3rd August 2019
Mollah Amzad Hossain

The main program of the government in ‘Mujib Year’ is access of “power to all”. Some 94% of the population is now under grid and non-grid power supply coverage. State Minister for Power, Energy and Mineral Resources Nasrul Hamid has already declared that “Power to All” will be achieved in 2020. For making ‘Mujib Year’ more eventful, another program has been taken up – bringing 64 or 460 villages under the coverage of modern customer services of electricity supply under the ‘One Village, One Township’ program of the Prime Minister. The Power Division also pledged to advance positively all its ongoing projects. But it is not clear yet what the Energy Division would do with its coal and gas exploration initiative. Till now importing coal and LNG is being given priority for meeting the emerging demand. Two new model PSC documents have recently been given approval for oil and gas exploration. Provision of gas price at the level of Asian countries has been included in those documents. It is not yet sure when the actions would start for engaging IOCs through using these PSC documents.

The gas price hike has featured as a hot topic of discussion in the recent time. The increased cost of blended gas – addition of 1,000 MMCFD of RLNG with 2,700 MMCFD of own gas – has been the reason for the price hike. Bangladesh Energy Regulatory Commission (BERC) brought this price increase into effect from the first day of the new financial year, 1 July 2019. The BERC determination included a statement that Petrobangla is facing a deficit of Tk 18,000 crore due to blending high cost imported LNG with the own production. According to their statement, 75% of price increase was required for covering the entire additional cost. But 32.8% price increase has been made at consumers’ level. The remaining cost would come as subsidy from the Energy Security Fund. The Power Division informed that the gas price increase would not have any impact on the power tariff. Around 50% of the imported LNG is being used for power generation. But the power tariff would not require increasing as the LNG use is reducing dependence on imported liquid fuel.

Before starting import of LNG, the industrial entrepreneurs used to say that the price would not be any issue for them if the gas is available. They wanted quality gas supply at right pressure. But now after the gas price hike, they are raising voice that the gas price hike would affect industrialization. The industries in operation would also lose global competitiveness. But experts believe that the efficient use of gas can still retain competitiveness of our industries in global market. But if the present fuel import policy of the government proceeds as it is by 2025, the gas price increase in some more phases would be essential. It is extremely difficult to assess without study now whether the pace of industrialization can be kept going at that increased price level. Experts are suggesting that import of fuel at higher volume can be delayed through expediting exploration of own fuel – coal and gas. It will also not be possible supplying power at affordable price if primary fuel supply at affordable cost cannot be ensured. Acknowledging this, Director General of Power Cell Engr. Mohammad Hossain also said imported fuel will not create affordability. But in the present situation, there exists no alternative.

The government is currently working with the target of achieving three milestones in the power and energy sector. One of these is 2021, 2030 and 2041. Till 2021 fuel import may not put stress on the economy that much. Bangladesh Petroleum Corporation (BPC) is spending US$ 5 billion for liquid fuel import annually. Besides, the private sector is importing furnace oil for power generation. Petrobangla is spending US$ 480 million for purchasing IOC share of gas. Around 1000 MMCFD or 7 million tonnes of LNG import using FSRU costs US$ 3 billion annually. By 2030, LNG import may grow to 21 million tonnes and by 2041 it may grow to 35 million tonnes. If significantly large gas reserve is not added by then, the entire gas supply would become import dependent. If that happens, LNG import cost alone by 2030 (considering US$ 8 per unit) would then stand at US$ 9 billion in 2030 and US$ 15 billions in 2041. On the other hand, the coal-based power generation plan is 100% import dependent. Coal import by 2030 would be 20 million tonnes and by 2041 it would be 66 million tonnes. Considering US$100 per tonne, US$ 2 billion would be required in 2030 and US$ 6.6 billions in 2041. Around 1,160 MW power is now being imported from India. Around 3,500 MW may be imported in 2030 and 10,000 MW in 2041. At the present tariff, US$ 1.6 billion would be required in 2030 and US$ 4.5 billion in 2041. In addition to that US$ 2.8 to 3 billion are required annually for purchasing power from IPPs. In addition to these, there is a liability to repay the loans of power sector projects.

