ICC Bangladesh

Introduction to ICC conference on energy 

Courtesy The Financial Express

13.04.2010

The Bangladesh economy has been growing at about six percent annually over the last few years. Of the sources of growth, the most prominent contribution has been from manufacturing; in fact, growth of the manufacturing sector has sometimes been in the double digits. Many feel the country has reached a take-off stage, where self-sustaining growth may soon be possible. One of the necessary, though not sufficient, conditions for development of the manufacturing sector in Bangladesh is the availability of energy, in the form of power and gas.
The current power generation is between 3,800-4,300 MW, while the demand is between 4,200-5,500 MW; there is no option to load shedding, which may be up to 1,500 MW on hot summer days. The per capita power avail ability is about 183 kWh – one of the lowest in the world – while more than half the people of the country do not have access to electricity.
The government has undertaken emergency plans to add more generation capacity. Each year, between now and 2014, new generation capacity will be added. Given the desire of the government to encourage private sector participation in power generation, public private partnerships will be an important feature of many new plants.
Power generation plants have used natural gas as fuel, as the reserves of gas were previously thought to be adequate for our needs and expansion plans. Increasingly, the demand for gas is coming from the industry. The gas demand projections made in 2006 were soon found to be outdated, and new calculations were made in June 2008. The latest demand supply projections are summarised in the table below:
 
Demand Supply Gap with present Generation Programme

The demand for gas has been growing at a very high rate, and new projections may need to be made in the near future. If the economy is to grow at a rate of 8 % per annum, the demand for gas will increase even further.
 
Gas demand-supply projections
(in mmcjd, as in June 2008)

 
The supply of gas has not kept pace with the demand. Till recently, the proven and probable (21P) reserves were about 20.6 tcf; with the reassessment of reserves of the Bibiyana gas field, the 2P reserves were revised upward to over 23.0 tcf. However, we have already consumed about 8.4 tcf (till June 2009), leaving a balance of 14. 6 tcf.  The gas reserve position is given in the following table:
 
GAS (2P) RESERVES & CONSUMPTION

 
To meet the immediate and long-term demands, the government plans include the drilling of appraisal/development wells, work over of existing gas wells and drilling of exploratory wells, both on-shore and off-shore.
The most important source of input for the power industry could be domestic reserves of coal. Large deposits of quality coal have been found, but have been exploited only marginally.
 
Coal Resources/ Reserve of Bangladesh

 
The estimated reserves are close to 3,300 million tonnes, while the proven reserve is about 884 million tonnes. All the discovered coal is in the Rangpur-Dinajpur area, and the geology, depth and thickness of the coal support strip mining. The quality of the coal is regarded as excellent, with minimum impurities. Given the experience of countries around the globe, there is strong justification for use of the coal for power generation. The technology is available for economic power generation, while meeting the needs of protecting the environment.
To supplement the domestic sources of energy, the government has taken the following measures: import of power from India and the establishment of power plants based on imported coal. In addition, the government is considering the import of LNG, as well as the establishment of a nuclear power plant.
For the private sector, this scenario poses a challenge and an opportunity. It is a challenge, in that the private sector plans for establishment of new industries will need to consider this reality. The private sector will also need to consider how to run the existing industries at full capacity, considering the shortage of energy. At the same time, this state of affairs also throws up an opportunity, where the private sector can assist the government in adding more generation capacity directly, in helping with the exploration and exploitation of hydrocarbon resources, and in promoting the environment in which immediate investment in power generation becomes a reality.
ICC conference
This backdrop provides the setting for the Conference being organised by the ICC Bangladesh. The participants include the relevant stakeholders, including the government and the business community, development partners, international organisations, potential investors and financiers from home and abroad, and experts.
The one-day conference is structured to provide the maximum opportunities to the participants to present their perspectives, and to exchange views among themselves. After the formal inaugural ceremony, the conference begins with a plenary, followed by breakout sessions, and ends with a concluding plenary. The description of the Sessions is provided below:
Plenary 
This session sets the tone for the Conference with the presentation of the demand for power and gas, and their availability; thereafter, the plan to increase availability will be outlined. Afterwards, speakers outline the critical issues in respect to exploitation of alternative available hydrocarbon resources for power generation and the means and opportunities of financing these projects.
Power project development: exploring the critical path this breakout session explores the opportunities for development of power projects. The Bangladesh experience will be highlighted, along with the experience in selected countries and by companies participating. There are hurdles to be overcome for the large-scale projects being contemplated, and the solutions will involve both local and foreign firms. It would be useful to understand the requirements for their participation. For example, the session could address the following questions:
(a) How does the rate of return required for projects in Bangladesh differ from that required in neighbouring countries; and, what can Bangladesh do to reduce the differential, if any?
(b) What measures are required to shorten the approval process and implementation lead times?
Hydrocarbon Exploitation & Regulatory Structure – Bangladesh has proven reserves of hydrocarbons, particularly gas and coal. Gas exploration and development of existing gas fields have not kept pace with the increasing demand; as a result, the country faces severe shortages. One solution is to develop the other resource available in Bangladesh: coal, which has not been exploited adequately. This Session will also look at the regulatory structure that is required. Key questions that could be addressed are:
(a) What type of contract s will make Bangladesh more attractive to potential investor s in hydrocarbon exploitation?
(b) What will it take to make coal exploitation a reality in Bangladesh?
Financing Energy Projects – A prerequisite for a successful project is its financing. Power projects and hydrocarbon exploration programmes are capital intensive, requiring large-scale foreign and local financing. While the global financial situation has made project financing more difficult, those providing capital will require certain conditions to be met. This session will address some of these key concerns and requirements, in particular :
(a) Is the global financial environment of the post-2008 period more difficult for project financing?
(b) What can Bangladesh do to increase its attractiveness for          project financing?
Concluding plenary – The discussion in the plenary and the breakout sessions will be presented in this session. The recommendations emerging from this session will form the basis for follow-up in subsequent conferences.
Given the importance of this subject, it is contemplated that this Conference will be just the beginning of a process in which the ICC Bangladesh, in cooperation with the government and the private sector, will continue to address this critical issue.
This conference provides a befitting occasion for the ICC Bangladesh to celebrate 15 years of its existence.