[🇧🇩] Energy Security of Bangladesh

Much-cherished oil refinery building thru fresh bidding
Interim govt scraps proposed SA Group deal
M Azizur Rahman
Published :
Aug 30, 2024 00:37
Updated :
Aug 30, 2024 00:37



A much-cherished crude-oil refinery will now be built through fresh competitive biddings as the interim government Thursday cancelled controversial S Alam Group's deal and made the latest decision.

The long-delayed refinery project, 'installation of ERL unit -2', will be implemented under public procurement rules (PPR) -2008, the energy and mineral resources division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) decides.

State-run Bangladesh Petroleum Corporation (BPC) will estimate the overall project cost by taking into account the latest foreign-currency rate, prepare the development project proposal (DPP) and send it to the Planning Commission for approval.

An MPEMR meeting, chaired by adviser for power and energy, and road transport and bridges Muhammad Fouzul Kabir Khan, made the decision.

Officials said prior to the fall of the previous authoritarian government, the then prime minister's office had approved a proposal on building the new oil refinery under public-private joint venture with majority stakes going to the acquisitive S Alam Group.

Earlier, the BPC had sought necessary funds worth around US$2.0 billion from the government to build the proposed 3.0-million-tonne-capacity crude-oil refinery in Chattogram.

Eastern Refinery Ltd (ERL), a wholly owned subsidiary of BPC, is set to implement the project.

Sources said Bangladesh had 'failed' to build any crude-oil refinery over the past half a century after its independence, resulting in huge waste foreign currencies gone into import of refined oils from the international market.

Only 'negligence' on part of the authorities concerned is to blame, they added-in an indication of dominance of rent-seeking import lobbies.

The country's currently operational maiden refinery - Eastern Refinery Ltd - was built way back in 1968 by French company Technip, three years before the emergence of Bangladesh from the Pakistani rule.

The volume of petroleum-oil imports has increased around threefold over the past five decades to feed growing consumption in transport, industries and other commercial outlets with the expansion of the country's overall economy.

Technip carried out the front-end engineering and design (FEED) a couple of years back for the new refinery. The BPC had been in talks with Technip over the past several years to have the refinery built through a negotiation bypassing tender process.

The contractor of ERL's existing refinery was interested to build the proposed refinery under an unsolicited deal-in line with the precedence of quick-rental deals in the energy sector, now ditched with the regime change.

An Indian consulting firm, Engineers India Limited (EIL), had been engaged with the proposed project as consultant for the past several years until early 2024 before the emergence of upstart S Alam Group to lay stakes on the project, they added.

The Indian consultancy, EIL, had estimated that the cost might be around $1.80 billion if the engineering, procurement and construction (EPC) contractor was selected through competitive tendering.

The EIL's consultancy cost for the project was around Tk 2.56 billion.

The Technip-done FEED work was also reviewed and accepted by the BPC in consultation with the EIL, which was carried out at a cost of around Tk 3.72 billion.

Once implemented, the new refinery can help the country save $220 million per annum, trebling the country's crude-refining capacity to 4.5 million tonnes from the existing 1.5 million tonnes per year, market-insiders say.

To implement the project the BPC purchased land for the refinery at Tk 2.30 billion from the Ministry of Industries.

"It is sheer negligence from the government high-ups as it could not build a new refinery even over the past 50 years," energy adviser of the Consumers Association of Bangladesh (CAB) Prof M Shamsul Alam told the FE.

"A vested quarter having nexus with government high-ups has been lingering the project's execution to earn money as commission," he says, in tune with usual quips over import preference.

"Consumers are the ultimate losers," he laments.

Building the oil refinery through competitive bidding will ensure execution of the project in a transparent and accountable manner, says energy-expert Prof M Tamim, who was a special assistant of a previous caretaker government.​

Ministry denies claims of gas export to India
FE Online Desk
Published :
Aug 29, 2024 22:41
Updated :
Aug 30, 2024 00:32



The Ministry of Power, Energy, and Mineral Resources has dismissed as a rumour claims on social media that Bangladesh exports natural gas to India via pipelines.

In a press release on Thursday, the ministry said no natural gas has ever been exported to India, either under the previous Awami League government or at any time.