Where the annual cost of fuel import would end up? What will be the annual fuel bill? How much money can be earned through selling the power to domestic market? Will the industries remain globally competitive after meeting cost of imported fuel and power generated from it? Will new entrepreneurs be interested for fresh investment? These are being widely discussed now. Some analysts of the sector believe, it could be more appropriate going gradually to fuel import, after developing economy to a matured level using local fuel. The present strategy going for imported fuel may create adverse impact on the economy. But the government policymakers do not vouch for this. They believe the fuel that will be imported would revolutionize industrialization and would bring 10 times rate of return on expenditures for fuel import. According to them, the government exchequer would be stressed but it would be possible meeting the financial obligations.

There are challenges of developing enabling infrastructure for fuel import. Among these, the main challenge would be infrastructure for LNG and coal import. Shallow draft of Bangladesh coastline is a major problem. Some 8 meters draft at Chittagong Port and 4.5 meters draft at Mongla Port are not ideal for coal port or LNG terminal. For these, decision has been taken for developing coal port and LNG terminal at Payra, Patuakhali. A study has revealed that US$ 3 billion is required for dredging channel from the shore to deep water. Another coal port is being developed at Matarbari for which another link canal is being dredged. There is plan for a land-based LNG terminal here also. But initiative has been taken to import coal by transshipment from mother vessels anchored at deep sea as Payra and Rampal power plants would be ready for operation before the works of coal ports are completed. This will increase cost of transportation and would ultimately add to power generation cost. Two FSRUs are in operation now for LNG import. The government has decided that for LNG import in future, land-based LNG terminals would be set up at Matarbari and Payra. No further permission would be given for any FSRU in future.

It can be said that the Awami League government in its fourth term failed to give due emphasis on utilization of own fuel resources. Rather it tried to meet energy crisis through importing fuel. Former Director of Petrobangla Md. Maqbul-E-Elahi said, “Ensuring optimum use of own fuel was the policy of the Bangabandhu government. But his party now in government has taken an about-turnfrom his policy.”

Bangabandhu in his energy policy and strategy adopted in new born Bangladesh created two corporations for exploring and exploiting own natural resources. These are Bangladesh Oil and Gas Corporation (BOGC), now Petrobangla, and Bangladesh Mineral Development Corporation (BMDC). Of the 13 corporations that existed at that time, BOGC and BMDC were given special status. These were empowered while Dr. Habibur Rahman and Dr. FH Khan have been made chairmen with the status of full secretaries. For absorbing oil shock in 1974 from Arab-Israel War, Bangabandhu planned for exploring oil at Bay of Bengal. At that time only Indonesia was using PSC for oil and gas exploration. Dr Kamal Hossain had been tasked with the responsibility of formulating PSC. Bangladesh as the first country of the region went for offshore bidding of PSC in the Bay of Bengal. As many as 46 companies expressed interest for exploration. Within 7 months, 6 PSCs were concluded for exploration in 8 blocks. Union Oil Company of California discovered Kutubdia gas structure. Now, Indian company ONGC is working there under PSC with Petrobangla. But at that time in mid-1970s, gas had not that much market access. Moreover, due to political upheaval of 1975, the IOCs gradually left Bangladesh.

It has been mentioned already that Bangladesh attached more importance to natural gas for reducing reliance on oil. At that time, use of gas was very restricted in domestic, commercial and industrial sectors. Only one gas based power plant at Shahjibazar, Habiganj and cement factory at Chhatak, Sylhet were using gas. Anglo Dutch Company Shell BV was the owner of the major gas fields. Of the five fields, limited volume of gas was being produced from Titas and Habiganj only. Bakhrabad, Rashidpur and Koilashtila were not developed for production. Shell was operating these fields under Royalty introduced during Pakistan regime. Bangabandhu instructed Shell to increase production and expand operation. But they were reluctant to do it.

In the meantime, for its failure to act as per request of Petrobangla for increasing production and expanding operation, Shell was proposed to sell their assets. When they were not agreeing to it under Petroleum Act 1974, Petrobangla acquired ownership of Titas, Habiganj, Bakhrabad, Rashidpur and Koilashtila gas fields. That gave new dimensions in the discussion with Shell. Finally, they agreed to sell their assets to Petrobangla at 4.5 million pounds sterling to be paid in nine installments. The final agreement was signed on August 9, 1975. Till now 35% of total national production is coming from these five fields.

