integration, cross-border electricity trade, renewable energy procurement, energy efficiency, and institutional partnerships. This program builds on years of successful wind energy projects in Bangladesh, including the Bangladesh Wind Resource Mapping Project, which assessed the country’s wind resources and provided data to support clean energy policy and planning.

Energy security and access are vital for Bangladesh to achieve its economic growth targets and enhance living standards. USAID, in partnership with the U.S. government interagency in Dhaka, collaborates with the Government of Bangladesh (GOB) and the private sector to foster a more favorable business and investment climate, ensuring a level-playing field for both local and international energy companies. In this context, USAID Bangladesh’s flagship clean energy project, Bangladesh Advancing Development and Growth through Energy (BADGE), aims to bolster energy security and resilience by enhancing access to affordable, reliable, and sustainable energy systems, and by promoting transparent and efficient energy markets. The project supports the deployment of advanced clean energy systems, advocates for transparent and best-value energy procurement, and increases participation in regional energy trade and cooperation, all under the guidance of high-performing energy institutions. This effort is designed to contribute to the sustainable development goals of prosperity, well-being, and resilience for Bangladesh’s citizens. The BADGE project has already signed a Memorandum of Understanding (MoU) with the Power Division of the Bangladesh Government and is establishing partnership arrangements with various private sector entities. These efforts aim to boost sector investment, create favorable policy and regulatory environments, support entrepreneurs in developing and distributing energy technologies, and share best practices in energy sector management. BADGE is aiding Bangladesh’s transition to a developed, decarbonized, and inclusive energy sector.

Since its launch in June 2021, BADGE has been pivotal in transforming Bangladesh’s energy sector over the next five years, enhancing energy security and sustainability both in Bangladesh and the broader South Asia region. The program’s objectives align with the Clean EDGE Asia Initiative and USAID Climate Strategy. With $17.2 million in U.S. technical assistance managed by Tetra Tech ES, Inc., the program supports the GOB in managing the energy sector, establishing an efficient and transparent energy market for long-term investment stability, and mobilizing clean energy finance. The BADGE Program aims to advocate for advanced energy policies, provide technical assistance to energy institutions, promote innovative energy procurement methods, and enhance regional energy trade participation. These goals highlight its commitment to advancing sustainable and efficient energy practices.

The potential of a US-Bangladesh strategic energy collaboration is brimming with optimism. The US can share its knowledge and technology, empowering Bangladesh to build a resilient and sustainable energy infrastructure. This translates to a brighter future for Bangladeshi citizens, with improved access to clean energy sources and a more stable power grid.  Furthermore, this collaboration fosters a thriving marketplace for US clean energy solutions, strengthening economic ties between the two nations. As Bangladesh spearheads South Asia’s transition towards a clean energy future, a successful US-Bangladesh partnership can serve as a beacon of inspiration for the entire region. By partnering, the US and Bangladesh can not only ensure their own energy security but also pave the way for a future powered by innovation, collaboration, and a shared commitment to a sustainable world.

Syed Raiyan Amir
Syed Raiyan Amir
Research Associate The Center for Bangladesh and Global Affairs (CBGA)