It also rejected as false and misleading the demand to shut down gas lines to India's northeastern states.​

Ulterior motive behind faulty energy plan
Syed Mansur Hashim
Published :
Aug 30, 2024 21:10
Updated :
Aug 30, 2024 21:10



Successive governments from 2009 onwards were headed by the same party and the country ended up paying billions of dollars for establishing several mega projects that were supposed to generation of 40 Gigawatts (GW) of power by 2030. If the biggest scam over the last 15 years centred around the banking system, then the energy scam follows close behind. Energy experts and the government's own energy professionals working in the sector were effectively silenced by disinformation. The use of certain civil society groups to whip up the myth of catastrophic environmental degradation if open-pit method of coal mining was done helped fuel this fallacy.

There is no denying that coal mining has its demerits, but the technological advancements made in the field were simply not taken into account. Then why were all these expensive coal power plants built? There was no way that Bangladesh could handle the millions of tons of coal which would be needed to keep these plants in operation from two vital points. First, huge investments would be needed in terms of setting up the physical infrastructure to transport coal and second but equally important, confrontation with a lack of requisite finance to sign long-term coal supply contracts internationally.

The idea that Bangladesh could always buy coal from the spot market was not only wrong but quite absurd because a handful of countries were both largest buyers and consumers of international coal and this included China, India, the United States and some other nations. Not only did these nations have deep pockets but also had the infrastructure and finance in place to buy up coal from far-off lands like Australia, Indonesia, etc. for many years in advance.

The idea of producing thousands of megawatts of power from coal was a pipedream, or was it? As one sifts through the emerging data in the aftermath of the change in government, it is now abundantly clear that the past regime was interested only in import. That's where the profits lay for a small coterie of business interests and corrupt officials. There was no intention to develop the economy. Developing own natural resources would have brought no profit at the individual or company level. What good would it serve if people did benefit, if industry developed or employment generated? That would mean no personal wealth for buying the $25,000 designer watch, no holidays in the Swiss Alps, no "Begum Para" in the developed world.

The scene was set for a Yeltsin-type era in Bangladesh. The country would serve the interests of a few hundred thousand people who would rip off this country in the name of development while the rest of the population would barely eke out a living. Former policymakers were dead wrong on the coal issue. If one looks at the Asia Pacific region, the global coal production reached an epic 179 exajoules (EJ), surpassing the previous year's record. Indeed, according to an article published in Forbes magazine, "The Asia Pacific region contributed nearly 80% of the global output, primarily driven by Australia, China, India, and Indonesia, which together accounted for 97% of the region's production." This is further explained in the '2024 Statistical Review of World Energy' published by the Energy Institute in June this year.

Coal didn't decline, its consumption has been rising over the last decade. Only our policymakers used the "environmental" argument to cripple the economy while rest of Asia was galloping ahead to use coal for spurring their economies. The second argument on international coal prices is that the demand has reduced over the last decade. But as stated before, global economic giants in Asia like China (followed by India) were in a competition to lock future outputs of major coal producing nations years in advance. How could an emerging economy like Bangladesh ever hope to compete at that level?

Our needs were a pittance compared to those countries. Why would any major seller even bother with our demands? It should be noted here that both high and low quality have been used in both these countries. Yes, there has been environmental fall-out, but it was deemed a national priority in both China and India to develop their economies first and invest in cleaner coal technologies to mitigate some of the environmental fallouts. Without strong economies, policymakers in those countries could not lift millions of people out of poverty and jobs would not be generated without cheap power.

Bangladesh missed the entire point of cheap, reliable power. Today, the interim government is stuck with this problem of multiple, multi-billion-dollar coal-fired plants that are sitting idle. We have wasted precious years when the coal mines could have been developed and there is no money to buy the coal from the international market now. There is no silver bullet to solve this mess and the only way out for Bangladesh is if the billions of dollars siphoned off and laundered abroad can be brought back. Then perhaps, some sort of financial settlement can be reached before seeking an exit from these contracts and investing in development of natural gas fields. A tall order, but there is no other option for today's policymakers.​

Adani says it supplies electricity to Bangladesh at cheapest rate
FE ONLINE DESK
Published :
Aug 30, 2024 14:26
Updated :
Aug 30, 2024 14:26



Adani Power, an Indian multinational power and energy company, says it supplies electricity to Bangladesh at the cheapest rate among all other imported coal-based plants, according to a CNBC report.

In response to claims of supplying costly power to Bangladesh, the company pointed out the comparative power costs detailed in the Bangladesh Power Development Board’s report for the 2022-2023 fiscal year.

The company sources stated that it supplies electricity to Bangladesh at a rate of Tk 14.02 per unit, compared to Tk 16.02 per unit from the Payra Power Plant and Tk 14.12 per unit from the Rampal Power Plant.