Apart from gas, initiative was also taken to explore coal and hard rocks in 1974. Bangabandhu took initiative to explore hard rock of Madhyapara and coal from Jamalganj and Barapukuria. Bangabandhu writing a letter to commonwealth secretary general requested for facilitating a feasibility study of Madhyapara hard rock. Positively responding to it, they engaged a consultant under a grant. A German company was engaged for feasibility study of Barapukuria coal mine. Bangabandhu initiated actions for mining from Jamalganj also. Late Maidul Islam was given responsibility to persuade an Indian company for mining at Jamalganj. He succeeded also. Indian company agreed for lending Tk 300 crore for it. But only few days before signing the agreement, Bangabandhu was brutally murdered.

Following Bangabandhu murder in 1975 new game started with the energy and power sector. For attaching highest priority to these sectors, Bangladesh Power Development Board, Petrobangla and BMDC was first vested under direct supervision of Prime Minister and then President. But after his killing, these were brought under respective ministries. The status of chairmen of these corporations degraded from full secretary to joint secretary. Dr. Habibur Rahman and Dr FR Khan stepped out. These corporations started losing competence and capacity which is still continuing.

Mining from Madhyapara started later, but the feasibility study of Barapukuria by the German company was never brought to surface. The coal exploration initiative was stalled. Army ruler General Ziaur Rahman tried to follow in Bangabandhu’s footprint for a while but could not achieve much. Energy sector got some momentum following annexation of state power by General HM Ershad in 1982. A PSC was signed with Scimitar for oil exploration in the Sylhet region. They discovered Jalalabad gas field. They submitted a development plan to Petrobangla. But it did not get approval after fall of Ershad government through civil commotion in 1990. Scimitar lost arbitration in international court against Petrobangla. PSCs were signed with Occidental for three onshore blocks in Sylhet and with Cairn Energy for one shallow offshore block when Khaleda Zia-led BNP government came to power in 1991. BNP during this time, instead of developing own gas field, Jalalabad handed over to Occidental. Through change of operatorship, Chevron now is the operator of PSC in three blocks.

Bangabandhu had signed agreement with Soviet Union for survey and exploration of oil and gas resources in onshore. They did some works. Wells were drilled at Begumganj, Muladi and Semutang. These were of course done after Bangabandhu killing. Bangabandhu sought assistance of Germany after formation of Petrobangla. Germany assisted Petrobangla from 1976-1986 and 2000-2003 in oil and gas exploration. They trained BAPEX in data processing. With their assistance wells were drilled at Beanibazar and Ostogram. Drilling at Fenchuganj was suspended after starting. Royal Dutch Shell drilled well at Shalbahan, Tentulia and Sitapahar in Chittagong under a contract. But they abandoned works failing to achieve any commercial discovery. One source claimed that one condition of Shell selling assets of five gas fields to Bangladesh was that they would spend the proceeds for further exploration in Bangladesh. Shell carried out those two explorations in accordance with the condition. During Ershad regime, in 1987, another PSC bidding was held using the Model PSC formulated during Bangabandhu period. This is known as second bidding round. Few companies including Total of France showed interest, but for lack of clarity regarding gas in PSC none finally agreed to continue. That model PSC, being mostly appropriate for oil and at that contemporary stage financial package offered in PSCs in Myanmar and Vietnam being more attractive, IOCs did not show any interest in Bangladesh. There was scope for getting grants for oil and gas exploration till end 1980s. But after that donors started attaching many covenants with their proposed loans after that for reformation and restructuring of the sector.

To comply with donors’ covenants, vertically integrated gas system operation was unbundled into production, transmission and distribution during Ershad regime. BAPEX was created in 1989. Investment was increased for power generation. Distribution network was expanded. At the same time, system loss through theft and pilferage became rampant. The entire power sector dipped into irregularity and corruption. International tender was invited in late 1980s for coal exploration at Phulbari. Some companies including Australian mining giant BHP showed interest. But during Ershad regime no decision was taken. During the period of Khaleda Zia-led government (1991-1996), contract was signed with BHP Mineral Corporation for exploring coal from Phulbari. But BHP after discovering coal assigned the contract to Asia Energy. The reassignment was concluded and agreed during Awami League government (1996-2001). But later during BNP regime again (2001-2006), they did not approve the Scheme of Development (SOD) that Asia Energy submitted as per agreement after conducting detailed feasibility study. For not approving the SOD and for agitation programs of Oil, Gas and Port Protection Committee (OGPC), mining from Phulbari remained suspended. Over the two years period of the interim caretaker government and 11 years of Awami league government, it has not been possible to take decision of coal mining. On the other hand, the BNP government (1991-1996) hurriedly started mining from Barapukuria by engaging a Chinese contractor. The mining operation is limping now. Study for open pit mining at Barpukuria and Dighipara is in progress now.

