Energy crisis and politics in Bangladesh

Oct 25, 2010 12:00 AM

Everyone will agree modern civilization relies heavily on energy security. Energy more than anything else is the underlying driving motive of world politics. It is global energy and mining giants those are dominating world politics. We know G8 countries are the most developed countries as they have more or less assured energy security. They either have huge energy resources and sophisticated energy infrastructures to support their long term energy needs.

Countries like China, India, Brazil are developing nations. They are also using their muscle power to access energy in energy rich region in various pretexts. Sometimes in the quest of Weapons of Mass Destruction [WMD], sometimes in the name of War on Terror. Their economies are fast developing. To feed their economic growth they need huge energy. They are desperate to access energy anywhere and everywhere.

Some countries like Qatar, Saudi Arabia, Iran, Iraq, Kuwait, Algeria, Nigeria, Venezuela and Russia have huge energy resources. They have developed their resources and feeding the rest of the world. Some countries like Japan and Korea do not have energy resources. They exclusively rely on imported energy. Utilizing imported energy they have created economic boom.

Some countries like Turkmenistan, Qatar, Myanmar have stranded energy. For geopolitics they are finding it extremely difficult to gain from huge energy resources. A country like Bangladesh is strategically located to act as transit country in trading of regional energy. It has substantial untapped energy resources of its own which can effectively feed its growing demand if professionally and judiciously exploited. It can also benefit through turning into a regional hub of energy -- buying and selling energy from and to across the border.

But for wrong policy, bureaucracy dominated energy sector governance, poorly structured energy sector management and corruption. Substantial gas resource at onshore and offshore remains unexploited. Huge reserves of high quality coal at mineable shallow depth remains unexplored for wrong politics and shallow vision.

Bewildered by chronic crisis and misguided by opportunist energy mafia syndicate government policy makers have embarked on unrealistic and improbable import initiative of coal and LNG for meeting prevailing and emerging energy crisis.

Countries energy scenarios deteriorated over the last 10 years mainly due to the following reasons:

·      Deep politicization of energy sector management.

·      Domination of incompetent bureaucrats in energy sector.

·      Shallow visions and inappropriate policies.

·      Poor energy pricing and weak state owned enterprises.

·      High system loss and huge accounts receivables.

·      Stubborn attitude of a section of civil society about free flow of FDI in energy sector exploration and exploitation.

·      Free for all corruption and mismanagement in state owned energy enterprises.

·      High level massive corruption and failures to punish corrupt syndicates [Saipem scandal, Scimter scandal, Magurchara blow-out mismanagement, Niko scandal].

 

The Bangladeshi energy sector was basically developed with donor funding from soft lending windows. Donors always prescribed reform measures to reduce losses and corruption. But after every project implementation donors failed to follow up the agreed covenants of original loan agreements. These have resultant into virtually dysfunctional state-owned enterprises which cannot raise enough revenues to reinvest in further expansion of networks or explore and exploit domestic resources of their own. The energy pricing remains well below economic pricing, system loss is still staggering. Politics of vengeance cannot create ideal atmosphere for discussions among political divide to reach national consensus on energy sector issues.

Major parties blame each other for the crisis. When the present Government took over it undoubtedly inherited serious energy crisis primarily due to inactions of 4 party alliance governments from 2002-2006, the Care Taker Government tried to take several initiatives. But for their limited authority they failed to make significant meaningful progress. Still they could bring Bibiyana gas field into operation and engage some developers for contingency power plants. The Care Taker Government also advanced offshore bidding and left recommendations for award of some blocks. Even the draft coal policy was at advanced stage. They were in power for about two years.

Present government is in power since January 2009. In almost two years government could not conclude the coal policy, it messed up offshore drilling, delayed signing the PSC amendment with Cairn/Santos to reap real benefit. Present government also messed up coal mining initiatives. Their so-called extensive home works on energy in two years could only trigger massive load shedding, serious gas crisis with heavy drum beating policy makers going to Singapore, London and New York for Road Shows. But these brought no visible impacts on investment in the energy sector.

