Petrobangla sources said Unocal agreed to their proposal to develop and supply gas of 200 million cubic feet per day (mmcfd) from late 2006.

The oil company is now making a development plan for the Bibiyana field shelving its proposal of gas export through pipelines.

"The government neither officially rejected the export proposal, nor accepted it," said a top Petrobangla source, "because the situation has driven the issue to a point where developing the Bibiyana field for domestic market turned out to be the most pragmatic option for Unocal."

Unlike many pro-export projections that says Bangladesh's annual gas and energy consumption will hardly exceed 5 percent growth rate, domestic gas demand has been picking up at 10 percent.

The pro-export projections claim that Bangladesh is 'floating on gas', but all recent attempts of oil companies to strike gas failed miserably. Even in the highly prospective block 9 where international oil companies began exploration, initial failure echoed Petrobangla's caution against unreal suggestions on gas reserve.

With domestic demands for gas soaring, the proposal to export the resources came under serious scrutiny. Many suggested that exports would only benefit Indian industries and Unocal, not Bangladesh.

In 2001, Unocal proposed construction of a 30-inch diameter, 1,363 kilometre pipeline with a capacity of exporting 500 mmcfd from the Bibiyana gas field to the Indian capital of Delhi.

Unocal said it would give Bangladesh $3.7 billion in revenue under a 20-year project with $500 to $700 million immediate foreign direct investment.

In support of its export proposal, Unocal said Bangladesh had not enough domestic demand for development of Bibiyana field for consumption.

In view of pressure for gas export from the World Bank-led development community and the United States, two national committees on gas utilisation and reserve were formed to tackle the issue.

The utilisation committee came up with a forecast for gas crisis from 2015, saying Bangladesh should not export gas unless the discovery of new reserves to meet local demands.

A wave of anti-export sentiment, largely sparked by major opposition parties, swept the nation and stopped the government from giving Unocal the nod to go for gas export.

A confidential report to Prime Minister Khaleda Zia a few months ago said the export proposal projected pots of profit to Bangladesh, but such a deal would make it to bleed.

"We must remember that the import substitution of gas (petroleum) is five times costlier than the gas we will export," said a source quoting the report. "We import petroleum for power generation in places where we have no gas and we spend a lot for such import."

"If we are making a profit of $1 from each unit of gas export, we are actually bracing for $5 expenditure for import of its substitute in near future. Once we spend the gas we have now, it will not grow back," said the source.

The report said the running of a project like Unocal's required a reserve of 9 trillion cubic feet (TCF) of gas. Bibiyana gas field has a proven reserve of 2.4 TCF and may run into 5 TCF in a very optimistic scene, the report added.

"Unocal's calculations show that 5 TCF reserve is enough for the export market. But Petrobangla has its share in Bibiyana gas what it is not going to export.

"So Unocal will need more sources -- it will need a reserve of 9 TCF to support its export plan," said the source.

The present gas demand has soared up to 1,300 mmcfd, growing by 100 mmcfd last year. This demand is set to grow by 10 percent every year and likely to peak at 1,824 mmcfd in June 2007.