Meeting our growing demand for energy
It was most interesting to read in the media that the government is planning to set up four more economic zones (EZs) in the country aimed at attracting greater domestic and foreign direct investment and fostering economic growth. The World Bank has apparently sponsored this latest plan. Under this concept the Comilla EPZ and the Hi-Tech Park for information technology in Kaliakoir under Gazipur district will be transformed into economic zones. It has subsequently been also revealed that the government has decided to establish two new Export Processing Zones (EPZs) -- the Meghna Export Processing Zone at Gazaria in Munshiganj and the Feni Export Processing Zone at Feni.
These are bold initiatives that will definitely help future economic growth. Such plans also bring forward the question about meeting not only our present but also our future energy needs. It would be pertinent to point out here that the country's gas fields are currently producing only 1700 mmcf of gas per day as against a demand of 1800 mmcf. This deficit is also expected to grow with more intensified industrialization and foreign direct investment in the economic zones.
This has become an important and crucial question. It has direct implications not only with regard to future investment possibilities but also for our existing industrial infrastructure. This has also assumed significance given the fact that our main fossil-based fuel source--gas--is running out faster than expected. The Special Assistant to the Chief Adviser Professor M. Tamim has recently commented that the country's proven gas reserves now stand at 8.3 trillion cubic feet and that it might not be possible to supply gas as per demand after 2011. It has also been mentioned that unless augmented, all gas supplies will cease from 2015. That is just round the corner. It is as serious as it gets.
We talk of food and energy security. We all know that these are the twin pillars for any form of economic progress. Yet, nearly four decades after our independence we find ourselves in a potential predicament that has not received the kind of urgent attention that it deserved. There has been some effort with regard to achieving food security but very little in respect of meeting anticipated energy demand. There has been a lot of bickering and finger-pointing but very inadequate perspective planning within the energy sector.
I shall be charitable in my criticism. I shall not put the entire blame on graft and politicization. I will simply state that the past political governments appear to have failed to grasp the seriousness of the situation. The immediate-past government in particular was far too busy in identifying ways on how it could cling on to power instead of focusing on how to enhance power availability through greater energy output. It was a disappointing five years bedeviled with corruption and mismanagement in the power and energy sectors.
Consequently, it has been encouraging to be informed that the present government, realizing the gravity of the situation (which has also unfortunately taken more than one year) has eventually decided to open third round bidding for exploration of hydrocarbons in the Bay of Bengal. Better late than never. Tenders have been invited and international oil companies have been requested to submit their proposals within 90 days from the date of opening the bid documents. The first step has finally been taken. It is being hoped that the government will sign production-sharing contracts (PSC) with the applicant companies by this coming October. It is being estimated that this will facilitate actual exploration work by the beginning of next winter at the end of this year. A successful completion of this process by this administration would, in my estimation, be as important as the holding of a fair and credible election. It will then open the twin windows of democratic governance and energy security--both of which are important factors for Bangladesh steadily graduating into a middle-income country.
A total of 28 blocks, eight in the non-deep sea area and 20 in the deep-sea region will be covered in this third round of bidding. It is understood that the Council of Advisers has already approved a new PSC model for this purpose. The new document has apparently incorporated some changes to protect national interest. That includes a new damage clause that will enable the owner of the gas field to claim compensation in case of blowouts or negligence or inefficiency on the part of the contractor. The arbitration clause has also been modified whereby the proceedings of the Arbitration Tribunal would be conducted according to the existing Bangladesh Arbitration Act that ordains such Tribunal's sessions to be held in Dhaka. Changes have also been brought about with regard to privileges and exemptions that were earlier standard practice. A new Assignment clause has also been incorporated whereby formal permission will be required from Petrobangla if an IOC wants to transfer its share to another company.
The new PSC has also proposed increase in the gas price per million cubic feet (mcf) consistent with the rise in the international price curve. There have also been changes with regard to provisions pertaining to export of gas and also with regard to the cost recovery clause. These are significant measures. They will only underline the seriousness with which our government is viewing the process.
It is also encouraging to note that the state-owned exploration company BAPEX has been instructed to start seismic surveys in five major gas fields by October this year. It is being hoped that their 3-D seismic survey will be able to compete on a cost-effective basis with the efforts to be undertaken on a parallel track by the IOCs. Three-dimensional surveys will apparently reduce the risk of drilling dry holes. The Asian Development Bank is expected to support such efforts. We all owe them a vote of thanks for this assistance.
I am an optimist. I believe that we have a serious problem but not an insurmountable one. We can still achieve energy security and sufficiency if we have sufficient political will and commitment. We still have three other alternatives -- introduction of nuclear energy into the power grid, coal-based power plants and obtaining of from Myanmar. These are avenues that also need to be very carefully pursued.
In this context it is indeed heartening to note that the Bangladesh authorities (during the Third Foreign Office Consultations in February) have decided to initiate discussions with the Myanmar government about the possibility of not only delimiting maritime boundaries between the two countries but also with regard to the possibility of jointly harnessing energy from hydroelectric power and utilization of gas (to be obtained from Myanmar gas reserves). It is important for us to harness regional potential and this is a path, which will need to be nurtured with utmost seriousness by the next elected government.
I now turn to the prospect of setting up coal-based power plants particularly in the underdeveloped northwestern region of Bangladesh. This will remove internal economic disparity and also help to generate employment. Experts have recently revealed that the country has about 2.5 billion tons of coal reserve, which is equivalent to nearly 77 trillion cubic feet of natural gas. It is important that we exploit this potential in a manner that helps to create balance within the economic activities being carried out in the different parts of the country. There has been debate over the method of exploitation of this valuable resource. Questions have been asked about open cast mining as opposed to the traditional method of underground mining. Economists and environmentalists have been divided over this issue. There has also been the question of resettlement and rehabilitation of the affected population. All these factors have made the issue complex. Nevertheless, this is a matter that has to be resolved in national interest. The government has to play a more pro-active role and find least common denominators that will lead to a sustainable solution. We have to agree on an acceptable solution that will be consistent with international practices.
The last factor is generating power through nuclear energy. I have written on this previously. We are party to different required international conventions and the NPT. It is our right to access to nuclear energy for civilian purposes. It will be capital intensive in terms of initial outlay. This can however be addressed by issuing shares in the proposed nuclear power company for subscription in foreign exchange by our expatriate community. We can also seek the necessary technical cooperation from our development partners in this regard.
Lastly, our relevant authorities should set up a Committee to identify the geographical locations in the rural areas where we can most benefit from solar energy and wind driven power. This can then be used for meeting the energy demand of SMEs in the non-urban tertiary economic zones, particularly in the cottage industry and handloom sectors. This can then supplement biogas.
We have many hard decisions ahead of us. There is also very little time in our hands. Success will depend on a meaningful and functional partnership between the public and private sectors. If others in this region have been able to move forward so can we. Our spirit of entrepreneurship will help us overcome the difficulties.
Muhammad Zamir is a former Secretary and Ambassador who can be reached at [email protected]
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