21st July 2022
Dr. M Tamim

The importance of energy independence was never felt more important than under the current situation. Energy independence is a national security issue. Bangladesh’s gas resource is dwindling, and the only other indigenous energy resource is coal. In 2012, the honorable Prime Minister declared that indigenous coal would not be developed for the time being. But time has changed. Despite serious energy transition efforts by advanced countries, the role of fossil fuels is not going to go away. Many countries will take much longer for the transition or may not even be able to move away from it unless some new technology evolves. Bangladesh never explored or examined the possibility to develop its own coal through an independent study. The two proposals on which much debate took place were proposed by Asia Energy and Hosaf Consortium. The entire issues of environment, crop losses, and rehabilitation must be studied by a noninvolved third party neutrally and see if these can be minimized below acceptable limits. The political decision must come at the end of a detailed financial, social and economic analysis. Now is the time to put behind all doubts so that we don’t regret our decision.

 

Dr. M Tamim, Dean of Chemical and Material Engineering Faculty of BUET, made the observation in an exclusive interview with Energy & Power Editor Mollah Amzad Hossain. 

 

The world economy is now facing an energy crisis. Bangladesh is also in a deep crisis. We are hearing about multi-faceted initiatives. Can Bangladesh manage the impacts?

 

Please note that the major challenge of Bangladesh is the acquisition and supply of primary fuel. The major impediment is arranging additional funds now required for imported primary fuel. Nothing much is being told about it. If we had a huge foreign currency reserve and steady earnings, we would have no problem. That would increase the price of electricity at the consumers' level from Tk 6.0-6.5/unit to Tk 8.5-9.0/unit. A huge amount of foreign currency is being spent to import nine million tonnes of liquid fuel. Add to that importing of coal and LNG. Though the price of coal has reduced from US$ 237/tonne to US$ 150/tonne, the price of LNG at the spot market remains sky high. Bangladesh needed an additional US$ 1.6 billion every year for just importing 150 MMBTU LNG per day from the spot market at US$ 30/ MMBTUThis in a way justifies power load management and a regulated loadshedding action plan for minimizing stress on fuel import. Similar actions need to be taken for austerity in liquid fuel use. In the present situation, austerity is the main contingency management action for Bangladesh. Reduced working hours, promoting public transport, controlled use of air conditioners, shutting down of shopping malls after evening and other similar measures can be taken for the time being, hoping that the energy price will ease out sooner.

 

Bangabandhu’s strategy for managing the impacts of the 1974 oil shock was to explore and exploit own fuel resources. His strategy has led Bangladesh to go for offshore exploration of oil in the Bay of Bengal. His government also successfully acquired major discovered gas fields from Shell BV at a nominal cost. Program was initiated for exploring coal. Do you think that the present global situation will push Bangladesh to exploit its own fuel resources?

 

Bangabandhu clearly understood and felt the need for energy independence. For the country’s own sake, he did not hesitate to bring in foreign investment, technology and expertise. But since 2000, nothing much has been done in gas exploration. Model PSC was updated for offshore exploration in 2008. But till now no bidding round could be done for deep water prospects. We could attract IOCs if we had sufficient data and information. It is being said that the IOCs are not interested in purchasing the data and information we have about offshore petroleum resources. That is why a multi-client survey is not being done. But we could not award the contract to the evaluated lowest bidder on time twice. I have a reasonable doubt whether bidders will respond if we cannot provide the required information. There is no guarantee that the IOCs will respond to invest in onshore frontier areas as well.

 

We have fallen way behind in coal mining. There have been lots of talks about the scheme of Development of Asia Energy Corporation. We should have reviewed it professionally. But we have not done that. If the decision of coal mining was taken on time, companies could agree to work relaxing some conditions. But if we take decisions now, we have to provide additional incentives for global reality. But once the honorable Prime Minister declared preserving coal resources for posterity, those who favored mining changed their tone. Actually that posterity could be now. If we cannot take decisions on coal mining now, we will lose ground on the negotiation or lose the opportunity completely.

 

Government estimates indicate that import dependency (electricity, coal, LNG, LPG, liquid fuel) in 5 years from 2017 to 2021 rose from 22% to 48%. Global situation may continue to increase further. It would cause more bleeding of the Bangladesh economy. How can Bangladesh manage the situation?

 

The plan of increasing import dependency was done on two factors – our economic growth and future energy price models. No price model before the Ukraine war predicted this high energy cost for so long. Any import dependency is inherently subject to supply and price risk. Unfortunately, we stumbled on that risk very early in our planning. If the current situation prevails, our crisis will further intensify. We are seeing oil prices fall due to demand destruction and the threat of recession in many countries. But Europe is going for LNG to replace Russian gas. That will be going on even if the war ends today. As a result, gas prices will remain relatively high for a while until a new equilibrium is reached in a few years. That puts us in a very precarious position. Our entire economic backbone is gas based. Apart from a land-based LNG with assured oil-indexed long-term contract (may be very difficult for now), we must start extensive exploration and enhancement of gas production from our own fields. Within the next 3 years, about 7,000-8,000MW imported coal-based and nuclear power will be added to the national grid. We must make our evacuation and transmission facilities ready on time. This would reduce pressure on gas and oil for power production. We must reevaluate our demand forecast and the projects on hand to ensure that we don’t end up with expensive over capacity.