The company also referenced the average power prices over the last 12 months, as per the merit order dispatch data.

The average per unit price of electricity provided by Adani Power in last 12 months was Tk 11.89. Meanwhile, the average price of Matarbari Power Plant in the period was Tk 13.36, Payra’s price was Tk 12.00, and Rampal’s price was Tk 13.57 per unit. The cost per unit includes capacity charge, fuel cost and variable cost.

Fully commissioned in July 2023, Adani Power's Godda plant uses imported coal and supplies about 7 to 10 per cent of Bangladesh’s total power demand.

As per company sources, Bangladesh currently has long-term Power Purchase Agreements (PPAs) with four other imported coal-based power generators—Payra, Rampal, Matarbari, and Barisal Electric Power.​

Want to breach the structure of irregularities in power sector: Adviser Fouzul Kabir
Published :
Aug 31, 2024 19:04
Updated :
Aug 31, 2024 19:04



Muhammad Fouzul Kabir Khan, the interim government’s adviser for Power, Energy, and Mineral Resources, has said that they want to reconstruct the power sector breaking the existing structure of irregularities in the sector.

Besides, a committee will be formed to investigate the allegations of irregularities in this sector, he told reporters after an exchange meeting with officials in the conference room of Rupsa 800 MW Combined Cycle Power Plant located in Khalishpur, Khulna on Saturday.

“It should be remembered that this is a new Bangladesh. Everyone has equal opportunities here. As there are risks, there are solutions,” he added.

The advisor said, so far a development story was being read in our country that our per capita income and GDP is increasing and we are moving from a low-income country into a middle-income country. It now appears that this was false, said the adviser.

A power plant has been built in Khulna at a cost of around Tk 80 billion (Tk 8,000 crores), which has been added to the national GDP. Even if the GDP increases, the gas-based power plant does not seem to be able to generate electricity immediately.

“Tk 8,000 crore was spent on setting up the power plant but people are not getting any benefit from it. This is the fallacy of development.”

The meeting was attended by Senior Secretary of Power Department Md Habibur Rahman, Secretary of Water Resources and Mineral Resources Department Md Nurul Alam, Bangladesh Power Development Board Chairman (Acting) Md Rezaul Karim, Khulna Deputy Commissioner (Acting) Md Yusup Ali and officials of power and water sector.​

Offshore oil and gas exploration delayed further
Mohiuddin Dhaka
Published: 01 Sep 2024, 10: 47


Offshore oil and gas explorationFile Photo

Offshore exploration for oil and gas in the Bay of Bengal is being delayed again as after not receiving satisfactory response, the immediate past government had approved the proposal to extend the deadline to participate in the tender by three months.

In the meantime the government has changed hands. Once the interim government issues directives, the tender deadline will be extended. This was learnt from sources in the energy and mineral resources division.

With multi-client survey revealing potential of offshore gas, a number of foreign companies last year expressed their interest in carrying out oil and gas exploration. The energy and mineral resources division sources have said 55 companies were invited to take part in the tender. Six companies have bought tender documents. The dead line to participate in the tender is 9 September.

The maritime territory dispute with India was settled in 2012 and with Myanmar in 2014. Though new Production Sharing Contracts (PSC) were drawn up in 2019, no tenders were floated. Then three years were taken to finalise PSC-2023. On 10 March this year Bangladesh Oil, Gas and Mineral Resources Corporation (Petrobangla) floated an international tender. Previously the last tender had been floated in 2016.

Petrobangla chairman Zanendra Nath Sarkar told Prothom Alo on Wednesday, approval has been taken from the energy and mineral resources division to extend the tender deadline by three months. After approval of the power, energy and mineral resources division is taken, a new notice will be issued.

In the meantime, tenders have been called for 15 deep sea blocks and 9 shallow blocks. Petrobangla officials have said, facilities have been considerably increased this time to attract foreign investment. Interests of the investing companies are also being given importance along with the interests of the country.

Due to political instability, foreign companies didn't want to come. Now the situation has improved. If the deadline is extended by three months, perhaps there will be a good response Badrul Imam, geologist.

It has been learnt that among the multinational oil and gas companies, the US companies ExxonMobil and Chevron, Malaysian company Petronas, Norway and France's joint venture TGS and Schlumberger, Japan's Inpex Corporation and JOGMEC, China's CNOOC, Italy's Eni SPA, Singapore's KrisEnergy and India's ONGC have shown interest at various times and have contacted Petrobangla.

