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Once again, sustained high oil prices are forcing policy makers in oil importing countries to consider alternatives to oil products as transportation fuels. Unlike in the past, advancements in technology, relative success of some experiments and increased familiarity among and acceptance by the public of some alternatives indicate a higher likelihood of success. In particular, natural gas offers a couple of the best options as compressed natural gas (CNG) and chemical conversion of natural gas into diesel (gas-to-liquids, GTL). These options are likely to be most attractive in countries that have cheap access to natural gas. We compare lifetime costs of several individual transportation options for Bangladesh, an oil importer with natural gas reserves. The results are then used to inform the natural gas policy debate in the country. Assuming a natural gas price of $1.5 per million Btu, both the CNG and GTL options are competitive with conventional gasoline/diesel cars if the oil price stays higher than $35–40 per barrel. If natural gas price increases after new upstream developments, CNG becomes less attractive while GTL remains competitive up to $2.5 if capital costs of GTL facilities decline as expected. Under a government policy push (lower discounting), the breakeven price of oil falls to $30–35 per barrel. |
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