 

I have been warning since PSMP 2010 that if we fail to utilize our coal resources and expedite exploration of petroleum resources by 2030, our import dependency may reach 90%. But policymakers banked on high economic growth and steady energy price. If required all-out initiatives for exploiting local resources are not taken right now, the vulnerability will increase further although we will not be able to avoid import altogether.

 

You are aware that Petrobangla has started working on a plan for drilling some 46 exploration, development and workover wells by 2025. It is being said that this will add 618 MMCFD gas to the grid. How optimistic are you about it?

 

I am extremely frustrated that they came up with such an ambitious plan in a hurry which they should have taken at least seven years back to maintain the peak production of 2016-17 maintaining a plateau. They have been assuring gas supply to several power plants on the imaginary future LNG supply which they will fail now. I am not at all optimistic about the Petrobangla program. BAPEX earlier completely failed in its 105 wells drilling program. Some success can be achieved now that they are under the lens. They are planning 46 wells operation (drilling and workover) in three years. If foreign drilling companies are not engaged in some areas, that would not be possible. Chevron gave a proposal to carry out some exploration outside their assigned blocks. They offered a gas price of US$ 5 per unit. The government should review and accept it.

 

PSC document has been further updated for offshore exploration. This is under the approval process of the government. Do you think IOCs would respond positively now?

 

I am not aware of what has been done actually with Model PSC.  I am not sure our bidding round will get a good response though petroleum price is high in the international market. We need seismic data for deep offshore. We should definitely try and under PSC the exploration will be financially risk-free. Even if we get a response, the entire process will take a long time to bear fruit. In the meantime, Bangladesh must give priority to purchasing LNG under long-term contracts. The crude-linked LNG price now is not over US$17/ MMBTU and will go down with the oil price.

 

We cannot benefit from LNG even if the price gets back to the normal level as we do not have the required infrastructure. Negotiation on 3rd FSRU is stalled now. Land Based Terminal (LBT) is said to come into operation in 2027. But no sign of physical activities is visible yet. What will you say?

 

Bangladesh must implement FSRUs and LBT on time. But I have reasonable doubts about the timely implementation. Most European countries are aggressively going for LNG facilities development now as Russian gas supply to EU countries has become uncertain. Bangladesh may not be an attractive destination for it and may suffer issues with procurement and investment. It is going to be a major challenge with our history of slow project implementation.

 

Matarbari Coal Hub is the second largest mega project. The amended project cost is over Tk 51,000 crore. A coal port, port-connecting canal and a 1200MW imported coal-based power plant are being set up there. All preparations are there for a second 1200MW coal power plant there. But now the Japanese government has informed us not to finance the second one. What can Bangladesh do now?

 

The huge investment at Matarbari cannot be justified with a lone 1200MW power plant. Bangladesh cannot also build the second unit investing from its own source. Given the present global situation, Bangladesh has to be extremely careful in utilizing its foreign currency reserves. On the other hand, developing Matarbari as a deep sea port is very important in terms of future LNG and coal imports. The strategy should be to wait, assess and go.

 

Some observers believe that a lack of coordination between BPDB and Petrobangla and inefficiencies also contributed to the present dismal state of power and energy. What do you think about it?

 

Definitely. Petrobangla must not commit gas supply to any new gas-based power plants without a confirmed gas supply source over the design life of the plant. On the other hand, before cross-checking Petrobangla's ability for gas supply, BPDB must not also go for any gas-based power plant project. All fuel inefficient gas-based power plants must be gradually retired. How could Petrobangla agree to supply gas to some medium-capacity gas-based power plants? Reliance was supposed to import their own gas as a condition of the permission for setting up their plant at Meghnaghat. Why did Petrobangla take that responsibility?

 

The implementation of the plants will be slowed down now. The implementation of the projects that have not started yet should be stalled.

 

What strategy should be taken in the energy sector for achieving the 2041 national vision?

 

Bangladesh must adopt an appropriate strategy to optimize the utilization of its own fuel resources. A 10-year comprehensive plan must be taken for exploring and exploiting primary fuel. A 5-year implementation strategy must be devised before launching the program. The power sector plan should be a 5-10 year moving plan reviewed and updated every year.

 

How much the Renewable Energy (RE), Energy Efficiency (EE) and Energy Conservation would contribute to overcoming the present crisis?

 

Solar is the only source so far in RE. There has been no major achievement yet. About 300MW solar power is on the grid now. Another 600 MW is in the pipeline. Hence it is not yet a major alternative. With policy and financial support solar should be promoted for rooftop, irrigation, street light and other areas wherever it can be applied. We have to give the highest priority now to EE and energy conservation. One MW saved is much cheaper than one MW added.


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