DHAKA, Nov 30 (Reuters) - Bangladesh Energy Regulatory Commission (BERC) rejected on Sunday a proposal by the state-run Bangladesh Oil, Gas and Mineral Corporation or Petrobangla to raise natural gas prices to offset losses.
"We decided not to raise natural gas prices proposed by the Petrobangla as the state firm is making profit by selling gas to the consumers," said Ghulam Rahman, chairman of the BERC.
Bangladesh in 2003 formed BERC following suggestions by the Asian Development Bank and the World Bank to closely monitor, review and adjust country's administered oil, gas and electricity prices in accordance with the global prices.
"Petrobangla proposed to raise gas prices by nearly 66 percent on average at consumer level to pay its bills to the international oil companies (IOCs), which we do not consider just and reasonable," Rahman told reporters.
The outstanding bills of the IOCs until June 2008 is about $359 million, officials said.
Foreign companies involved in gas exploration and production in Bangladesh include Chevron of the United States, the UK's Cairn Energy, Irish company Tullow, French oil company Total SAa and Canada's Niko Resources.
Rahman said the BERC might consider to hike gas prices between 10 and 15 percent only if Petrobangla wanted to create a "gas development fund" dedicated to gas exploration and production in order to boost natural gas supply.
Bangladesh at present faces up to 250 million cubic feet of gas (mmcf) shortages every day.
"The Petrobangla has to place a new proposal for any price increase," Rahman said.
"After we received the suggestions from the BERC, we will review and discuss with the ministry to take a decision," said Jalal Ahmed, chairman of the Petrobangla.
BERC said Petrobangla is making profit as its production cost for per unit or per thousand cubic feet (mcf) is 109 taka ($1.58) and selling price is 111 taka ($1.61), meaning it is making nearly 2 percent profit.
Jalal told Reuters Petrobangla was incurring losses of 800 million taka ($11.6 million) every month, because its buying cost of natural gas from international oil companies is more than the selling prices.
Petrobangla is supplying nearly 1,800 mmcf of gas per day to the national grid, of which it buyes almost half from the international oil firms with a cost of 94 taka per unit compared with 7 taka from the Bangladeshi oil firms.
In total, Petrobangla is purchasing gas worth 2.1 billion taka a month, which it sells for only 1.3 billion taka, Jalal said. ($1=68.80 taka) (Reporting by Serajul Islam Quadir; Editing by Andrew Macdonald)