Fuel price should be market based from commercial point of view. Bangladesh Energy Regulatory Commission (BERC) must ensure through energy auditing that the wastage and inefficiency of energy sector organizations does not reflect upon energy pricing. If the government wants to provide some kind of incentives to certain sectors, it can be provided in the form of subsidy. Extensive studies must be done on future energy price and its impact on industrial development for adopting the most suitable fuel mix. There must be a decision on optimum use of own primary fuel.
Muqtadir Ali, former Chairman of Petrobangla and Bangladesh Petroleum Corporation (BPC), said this in an exclusive interview with Mollah Amzad Hossain, Editor of Energy & Power.
You worked as the Chairman of BPC. There are many questions about its efficiency. How do you think it can be restructured?
BPC as a fully government-owned company is working within the periphery of the government policy. BPC has hardly anything to do about the fuel pricing as it is fixed by the government. In my opinion, BPC must be allowed to function as a commercial organization. Fuel price must be regularly adjusted to make it market oriented. In neighboring India, the fuel price is adjusted almost every 15 days. But the consumers in Bangladesh are not getting any benefit of the lower price of fuel in global market. Now the price of fuel in Bangladesh is almost same as it was when the crude price in global market was US$150/bbl. But the price of crude in global market now is around US$60. While adjusting the fuel price and making it market based, there must be effective control on other sectors which are affected by the fuel price.
The government must let BPC work as a commercial entity. As overhead cost, it may be given a certain margin say up to 10-12%. The BPC can continue its operation as a service organization even with 10% overhead margin, if it does not make profit. At the same time, it must be restructured with skilled and competent qualified personnel to cope up with the advanced knowledge of oil industry of the world.
A large section of population believes that consumers have to bear the burnt of the theft and pilferage of BPC. What it is actually?
There is no doubt that people have lack of confidence about the operations of BPC. Loss in the import of crude and finish products are very much within the international limits as the custody transfer of products are measured at the offshore of Chattagram. It may not be known to the public that BPC had to pay the fixed tariff for its all imported products. But the cost of lighterage is getting higher for transshipment of fuel from mother vessels anchored at deep water. Losses are also happening at different stages of distribution. Though 0.3% loss is accounted for these purpose, thefts and pilferages are happening in different places during transportation in barge and fuel tankers. Three marketing companies of BPC are making profit every year even at the set price of BPC. The theft during transportation is remaining suppressed and the consumers are burdened as a consequence.
Do you think the pipeline transportation of petroleum product that has been initiated would reduce these losses?
Pipelines would be an alternative source of supply and security. These would create uninterrupted opportunity for supply and would be easier to control. Around 2,700-3,000 tonnes of jet fuel is required every day at Hazrat Shahjalal International Airport. Around 250 tank lorries used to transport the Jet fuel every day from Godnail Depot. A pipeline of 35-km long is under construction now from Kanchan to Airport. When completed, jet fuel supply will be secured and some pressure on congested roads of the capital Dhaka would be eased.
Construction of a 280-km pipeline from Chittagong to Dhaka would be started soon. When completed, it will significantly reduce dependence of fuel supply by barge to Dhaka. It will ensure security of fuel products for Dhaka in addition in controlling theft and adulteration of fuel. Dhaka alone consumes about 32% of the total national use. The rest is supplied to the other areas of the country.
Initiative has been taken to construct a pipeline from Numaligarh India to Parbatipur in Bangladesh. What are your views about it?
It is a good initiative for cooperation in the liquid fuel supply. It is understood that BPC is also paying its share of construction cost for the pipeline. Presently BPC is importing finish products from the international market and for importing it is paying negotiated premium over the fuel cost as transportation cost. In my opinion, the same procedure may be applied for importing petroleum products from Numaligarh or a procedure may be formulated so that the import cost through the pipeline matches the import price of other sources. The benefit of the pipeline can only be appreciated if the import price is comparable
Nine years have elapsed since the initiative was launched for Single Point Mooring (SPM) facility from deep water of Bay of Bengal to Eastern Refinery (ERL) Chittagong. But SPM construction could not be started yet. Why this delay? Do you think SPM would benefit?
It is known to all that because of inadequate draft big vessels carrying petroleum products cannot reach Chattagram port. As Bangladesh does not have deep seaport also,hence transshipment/lighterage is required for transporting crude oil to ERL from the mother vessels anchored at deep sea. For the lighterage additional time and added cost of about US$ 4-5/bbl is required in transportation. As draft for larger vessels not available in Chattagram port, BPC is compelled to use smaller vessels ranging capacity 20,000 tonnes to 30,000 tonnes for import of finish products and it is paying huge money for the smaller vessels in comparison to larger vessels. Hence initiative was taken for a Single Point Mooring (SPM) at Matarbari in Maheshkhali Island. Oil tankers of capacity more than 100K tonnes can anchor at SPM. Through the Offshore pipeline crude and finish products would be stored at Matarbari and from there crude and finish products would be brought to Chattagram. Around 700 million dollars would have to be invested in the project through foreign investment and own funding. It will save up to 125 million dollars every year being spent in fuel import under present situation.