According to Petrobangla officials, after completing the tender process, the contract can be signed in the first half of next year. Then it will take a couple of more months for them to being their vessels and equipment. However, some say after finishing all the details, exploration may begin in 2026.

There are 26 blocks in the Bay of Bengal, 15 deep sea and 11 shallow sea. On 2010 ConocoPhillips got the contract to work on two offshore blocks. They carried out 2D survey but left because their demand for an increase in gas price was not met. Similarly, Australia's Santos and South Korea's Posco Daewoo also abandoned work after signing the contract. Now only the Indian company ONGC is carrying out exploration in two blocks in the shallow sea.

A Petrobangla official, on condition of anonymity, said according to contract, ONGC has up till next February. They drilled one well and found no gas. They are supposed to drill another well. Investment has increased more than planned. In inviting tender thrice for drilling well, they got abnormal rates and so they have not applied to extend their term. They are likely to leave in February.

Petrobangla sources say, Germany's Schlumberger was tasked with carrying out a preliminary feasibility study for offshore prospects. Any interested company can buy the information of the survey. Petrobangla also has details of the ConocoPhillips 2D survey. This too indicates the presence of gas in the Bay of Bengal, though extractable gas reserves cannot be determined without drilling exploratory wells. Till now no well has been drilled in the deep sea. But the two neighbouring countries India and Myanmar have both discovered gas in the same sea.

Geologist Badrul Imam, speaking to Prothom Alo, said that it has already very late. But due to political instability, foreign companies didn't want to come. Now the situation has improved. If the deadline is extended by three months, perhaps there will be a good response. After that, it would not be right to extend the time any further.

*This report appeared in the print and online edition of Prothom Alo and has been rewritten for the English edition by Ayesha Kabir​

Significant impact of cut on fuel prices unlikely
Published :
Sep 02, 2024 23:04
Updated :
Sep 02, 2024 23:04



Under the monthly fuel adjustment introduced by the deposed government in March last, the first such revision to the relief of some has been effected by the interim government. The relief is because of the downward adjustment of fuel oil prices. However, the slashing of oil prices is unlikely to benefit all strata of society. With a nominal cut by Tk 1.25 on a litre of kerosene and diesel for the month of September without any such adjustment in August by the previous administration, the more deserving lower segments of society will hardly benefit from the move. These segments are the major consumers of these two types of fuel oil. Petrol and octane are considered luxury fuels for reasons understandable and the two have become significantly less costly by Tk 6.0 a litre from Tk 127 down to Tk121 and from Tk 131 to Tk 125 respectively.

The inescapable fact is that the poorer segments of society reeling from unrelenting inflation and lately from the impact of floods in several areas of the country needed some pragmatic move towards lessening their sufferings. If farmers who need diesel for operation of irrigation pumps or boatmen for trawlers or mechanised boats as well as public buses, trucks and covered vans for running them could enjoy a substantial cut on this particular type of fuel, it would have a beneficial impact on production of crops and transportation of commodities. This would ultimately reflect on the galloping inflation. Petrol used in cars, on the other hand, much as it may become cheaper, will have no or little impact on the economy. Had the price tags for different types of oil been reversed, it would make an immediate impact on transport fair and carrying costs of commodities including the daily essentials. Under the guideline on automatic oil pricing the Bangladesh Petroleum Corporation (BPC) prepared, the prices between diesel and petrol/octane have to vary by at least Tk 10. There is no bar to have a higher price differential between those. In fact, the price gap is of Tk 15.50 between kerosene/diesel and petroleum and of Tk 19.50 between octane and the former cheaper variety now costing Tk105.50 a litre.

Effective from September 1, the new fuel prices are unlikely to give enough cause for celebration by the common people. There is a need for a comprehensive review of the requirements of fuel oils in different areas in order to assess the priority sectors in terms of production and contribution to the economy. Bangladesh's domestic oil production is next to nothing and hence it must prioritise the use of imported fuel for reaping the optimal benefits.

In this context, it is worth noting that oil import in 2023 declined by 20 per cent not because prices went up but because devaluation of Taka and dollar crunch did not allow the import of a little over 10 million tonnes it imported in 2022. With almost similar amount of expenditure, the country ended up importing 8.26 million tonnes in 2023. Since there is no scope for import of oil by private companies other than the BPC, industrial units with reduced availability of fuel had to curtail production. This explains why a contractionary monetary policy was followed and the economy shrank. So there is no alternative to rationalising use of fuel oils.​