How to confront the energy crisis?
Khondkar Abdus Saleque
Flawed planning, wrong strategy and poor management of infrastructure projects in the energy sector are driving the Bangladesh economy to a possible serious depression.
The present government which claimed to have done extensive homework on the energy sector prior to its election in 2008, possibly failed to understand and assess the depth and diversity of the crisis. Hence, their inappropriate actions in almost three years have failed to improve the energy sector scenario. Lack of power and energy supply has stalled industrial growth, foreign investment is dipping, and export growth is slowing down as operation of existing export-oriented industries is suffering. The economy is under serious strain. The foreign currency reserve has dropped to alarming levels after meeting the government’s payment obligations and providing subsidy in power and energy sector. A leading Bangladeshi think-tank in a recent report mentioned about the major challenges that the Bangladesh economy is facing now. These are: Implications of the new wave of global economic crisis; deepening stresses in public finance management; unabated price inflation; and increasing pressure on the balance of payments.
This write-up will mostly discuss about the present energy crisis scenario, reasons behind it and suggest some remedies. The 6th Five Year Plan has correctly assessed that for every 1.0 per cent of GDP growth it requires 1.5 per cent growth of energy demand. For 6.0 per cent growth of GDP every year over the last 4-5 years energy demand grew by 7.5-8.0 per cent per annum. But our failure to augment generation of power and production of basic fuel has created the present energy and fuel crisis. Only 40 per cent of our population of 160 million have some access to electricity and about 10 per cent have direct access to pipeline gas. This creates about 6500-7000mw power demand and about 2600mmcfd gas demand. But at present we can only generate about 4800-5000mw power and produce 2050mmcfd gas. The consequent deficit is bleeding the national economy. The annual loss of production and income from power outage has exceeded 0.5 per cent of GDP per year. The availability of domestic primary fuel supply is getting scarce, forcing the shutting down of fertiliser factories, rationing gas supply to domestic users and CNG.
The 6th Five Year Plan also identified the reasons for the failures as: Outdated generation and distribution system of power; poor power and energy price leading to mushrooming growth of energy inefficient small and medium industries; mono fuel natural gas dependency for power generation; minimum private sector investment in power generation; inadequate fund for maintenance of power infrastructure; inefficient management in electricity generation, distribution and sales; unavailability of required funds to invest in generation and supply of power and exploration of gas and coal; and poor capacity of state-owned enterprises.
The present government when it took over power in January 2009 was well aware of these challenges. It announced in its election pledge to appropriately address all related issues to deal with the situation. The Prime Minister herself kept the Ministry of Power and Energy under her direct supervision, engaging a retired bureaucrat as her advisor. The government announced mega plans and vowed to make the country load shedding free by 2012. In the end of 2009 and early 2010, a high-powered government delegation using funds from Petrobangla embarked on expensive road shows in Singapore, London and New York for attracting investors in the energy and power sector. Judging from actual outcome in the end of 2011, one can assume that the road shows were poorly conceived, failed initiatives. The expected investment did not come.
In 2009 and 2010, the government had to resort to massive power load shedding during irrigation period to divert power to farmers. The power system end users suffered from unbearable load shedding. The government took up expensive liquid fuel-based contingency plants, known as peaking plants. Here also the plan was flawed. To give unnecessary benefit to party loyalists and inexperienced developers, the government allowed “Tom, Dick and Harry” to go for liquid fuel-based plants. Bangladesh Petroleum Corporation (BPC) was tasked to import fuel at a high price and supply to investors at a much lower price. Bangladesh Power Development Board (BPDB) was asked to buy expensive power. Consequently, BPC and BPDB both struggled to survive. The government was required to arrange subsidies to make the state-owned enterprises (SOEs) survive. Even after all these, some power plant developers failed to implement their respective projects. About 50 per cent of the plants cannot generate even 50 per cent of the rated capacity for importing inefficient power plants. It is true that the government had little choice but to go for such an initiative. But the government must not have taken responsibility of importing fuel and should not have been so generous to unworthy developers. Now the flawed plan has not only failed to address the crisis, it has also created additional financial burden on the government.
The government plan for allowing too many liquid fuel-based contingency and peaking plants have created multi-dimensional problems. BPC was tasked to import liquid fuel from the volatile international market at higher price and supply at lower price to Power Plant Developers. The BPC went to the brink. The government had to provide huge subsidy. The BPDB was asked to buy expensive power and sell at a lower price. The government had to account for the subsidy. The additional subsidy burden stressed the national budget. Now, the government has to adopt unpopular actions of price hike of fuel and electricity. These actions will soon have all- round adverse impacts on the market.
The government claims to have added about 2000mw new power but effectively power generation has increased from 3800mw to 4800mw. A significant portion of installed capacity remains unutilised for lack of gas supply and chronic mechanical problem of old plants and contingency plants. People also have serious doubt about the electricity demand projected by the BPDB. According to some sources, the actual power demand may have exceeded 7000mw. That is among reasons why the increase of generation has no visible impacts.
