ADB, AIIB join hands to support energy-starved Bangladesh

DHAKA - The Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB) have again joined hands to co-finance a mega energy project in Bangladesh.

ADB on Monday approved a $167 million loan to promote sustainable economic growth and reduce poverty in Bangladesh by improving production efficiency at a key gas field north of the capital Dhaka and by expanding transmission infrastructure.

AIIB is expected to lend an additional $60 million which will be subject to board approval and be managed by ADB, said the Manila-based lender.

It is the second project to be co-financed by ADB and AIIB, a China-proposed international financial institution that aims to support the building of infrastructure in the Asia-Pacific region and which was formally established in December last year.

In June this year, AIIB approved $165 million in loans for a Bangladesh project - the first batch of loan for the country from the China-proposed development bank.

The bank's board of directors had then approved its first four loans totaling $509 million to finance four projects including the one in Bangladesh.

ADB on Monday said that Bangladesh's economy is growing fast; however, domestic natural gas supplies cannot keep pace with soaring demand for energy, resulting in rising dependence on oil and diesel-based power generation.

"The project will help the government address the country's energy crisis by making available additional clean energy, particularly imported natural gas, through the transmission network," said Hongwei Zhang, finance specialist (energy) in ADB's South Asia Department.

"By addressing gas supply constraints and transmission bottlenecks, the project will increase the energy sector's contribution to sustainable economic growth in Bangladesh," the specialist said.

According to ADB, the project will boost gas transmission by building a 181 kilometers of transmission pipeline from Chittagong to Bakhrabad southeast of Dhaka.

The project will also install seven wellhead gas compressors to increase pumping pressure and ensure steady extraction at the Titas gas field, Bangladesh's largest field, it said.

The $453 million project is expected to be completed in late 2021. It will substitute the use of other fossil fuels, thereby reducing over 700,000 tons of carbon dioxide emissions per year over the ensuing 10 years, ADB said,

The Bangladesh government will provide $226 million for the project, it said.