The landslide victory in the general election held on December 30, 2018 has created another opportunity for the grand alliance government led by Bangladesh Awami League to continue with the momentum it created for working towards sustainable energy security. Never before any particular political alliance had the opportunity to serve the nation for the third consecutive term. No government had even served two consecutive terms. It must not have escaped the attention of informed observers that Bangladesh moved out of chronic power and energy crisis to the region of comfort from 2009 to 2018. Access to power increased from 47% to 92%, installed generation capacity of power increased from 4,942 MW to 17,865 MW, the actual generation increased from 3,200 MW to about 12,000 MW. However, it has not also escaped attention that rapid depletion of predominant primary fuel, own natural gas, pushed Bangladesh increasingly towards imported liquid fuel.
The government over two consecutive terms unfortunately failed taking political decision on exploiting own coal resource. The exploration for petroleum resources in onshore and offshore could not be done at required pace. Consequently, due to increasing demand for gas outpacing reserve replenishment caused rapid depletion of proven reserve. The government plan for importing LNG to overcome gas deficit also suffered protracted delays, causing gas crisis to continue. The government rightly planned for diversifying the fuel mix, making imported liquid fuel the preferred option over short term, coal for mid-term, coal, nuclear and imported power over the long term. The short term plan achieved success. The mid-term one for setting up several large coal based power plants suffers from prolonged delays, causing liquid fuel based contingency short term plan extended and expanded. All these have made sustainable supply of fuel for achieving energy sector vision a major challenge for the alliance government in the new term. The Power System Master Plan 2018 prescribes 35% contribution to targeted 60,000 MW of generation, which is planned to come from coal (34% imported), 35% from pipeline gas and imported LNG and 30% from nuclear, imported fuel and renewables. The present fuel mix, according to BPDB website, shows natural gas contribution 57.31%, furnace oil 22.63%, diesel 8.91%, power import 6.56%, coal 2.96%, hydro 1.36%, renewables 0.13%. One can imagine how steep is the challenge for Bangladesh in developing infrastructure, facilities and capability for importing coal and LNG to achieve the planned contributions from imported fuel. The success of Bangladesh achieving power system vision largely depends on arranging sustainable and affordable fuel mix. The government needs to explore and exploit its own primary fuel reserve and resources with highest priority alongside developing required infrastructure for fuel import. Bangladesh must develop its human capital much more aggressively to professionally manage the massive power and energy infrastructure. The government must also open its windows to private sector for integration in all segments of power and energy value chain for well harmonized growth and development. Absolute majority in the parliament has armed the government with required authority of taking positive decisions.
Affordable Fuel Mix
A developing country like Bangladesh cannot sustain almost exclusive dependence on imported fuel. The situation, circumstances and reality is very different than Japan, South Korea and few other countries which can afford it. Those countries do not have own primary fuel. They are located geographically in areas having wide sea and waterways all around. They have technology and capability for setting up coal ports, LNG terminals. They have own qualified and trained human capital. Moreover, their economy can absorb higher cost of imported fuel. In such consideration, Bangladesh must have balanced fuel mix of imported and own fuel. For different reasons, Bangladesh could not take decision on exploiting own coal. It also could not explore and exploit its hydrocarbon potential to full extent. New government must take decision for mining own coal and adopt strategy for expediting own petroleum resources. A 50:50 mix of imported and own fuel would be the right choice. If the right strategy is adopted within the first 6 months in the office, positive results may be evidenced by the end of the term in 2023.
Local Coal and Imported Coal
The election pledges of the political parties or alliances, not even that of the Awami League, had no clear vision about affordable fuel mix or the sustainable supply of the fuel. No pledge included any clear vision for exploiting substantial own coal reserve and petroleum resources. In business as usual case, Bangladesh may become over 90% dependent on imported fuel if it fails to take required political decision now for exploiting its 67 Tcf equivalent superior quality (high heating value, low sulfur, low ash coal) and expediting exploration and exploitation of petroleum resources at onshore and offshore. The new government must take appropriate decision for mining coal from at least four of its five discovered coal mines within the first six months of assuming office in the new term and plan for about 10,000 MW of mine-mouth power generation. Side by side Bangladesh must develop its railway communication system for transporting coal by rail from Dinajpur, Rangpur to Payra, Rampal and other areas where medium to large coal fired power plants are being set up. It has been seen already that setting up of coal port and coal transportation terminal is a major challenge for Bangladesh for shallow drafts in Bangladesh coastal areas. Only South Matarbari is the suitable area where a coal port is being developed. It may take up to 2023 for making it suitable for coal export for the 2X1200 MW imported coal based power plants under construction there. There is not much progress in the plan for a Coal Transshipment Terminal (CTT) at Matarbari which is planned for meeting requirements of coal for about 10,000 MW total capacity power plants in Matarbari, Maheshkhali and adjoining areas.