The government is ill advised to pursue import of LNG and coal. Bangladesh does not have necessary port facilities and associated infrastructures. Floating LNG plant and using mother vessel for coal anchored at deep-sea and use lighterage to carry coal will require huge expenses. Moreover, expensive LNG and imported coal will make power very expensive. The fragile economy of Bangladesh cannot absorb such expensive power. Both these initiatives will be ultimately abandoned. The sooner it is done the better.
The government should rather have gone for required exploration and exploitation of own fuel resources, coal and natural gas, in an appropriate manner. It wasted three years with unnecessary coal policy formulation. After so much of brainstorming, it has commissioned a new committee to further review impacts of different methods of mining. With only a little over two years remaining of its present term, it is highly unlikely that the government will go for mining of coal within its present tenure.
Any genuine mining expert will suggest mining of coal from Barapukuria and Phulabri at least by modern open-pit method. Geology, soil condition, nature and characteristic of coal seams and mineable depth support open-pit mining. Two world-renowned international engineering companies SMEC and GHD have carried out extensive studies at Phulabri and came out with positive recommendations. Inappropriate underground mining at Barapukuria triggered disaster – flooding, gas formation and subsidence. Unfortunately, Bangladesh did not learn the lesson. Why we cannot set up a strong committee to monitor mining in the area to ensure management of all social and environmental impacts? Why we cannot relocate and rehabilitate the mine affected community properly? Open-pit mining can mine 90-95 per cent coal in place and allow setting up of at least 2000-3000mw mine- mouth coal plant in four years. If it could be started in 2010 we could be in a position to have 2000-3000mw power by 2014. Our policymakers and planners are chasing the rainbow instead. LNG and coal import for running power plants will not materialise in the near future in Bangladesh.
There has been minimum achievement in the gas sector during the last three years. The works of major gas-based power plants have not also advanced as expected. A major private sector power plant developer has monopolised gas-based new power generation. It is highly unlikely that these plants will come on stream as planned. Petrobangla could only increase production from Bibiyana and in efforts to increase additional gas to already congested North-South Corridor of Gas transmission system the pressure all over gas grid has gone down. Petrobangla failed to implement gas transmission projects in time. The controversial Gas Pipeline Compressor station at Muchai given to Chevron has not yet been commissioned. GTCL spent five years in selecting contractor for the other two compressor stations. In the absence of required gas transmission facility, the entire gas distribution system has become unreliable. Failure of GTCL to conduct routine on-stream pigging has impeded the capacity utilisation of the gas grid.
Chittagong is the worst sufferer. It used to rely mostly on gas from the Shangu offshore field brought into operation in 1998-99. Over-production from the field started evidencing fast depletion from 2002. Experts suggested reducing production which the Petrobangla bosses ignored. Consequently, in three years from 2003 -2006 production drastically reduced from 160mmcfd to 40mmcfd. Now, it can hardly produce 14mmcfd. Meanwhile, the gas demand in Chittagong kept growing. In this situation, Petrobangla must have planned alternative measures. The other source of gas supply, the Bakhrabad-Chittagong pipeline, has capacity constraints. In the present situation, it can only divert 220-230mmcfd from national grid. Leaving about 30mmcfd for the greater Comilla and greater Noakhali regions, Chittagong can get about 200mmcfd. Hence, Chittagong can get only 210-220mmcfd against a demand of about 400mmcfd. The consequent huge deficit led to shut down of CUFL, rationed gas supply to all consumers including power and industries. With only gas from Semutang and Shangu available in the short term, Chittagong is due for a long term gas crunch.
In the present situation, the government must seriously review the situation and without any delay must take the following actions:
* Abandon the LNG and coal import initiative.
* Start mining of own coal from Barpukuria and Phulbari using the technically most appropriate open-pit mining method and start actions for setting up about 2000mw mine-mouth coal powered power plants. All party parliamentary committee comprising of mostly MPs of greater Dinajpur and Rangpur may oversee and monitor relocation and rehabilitation of the affected communities by the mine developers.
* Engage drilling contractor through credible transparent mechanism for drilling and developing at least 10-15 production gas wells at Titas, Rashidpur and Bakhrabad gas fields to add about 250-300mmcfd additional gas to the national grid by 2013.
* Construct the Ashuganj Gas Pipeline Compressor station, Ashuganj- Bakhrabad Loop line and Bakhrabad – Shiddhirganj Loop line by December 2013.
* Take up a contingency project: Bakhrabad-Chittagong bi-directional gas transmission loop line for urgent implementation.
* Conduct on-stream pigging of all major gas transmission pipelines in a planned manner by June 2012.
Energy is one of the basic needs. There must be political consensus on energy issues. We must explore and exploit our own energy resources in the best possible manner, adopting cost-effective methods without bothering for who says what.
Engr Khondkar Abdus Saleque, PE & FIEB, can be
reached at email: khondkar.saleque@gmail.com