Bangladesh is gradually becoming net primary fuel importing country. Can long term sustainable energy security be achieved relying exclusively on imported fuel?
Availability and price should determine the affordable fuel mix for Bangladesh. There are many countries does not have own fuel. But their situation is not vulnerable. Till early 1980s, Bangladesh used to run most of the power plants using furnace oil. Thereafter, all most all the plants were transformed into natural gas-based plants. At that time, it was only considered the use of own gas at lower price forgetting the energy mix. Now Bangladesh has started using imported gas in the form of LNG and in near future would also use imported coal for generation of electricity in addition to own gas and imported liquid fuel. To achieve long term sustainability, we must go all out to explore and exploit our own coal and gas resources. That will ensure sustainable energy security. A very important factor-deeper zone onshore exploration must be taken as soon as possible. Deeper zone exploration might open an opportunity for Bangladesh to have new discovery in the onshore areas.
Realistically Bangladesh could not make much headway in oil and gas exploration over the past 20 years. Achievement in coal resource exploitation is almost nothing. Why it happened like that you think?
Appropriate strategy for oil and gas exploration could not be adopted during this period. It is not possible to explore oil and gas only through our own resources’. On the other hand, appropriate PSC model could not be formulated for engaging IOCs for exploration in onshore and offshore areas during this time. PSC bidding with lower gas price could not attract major IOCs. Many believes that BAPEX can alone handle onshore exploration. But BAPEX could not be developed for shouldering the exclusive responsibility over this period. It was told that procuring rigs would assist in developing their capacity. But now leaving BAPEX rigs idle foreign drilling companies are being engaged for drilling wells.
Now two model PSCs have been finalized for onshore and offshore exploration. I do not think even these models would get encouraging response from IOCs. In my understanding if the price for offshore and onshore exploration is fixed in line with the imported LNG price, then IOCs would be interested to participate in the PSC biddings of Bangladesh. On the other hand, our own coal if explored and utilized would be much cheaper than imported coal.
Can LNG import under present planning help achieve sustainable energy security?
Please note that the entire power and industry sector of Bangladesh is still predominantly gas based. There was no alternative but going for LNG import as we could not ensure supply of required gas from own source. On August 8, 2019 the gas demand for grid power was 2,150 MMCFD. But against that Petrobangla could supply only 1,300 MMCFD. The deficit was 850 MMCFD. Required gas cannot be supplied for fertilizer production. Around 1,600 MMCFD gas is supplied to industries while the demand now may not be less than 2,500 MMCFD. Many industries are not getting supply as per their demand. Fuel must be supplied if industrial growth and development is desired. There is no alternative to LNG import now as domestic gas supply remains well below the demand.
But gradually we have to make our energy price market based. I do not agree with those who feel that market based energy price would make our industries losing competitiveness. Fuel price constitutes only a very nominal part of industry operation. Efficient use of energy and efficient overall operation of the industries can reduce impacts of increased fuel price significantly. Industries must use fuel very economically. State cannot or should not continue giving subsidy.
Industries are not showing much interest in using grid power for existence of captive power facility. Consequently, BPDB has to keep a significant available capacity remaining idle. What is your view?
Please note that gas for power generation is not efficiently used in the country. The scenario is not different in captive power or grid connected power generation. Captive power generation was introduced at a stage when the BPDB could not meet the demand of industries with grid power supply. Later the capacity of captive power generation increased for different reasons. Gradually, this has to be discouraged. Side by side, the cost of grid power should be reduced progressively through increasing efficiency. Quality power supply on uninterruptible basis must also be ensured.
It is known that there are some plants which are more than 30 years old and it is high time to decommission those plants. But I do not feel that any efficient power plant is remaining idle for lack of gas supply.
Do you think the eventual increased fuel price under exclusive imported fuel dependency would keep our industries competitive?
Please note that such talks are being there from notional basis. A detail techno-economic feasibility study is essential now to determine the operating expenses of different industrial products under different pricing scenario at different levels of imported fuel dependency. The government must take initiative for that right now. But fuel price must be made market based. If the government want providing subsidy to particular sector that should be given directly to them. Providing subsidy to energy pricing will not be appropriate solution at all.
On the other hand, it must be ensured that inefficiency in use, theft and pilferages in energy and power use must not burden consumers with higher pricing. For this BERC, Petrobangla and BPC must resort to modern technology and enhance the capacity of their human resources. Laws enabling efficient use of energy must be enacted and enforced.
Coal of Bangladesh is a very useful resource. What should be done to develop the sector?
Long experience in gas sector has created competent human resources. But Bangladesh lacks skilled human resources in the coal sector. I think Bangladesh must take decision now without further delay for engagement of leading mining companies having efficient manpower and modern technology for the development of coal sector. As the question of export of coal is no more there, experienced coal extraction company with mine mouth power plant should be given preference for the extraction of coal. This would enable Bangladesh generating power at affordable cost.
