• Friday, August 01, 2014

Irked by poor governance

Foreign energy investors want access to onshore blocks to tap 3-5 tcf gas; power companies seek fair tendering process, ask ministries to follow rules

Sharier Khan

Foreign investors in energy and power sector yesterday expressed their concerns to the government that red tape, dysfunctional regulatory process and various restrictions were affecting their investment and performance in Bangladesh.
Under the banner Foreign Investors' Chamber of Commerce and Industry (FICCI), they met State Minister for Energy Nasrul Hamid Bipu and said restrictive tendering practices in the sector were keeping reputed companies away.
They alleged that the tenders were crafted narrowly to favour certain companies, discouraging better technologies and competitive prices.
The team, which included chiefs of Chevron Bangladesh, Asia Energy, Santos and Siemens, noted that inadequate offshore fiscal terms in Production Sharing Contracts and restrictive onshore access have resulted in limited exploration investment.
Headed by Executive Director Jamil Osman of FICCI, the team cited examples of dysfunctional regulatory processes, their impacts and mentioned how those could be solved.
They said the energy ministry in the mining sector was ignoring the 60-day timeline, outlined in the regulation, to give approvals to mining companies.
“As a result, the coal sector is stalled denying the country large-scale affordable electricity leading to excessive expenditure on imported liquid hydrocarbons,” a meeting source said.
“In oil and gas sector, delay in the signing of PSC [Production Sharing Contract] for offshore blocks has delayed exploration by a year as the weather window was missed. Payments to oil companies were often held up due to bureaucratic mismanagement,” added the meeting source.
Such delays impose additional costs on the oil companies, which affect their returns. Delays in payments over six months severely affect business viability.
Besides, the investors are often affected by delayed approval because there is no clear delegation of authority when key officials are away.
The oil companies noted that the current government policy prevented allocation of new onshore exploration acreage to them as only Petrobangla companies, like Bapex, had the rights to explore onshore.
“Although Petrobangla companies have succeeded in finding new reserves, they are constrained by lack of financial, human and technical resources to exploit the unlicensed acreage,” an investor told the state minister.
Explaining the impact, the investor said Bapex had identified an estimated 3 to 5 trillion cubic feet gas reserve and this could be developed in the near term if the acreage was offered to the international oil companies.
Access to such acreage would also allow a more competitive service industry, the investor noted.
The oil companies sought provision for gas price enhancement, freedom to market their share of the production, and flexibility for modifying fiscal terms based on block location.
Criticising the power tendering process, they said the procurement process did not allow efficient allocation of resources, lacked transparency and was detrimental to attracting better investors.
They urged the government to promote a level playing field and transparent bidding process to attract investment from multinational companies.
They also expressed concerns about the PSCs which did not adequately address the exploration and development costs and the risks the oil companies had to manage. Poor fiscal terms do not provide sufficient economic incentive, resulting in very low levels of exploration and development, and lack of competition.
On the delays they face in imports and exports, the investors said it affects timely installation and maintenance of power plants and other high-end machinery.
After the meeting, State Minister Nasrul Hamid Bipu told the press, “They have given some proposals and made some complaints which the government would consider. In the power and energy sector we need more of their support.”
The delegation included Chevron Bangladesh President Geoffrey Strong, Asia Energy Chief Executive Officer Gary Lye, Chairman of Barakatullah Electro Dynamics Faisal Ahmed Chowdhury, General Manager Kris Energy Bangladesh Edwin G Bowles, President of Santos Sangu Field Andrew De Garis and Managing Director of Siemens Bangladesh Indranil Lahiri.

 

Published: 12:00 am Friday, May 09, 2014

Last modified: 10:16 pm Friday, May 09, 2014

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