Policy of passing on the buck

The Metropolitan Chamber of Commerce & Industry (MCCI) has recently published a survey on the business performance of its member firms for the first half of the current fiscal (FY2012-2013). Though several impediments were highlighted, overall production and investment have increased in the country. However, two barriers to growth that respondents highlighted were as follows: “Firms in general cited shortage of electricity and gas as the most serious impediments to production, much more than problems of physical infrastructure, access to credit and the fallout from political conflicts”.
Indeed, the survey merely reaffirms what is already known. The present government has done reasonably well on the supply of secondary energy by installing several rental/quick rental power plants for managing acute shortages of electricity supply. Yet it has remained largely inactive in addressing the issue of supplying of primary energy. Today, in the last year of its present tenure, the government has finally decided to address this area.
From what has been published in The Financial Express on February 12, the government is taking hard-term loans (ECA) to the tune of about $1.5 billion from export credit agencies for setting up five large power plants. Terms of payment on these loan packages carries a repayment period varying from 2 to 10 years. Since these are, essentially, short-term loans, interest rates will be much higher. So, what is the country getting for its $1.5 billion? According to The Financial Express, a total of 2,700MW of new base-load power will be generated from the implementation of power plant projects following several contracts signed by the government.
All these contracts are for gas-fired power plants. Within 2020, the projected power demand will be 22,400 MW. Since the Power System Master Plan (PSMP) of the government projects half of total power generation in the country coming from coal by the year 2030 and only 30% coming from gas. So, with about 3 billion tonnes of coal resources in the discovered coalfields in Jamalganj, Barapukuria, Khalashpir, Dighipara and Phulbari remain largely unutilised.
The PMSP points out that of all the discovered coalfields, Phulbari remains the most promising for commercial extraction. But thanks to the political sensitivity of the Phulbari situation, the present government opted to leave it alone. Furthermore, government has not taken any meaningful initiative to develop other coal fields except for the Barapukuria coal mine established by the previous government. It is ironic, because at this stage we are uncertain about where our next big gas field is going to be discovered.
Precisely what will happen to the country's precarious state of energy if no significant new gas field is discovered? By the look of things, i.e. going for hugely expensive credit to pay for essential base-load plants that will run on natural gas, the supply of which becomes increasingly uncertain, it is essentially a recipe for disaster. With limited gas supply, it is little wonder that policymakers have to put up a juggling act. Shutting down one sector to supply another has been the norm over the last few years.
Sadly, such undesired acts do not bring desired dividends. For instance, if we look at the situation of fertiliser production in the country, we are looking at an essential commodity needed for agriculture production. Due to the current shortage of gas, limited gas is supplied to the government and private fertiliser plants, leading to production pitfalls. These need to be offset by imports that cost hard currency, which becomes another headache for policymakers since foreign exchange is a precious commodity.
The country's power generation capacity is hampered by a shortfall of a few hundred million cubic feet on a daily basis. For the sake of argument, should Bangladesh fail to make a major breakthrough in discovering substantial new sources of gas, what will the scenario look like? Precisely what is going to be the situation when 2,700MW of new energy comes online requiring additional approximately 675 million cubic feet of gas? The repercussions are simply too horrendous to contemplate.
Today, we stand at a critical juncture. Some fundamental decisions have to be made here. Natural gas production in the short term may add few hundred million cubic feet of gas. Assuming Bapex and the Petrobangla contractor GAZPROM successfully complete drilling 8-10 more wells in the existing gas fields to add 250-300 million cubic feet of gas (although it is not very clear why a development well drilled by Bapex produces approximately 20-30 mmcfd gas compared to Chevron's 75-80 mmcfd gas from Bibiana and Maulvibazar fields). But the demand for power plants will surpass the cumulative productions of natural gas from the new fields.
Our energy sector managers have successfully contained electricity demand growth both by rapid escalation of power tariff and by not providing connections to interested customers. But how long the unmet power demands can be kept waiting? How then will the very fundamental questions of power and gas supply as the major hindrance for the growth of industrial production identified by MCCI survey remain unaddressed?

The writer is Assistant Editor, The Daily Star.