Energy Sector Heading for Crash Landing?

EP Analysis

The elected government with massive mandate in the last general election spent almost 7 months in office. It is sheer irony that the government is still grappling with strategy for resource exploration to fuel power generation for sustained economic growth. The nation is suffering from severe energy crisis, power load-shedding. 

There are little or no reason to believe that the government is really serious about positively approaching in its efforts to revitalize almost non performing energy sector management when one reads the following news headlines of media.

• Petrobangla comes under JS body fire.
• Petrobangla gets hammered for not taking steps for exploration.
• Cabinet Committee sends back for fresh scrutiny oil, gas & metro rail projects.
• JS panel suggests speedy approval of coal policy.

These reports refer to lack of appropriate efforts of Petrobangla for exploration and development of potential energy resources, indecision of government policy makers to approve offshore exploration efforts of Petrobangla and protracted delay in finalizing coal (essential or non essential) to explore and exploit countries substantial coal resource.

Petrobangla is mandated to deal with exploration and exploitation of gas, oil, coal and other mineral resources. It works on behalf of Energy & Mineral Resources Division of the Ministry of Power, Energy & Mineral Resources. All its actions are seriously impacted by bureaucratic chain of the government.

The news headlines refer to two parliamentary committees -- Public Accounts Committee headed by MK Alamgir MP and Standing Committee on Power, Energy & Mineral Resources Ministry headed by Major General (Rtd) Subid Ali Bhuiyan MP. The other news refer to indecision of Cabinet Committee for Purchase headed by Finance Minister M.A Muhith.

The country is suffering from serious power load shedding. Effective Power generation capacity now is about 3800-4000MW against daily demand of 5500MW. About 90% of power is generated from natural gas. Gas is also used for fertilizer production, industrial, commercial, domestic use and for CNG. Gas demand now is 2100MMCFD against which effective production is about 1800MMCFD. There is some apprehension that the proven gas reserve may deplete by 2015 if no new gas fields are discovered and brought into production.

It is also true that almost entire offshore and significant areas on onshore have not been explored yet. Even the known gas reserves have not been thoroughly appraised as yet.

Bangladesh possess about 3 billion tonnes of high heating value, low sulphur and low ash coal reserve in about 100Sq KM area in the greater Rangpur and Dinajpur area.

Bangladesh Awami League in its election manifesto declared that by 2011 it will add 1500MW new power and by 2013 another 3500MW. This means that by the end of their tenure the countries total power generation capacity would reach from 3800MW to 8800 MW. To achieve this it was expected that it had accomplished some homework. It is not out of context to consider that some policy makers read the draft coal policy and offshore exploration PSC.  But judging from present stalemate situation over coal policy finalization and hesitant attitude of the government to approve PB recommendation for engaging IOCs for offshore exploration it appears that there were very little or no homework done.

Government has spent almost 7 months in office.. The present situation does not give positive indication that government can achieve its election vision of adding new power to national grid. They cannot have required fuel; they can not complete installations of required power plants.

Parliamentary committee for public accounts has put Petrobangla on sword. But what Petrobangla can do without appropriate government support? Petrobangla has little role in signing lopsided deals with IOCs, Petrobangla has limited capacity to recover compensation from defaulters of blowouts. Why Parliamentary Committee dies not ask Energy Minister, Advisor to PM what happened to Enquiry Committee Report on Magurchhara blowout? How that issue was managed? Why Occidental was let off the hook when the PSC had provision for scraping their PSC for non-performing minimum obligation at the time of blowout?

PB had its limitations. It could not retain its trained professionals. Its capacity eroded over time due to massive brain drain. But did this government in 7 months perform any efficiency check? Did they engage appropriate professionals in key Petrobangla positions? What professional track records senior executives of PB have to manage PB in crisis period? Only experienced PB professional having extensive technical track record is sidelined in administration. Who is to answer this?

Petrobangla took appreciable initiative within its humble resources to update PSC for offshore exploration with professionals and assistance of international consultants. It was viewed and endorsed by notable lawyer Dr Kamal Hossain. The draft tender document and draft PSC got approval of the government. PB followed all recognized transparent route of tendering, tender evaluation and approval process. The caretaker government could have taken decision. Considering very aggressive exploration campaign of neighboring countries Bangladesh should have commenced its part much earlier. But the caretaker government lacked guts to take decision and left it for elected government. It took over 6 months for a advisor led government to take the offshore exploration PSC award case to cabinet committee to Council Committee after endorsement of PM as Energy Minister. But unfortunately it bounced off. Can one blame Petrobangla for it? Even if government takes positive decision soon on offshore exploration it will not be possible to get benefit in less than 7 years and that too depends on discovery of gas.

The only major option is to explore discovered coal resource. The coal exploration efforts are stuck in the quick sand of coal policy. When a country has Mines & Minerals act and Mines & Minerals rules why did we need coal policy? Do we have separate hard rock mining policy, gas policy or oil policy? Will we have iron policy, lime mining policy? How Barapukuria Coal mining could start with out coal policy?

If one checks the 9th draft of coal policy achieved after 4 years of struggle of non coal miners one can discover it is an extensive research paper having so much inherent conflicts and contradictions. Usually a policy is a brief concise document discussing energy security, investment and resource mobilization, implementation agency structure, impact management and resettlement and rehabilitation issues of mining. When we have mines and minerals acts and rules the initiative to formulate coal policy was to frustrate mining efforts which theoreticians could successfully do putting the nation in the present energy crisis. It is encouraging that parliamentary standing committee realizes the necessity for finalizing coal policy urgently and commences mining.

But one thing we must remember Bangladesh has almost zero capability of mining itself. It even does not have enabling core technical or managerial group to efficiently monitor activities of a world-class mining company. There is no opportunity to learn mining technology in the country. The only operating mine in Barapukuria is a technical and financial disaster.

Coal policy cannot dictate technical aspects of mining – like mining technique, mining methods, and rate of mining. Economics will dictate mining method. If the extent of the resource recovery justify investment of all require costs in a particular method including all cots of impacts management, relocation and rehabilitation of impacted community that method must be applied. Investor will have its own economics. It will have its own plan for recovering investment. No coal policy dictates what should be the rate of recovery. Once commercial coal mining starts it is impossible to change mining rate. Hence down stream local market must have capacity to absorb mined resources. Coal is self-burning.

We should also remember our coal has only 0.5% sulphur and very little ash. The coal, which is imported from across the border has much higher sulphur and ash content. It is polluting our environment while our sweet coal remains buried. Conspicuously the section of our civil society opposing mining does not object to import of dirty coal from neighboring country.

A media report also quoted Energy Advisor's discussion with US Ambassador seeking technical help for coal mining. He reportedly said about challenges of strip mining given the fact the coal seams are at least 200m below the surface and extensive water pumping is required to reach there. He off course pointed out subsidence impacts of underground mining.  Modern mining technology can even reach much higher depth with appropriate water management. Water is considered as another mine resource, treated and is used for community supply, round the year irrigation and refilling the aquifer. Advisor possibly wants to train Bangladeshi professionals utilizing SARRIE resources. That will be extremely useful. But Bangladesh must immediately start mining education. Some smart boys and girls after HSC exam result must be offered scholarship to study mining engineering, mining technology on condition of serving Bangladesh after education and training.

Time is fast running out for the government. It will be impossible for them to reach anywhere near its energy sector vision if it fails to start coal mining and exploration for petroleum in a proper way by December 2009. For this they must evaluate the performance of present energy sector management without bias and engage truly committed professional to mean business. People with failed image and dark past record of hobnobbing with energy sector mafias will lead energy sector to further disaster.