There exist huge challenges of coal import for Payra and Rampal power plants. Studies evidenced that transshipment of coal from deep water of the Bay of Bengal in Bangladesh territorial waters has restricted weather window. The present plan for transshipping coal from nearby Indian port or deep water would make coal transportation expensive.
This would impact on power generation cost and ultimately make it challenging to supply to even the coal based power plants at affordable cost. Given the climate change vulnerability, Bangladesh has adopted ultra super critical technology for coal based power generation. This would require use of superior quality coal and blending for a right mix. Bangladesh coal perfectly suits the technology. All these make local coal as the most affordable option.
Local Gas and LNG
Bangladesh could compete appreciably in the world market for relatively cheaper own natural gas making major contributions in power generation and fuel supply to export-oriented industries. Imported LNG is prohibitively expensive. The present and emerging situation of gas demand exceeding supply manifold makes it imperative for LNG import. But in no way Bangladesh can rely almost exclusively on imported LNG. The relatively much higher cost of LNG would not keep Bangladesh export commodities competitive in the world market. Moreover, it has already been experienced that Floating Storage and Regasification Units (FSRUs) is not a right solution for Bangladesh. It requires land based terminals. These would be very expensive and would take long time. Moreover, global and regional geo politics would keep global fuel market volatile. The price of crude oil linked to LNG would make imported energy generation prohibitively expensive. Bangladesh is still among the least explored country of the world. There is significant potential for discovering more gas in onshore frontier areas and offshore. The new government must finalize the Model PSC 2018 within six months of assuming office and announce fresh round of PSC bidding. The new PSC bidding should have three parts – offshore bidding for shallow water and deep water blocks, onshore bidding for western region of Bangladesh and onshore bidding for deeper plays of discovered gas fields. The government must not hesitate at all for letting out PSC bidding in onshore blocks. It is well beyond BAPEX capability now to shoulder exclusive responsibility for onshore exploration. It can be strongly suggested for organizing an international seminar in Dhaka inviting all prospective IOCs, donor agencies and development partners on Model PSC 2018. Based on discussions and suggestions, the Model PSC 2018 may be further updated, making it truly investment friendly and win-win prospect for contracting parties.
Human Resource Development
Whether it is development of power and energy infrastructure mega projects, operation and maintenance or negotiating for fuel/power import and contracts management, Bangladesh essentially requires human capital development. The new government must attach highest priority to this area. Operation of ultra super critical technology using thermal power plants, operation of coal and LNG value chain would require few thousands of qualified and well trained professionals. Technical universities and institutes are producing graduates and technicians in Bangladesh. But unfortunately these institutes have no linkages with the industry. As such industry relies heavily on foreign experts and consultants. A 10,000 MW power industry is limping in such situation. Bangladesh must not let it go like this while it plans for a 40,000 MW power generation capacity by 2030 and 60,000 MW by 2041. There must be a very well executed human resources development program for efficient operation and maintenance of Energy and Power Infrastructures.
Policy Updating for Private Sector
We suggest the government to update the policies as soon as possible for integrating private sector, preferably local private sector in different segments of power and energy value chain. The industry is growing well beyond the capabilities of state owned enterprises for investment, reinvest and operate efficiently. The private sector can recruit and retain competent professionals with required incentives, adopt appropriate technical and managerial excellence, woo investment of non-resident Bangladeshis, utilize the experience and capabilities of non-resident Bangladeshi experts.
We hope the government over the past two terms has learned lessons about professional development of its energy and power sector. The challenges for the sector is very different than most of the other sectors. The success of the government in holding on to the momentum of economic development would largely depend on how effectively it addresses the challenges.
Saleque Sufi;
Contributing Editor, EP