The Awami League government over the past 11 years could not demonstrate any mentionable success in exploration and development of own fuel resources, following Bangabandhu adopted self-reliance policy. Though gas production increased by 1200 MMCFD, it mostly came from discovered gas fields. Some 8.5 Tcf gas has been used over the past 11 years. Against that less than 2 tcf new gas has been added. Pursuing BAPEX-alone policy in offshore exploration did not bring much dividend. It has now become essential to engage IOCs through PSCs for onshore and offshore exploration as well as to abandon BAPEX-alone policy. Experts observed that with the data and information that Petrobangla already possesses in archive is enough for inviting private companies through PSC bidding under updated Model PSC with required fiscal incentives for exploration in offshore and onshore. The target must be concluding some PSCs by 2020. Many think that the government should replicate successful experience of power sector for oil and gas exploration.

On the other hand, the government should take decision of coal mining from Phulbari and Khalashpir after reviewing the two Schemes of Development (SODs) lying unattended with them. Dighipara must be developed and Barapukuria must be further developed applying appropriate mining methods. During the tenure of the interim caretaker government (2007-08), a foreign company reviewed SOD of Hosaf Group for Khalashpir field. More study was recommended before the approval. But that remains unattended unfortunately. Asia Energy submitted SOD for Phulbari mine in 2006. But for reviewing that a committee was formed with a BUET teacher having no past proven track record of mining. Failing to assess the technical merit of the SOD, the committee raised irrelevant issues regarding the contract. Consequently, it created controversy. The government did not take any decision. For this, mine ready in all respect for mining is waiting for years for decision. Experts believe the government must give green signal for mining by engaging competent companies having proven track records. Experts believe that no major mining company would come to Bangladesh till Phulbari grid lock is amicably settled.

The former chairman of Petrobangla and a mining engineer by profession Mohammad Mosharraf Hossain said, “Imported fuel dependency will make the energy security vulnerable. There is nothing wrong starting mining by foreign company under contracts protecting the interest of the country. The government agencies on standalone basis have no capacity for this. IOCs must be engaged for exploration of petroleum at onshore and offshore alongside BAPEX.” BUET Professor Dr Ijaz Hossain also suggested engaging IOCs for exploration of oil and gas at onshore and offshore. He also suggested taking stern actions for ensuring efficient use of fuel and energy. According to him, greater use of own gas and coal would delay requirement of import of expensive fuel from global market. By using own fuel, Bangladesh economy can grow to a stage eventually to absorb price shock of imported fuel. Former Director of Petrobangla Md. Maqbul-E-Elahi thought that not being able to ensure proper use of own coal and gas is a failure of the government. According to him political leadership and a certain group of so-called intellectuals cannot deny the responsibility for this.

No one would deny the remarkable success of the present government in power sector. But the sustainability of the success would come under question if the government fails to arrange sustainable supply of fuel at affordable cost. Success in power sector could be achieved through planned integration of private sector in power generation. Following the same route, enabling documents must be prepared for attracting local and foreign private sector investment for oil and gas exploration. If that can be done, major success in oil and gas exploration can be expected within 5-10 years. Even if no success is achieved, the government will not have any financial obligation. It can plan its fuel option properly.

The government has a reserve of 3.2 billion tonnes reserve of superior quality coal. Of this, mining is currently being done in Barapukuria only. A 15 million tonnes capacity Phulbari mining proposal is gathering dust at the possession of the government. If the government can give green signal to mining after reviewing this proposal by a competent company within three years, this coal can contribute massively for power generation.

We want to believe that showing due respect to Bangabandhu pursued policy of achieving self-sustaining energy and power sector relying on fuel resources, the government would adopt appropriate plans. Let that be the vision and mission of the government in the ‘Mujib Year’. Not the imported fuel dependency, but through emphasizing on exploration and exploitation of own fuel and making own fuel as backbone to national economy, Bangabandhu’s dream of Sonar Bangla can be materialized. Own fuel exploration and use will take nation one step forward. Criticism of so called self-declared patriots must not be taken on board.

  


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