6th August 2020
Syed Mansur Hashim

Without meaningful industrialization, the dream for Bangladesh to become a true, middle income country will remain elusive. To attain that status, the government has made notable strides in infrastructure development. Our main pitching points to attract the billions of dollars in FDI needed to propel the country’s infrastructure have seen movement towards setting up special economic zones, transportation networks and speeding up power generation. Our two main selling points have been the availability of a large pool of trainable and affordable labor, and, cheap energy.

 

We love to talk about the abundance of our labor. We seldom touch on the issue of productivity and efficiency. Once those coal-fired power plants are up and running, every power company will have to have a pool of highly trained and skilled manpower involved in the entire supply chain (import of coal – transportation – handling of coal from port to power plant). That pool of skilled labor does not exist today. Our educational institutions including universities are unfortunately have fallen behind and unable to match the skillsets that will be required by this pool of manpower in the not too distant future. Case in point example is our vibrant textile and apparel industry which is largely run by a pool of hundreds of thousands of foreign technicians. So, unless policymakers start making inroads into upgrading the technical education that will be adequate to meet needs of industry, these plants being built by foreign contractors will have to be manned and operated by foreign experts – the cost of which will be an added burden to the cost of power produced – an unfeasible situation.

 

On the question of cheap abundant energy, there is bad news on both fronts. Unfortunately, our energy is no longer cheap. On top of that, energy sector planning has been hamstrung by a lack of serious exploration of own gas resources, both onshore and offshore, and no move to extract own coal deposits. Policymakers have undertaken major projects to meet power generation progressively for 2021, 2030 and 2041. The vision states that some 60,000 megawatts (MW) power generation capacity by 2041, where coal-fired power plants will produce 22,000MW. And this power is to be produced with “imported” coal. Let us look at some basic facts. The government will have to import approximately 66 million tonnes of coal annually to generate 22,000MW.

 

In a country where we have the unfortunate experience of some 140,000 tonnes of coal disappearing from Barapukuria coal mine, precisely how are we going to tackle and keep track of millions of tonnes of coal being imported? While there are plans to setting up a coastal corridor and using river routes to transport coal to power plants, how feasible is that plan in reality? Given that if a single vessel sinking in a shallow river holds up traffic for days on end, what contingency plan do we have to deal with the chaos of hundreds of coal-laden vehicles crisscrossing our rivers to keep coal plants up and running? The time has come to introspect and do what is feasible.

 

The experiment with LNG has not given us “affordable” energy. The price of imported LNG is three to four times that of natural gas produced in the country. So, as we dilly-dally with drilling exploration wells for natural gas, the energy needs of the country is going lopsided. The LNG, even if it is USD 8.0 per million standard cubic feet (MSCF), will cost the national exchequer around USD 3.0 billion for 1,000 MMCFD. Can we afford that sort of import bill?We should not forget that the present (apparently attractive LNG price) will not remain at this level forever. Once the petroleum product market shoots up (it is inevitable), how are we to deal with the balance of payments? Are we ready to indefinitely provide subsidies for both primary and electric energy? And what will be the price of gas when this expensive imported fuel joins the fuel mix? All these questions lead us to the fundamental question as to why Bangladesh is not extracting its own coal reserves?

 

For years the open pit mining of coal deposits has been a festering political issue. The reality is that without open pit mining, there will be a very little option of attracting FDI in the areaas the major coal field in Phulbari-Barapukuria area (comprising of nearly a billion tonne good quality coal reserve) is technically and financially feasible to mine only with open pit mining method. Can we afford to avoid extracting own coal? The problems associated with import of coal is already stated. The physical transportation of millions of tonnes of coal via waterways is a technical challenge far beyond our capacity to meet. The cost factor will also be exorbitant. But most importantly, why are we betting our horses on an import-based policy of raw materials for energy generation? This policy is fraught with political challenges. What happens if there is breach of contract by exporting companies and we are left high and dry of coal supplies? Are our plants to sit idle? Can we afford to not produce for a single day? This is a pipe dream and a recipe for disaster. We should not forget the coal fired power plants’ capacity under construction and those that are in the pipeline and their respective need for uninterrupted coal supply. In addition, the idling cost (capacity charge) burdens that the country will have to bear in case of supply interruptions of coal for the power plants.

 

It is high time we set aside our misgivings about the development of our own proven coal deposits. We cannot afford to delay the decision for another decade. Because the deposits of our primary energy source (natural gas) have already fallen to dangerously low levels hovering around 8.0 TCF (trillion cubic feet). And we cannot afford to import either coal or LNG which will entail billions of dollars every year in import bills. These matters are not lost upon potential foreign investors. Foreign investors will judge the cost of doing business and payback period for investment very seriously before putting in a single dollar into our economy.

 

They will judge the timely delivery of services, including energy. And if we cannot ensure quality power and energy at a cost that is deemed to be cost-effective, all the national plans and visions for the future will be laid to waste. The unfortunate reality is that more than a decade has been wasted on the coal issue and there is no more time. The coal plants are being built and we have to move beyond the utopia of imported coal. The LNG-import experience alone should be enough to wake up policymakers about what sort of headache the country is headed towards when millions of tonnes of coal will have to be tackled.

 

Of all the coal mines in the country, Phulbari is the only field ready to be mined seriously. This is where investors are willing to invest. Work on all other fields should be started simultaneously. It is the lack of a political decision that has hindered progress on coal development and exploration, and it is time to correct the historic mistake of not going for own coal a decade ago.

 

Syed Mansur Hashim;

Deputy Editor, EP


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