AEC Phulbari Coal mining is in limbo. A PSC with Conoco Philips may be signed. But many feel ConocoPhillips's offer has an unrealistic investment strategy which will become apparent when they start work.

Government failed to resolve disputes with Niko. Gas from Feni and Chatak cannot be utilized in the present crisis mitigation. Further development of major gas fields Titas, Habiganj, Bakhrabad, Rashidpoor were envisioned in the ADB funded GSDP, later restyled GTDP in 2005. But in 6 years it failed to take off.

The gas transmission capacity enhancement initiative is still in limbo. Petrobangla/GTCL even cannot manage its existing gas transmission grid professionally, GTCL SCADA is virtually non-functional, transmission pipelines have not been pigged. In these scenarios the gas sector remains in big shambles to meet national demand. Fuel for power is a major bother as existing natural gas supply cannot meet the present demand of all connected consumers.

Government has to alternate supply between fertilizer and power to tackle crisis. Government expanded CNG network in Dhaka and other gas franchise utilising ADB finance under Dhaka Clean Fuel project. CNG improved the quality of air. But uncontrolled expansion of CNG reached such a state that CNG business is on the verge of collapse. Government in two years virtually did little in the coal sector. The underperforming Barapukuria mine is approaching closure. The Phulbari mine developer has not yet heard anything on their Scheme of Development submitted in 2005. In this situation government may not find a genuine mining company waste their time, money and energy in Bangladesh.

Energy sector mafias misguided policy makers to set up coal plants at Chittagong, Khulna and Meghna Ghat based on imported coal. These places do not have an enabling infrastructure to receive huge amounts of coal that will be required to feed large coal plants. Similarly another group has influenced policy makers to import expensive LNG. Bangladesh will need a few billion dollars to set up LNG infrastructures. Panic has just started setting in. Some persons like Dr Akbar Ali Kahn have started pointing out the long term adverse impacts of wrong energy vision and failures of politicians on present energy crisis. But it appears that Government remains unconcerned.

People like to see government punish war criminals and try other major acts of terrorism in the past. But people want to see government deal with the energy crisis on top priority basis. I wonder why the energy crisis situation is not debated in parliament? Why major politicians do not make energy the top agenda for discussion? Why an indemnity bill is required? Why energy sector developers cannot be engaged through fair and transparent open bidding? LNG or coal import and power import from India cannot solve the crisis. We must act positively to explore and utilize our own coal and gas and expand our transmission infrastructures, we must rationalize energy pricing, we must create incentives in energy companies so that quality professionals can make contributions without undue political interference.

If Government cannot make immediate changes in its failed strategy it may have to face people’s agitation soon everywhere. Excuse of war criminal trials will not give a required cushion to the government. The people of Bangladesh must not be taken for granted. The gas sector failed miserably to manage its responsibilities professionally. Still they are not made accountable as persons spearheading have a strong political allegiance.

The power sector made some success. But it relies so heavily on fuel supply that it can do little without assured supply of gas and coal. It is inconceivable that power generation will continue to remain on imported fuel for a longer term. We desperately need private sector massive investment in the power and energy sector at all segments of the energy value chain. But BERC is not yet fully functional to give required confidence to investors. It has failed to create a level playground for all investors.

Moreover identified agitators backed up by parasite political parties are still agitating on the streets against foreign investment. The sooner the nation can adopt an investor friendly energy sector strategy the better. Otherwise the nation may soon plunge into darkness for wrong politics.

The following actions are recommended:

·      Fully corporatize Petrobangla and PDB.

·      Complete reforms and restructuring of power and energy sector.

·      Fully operationalize BERC and reduce Ministry function to policy making and facilitating power and energy business.

·      Ensure full autonomy of power and energy companies.

·      Coal policy or not commence coal mining under mines and minerals acts and policies.

·      Scrap indemnity act of energy and engage developers through ICB.

·      Allow BERC to independently regulate energy business.

·      Go for fresh block bidding for Petroleum at offshore and onshore after carrying out required amendment to draft PSC.

·      Engage true professionals at key positions of power and energy sector management.

·      Discuss energy sector issues in the parliament and make key energy sector management accountable to parliament.

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