Archive for the ‘Energy’ Category

BPC’s red balance skyrockets
Incurs Tk 72.08b loss in fiscal 2010-11

M Azizur Rahman

The aggregate loss of Bangladesh Petroleum Corporation (BPC) skyrocketed to Tk 72.08 billion in the last fiscal year (FY) 2010-11, up by 251 per cent over the previous fiscal’s Tk 20.49 billion.

The purchase of a substantially higher quantity of petroleum products from the international market at increased prices and the sale of the same in the domestic market at below procurement cost, were largely responsible for such hefty losses of the BPC during the year, a top official said Friday.

He said BPC imported around 5.10 million tonnes of petroleum products, including refined and crude oil, in FY 2010-11. The quantity was 38.66 per cent higher than that of 3.75 million tonnes imported in fiscal 2009-10.

The corporation’s imports increased mainly in order to keep the newly-installed diesel and furnace oil-fired power plants operational. The demand of other sectors including industries, irrigation, transportation and residential apartments also rose during the year, according to an official source.

Concerns over the global supply situation, in the wake of volatile political developments in the oil-rich Middle East and north African countries, also led to a surge in oil prices in the international market. That furthermore contributed to the BPC’s massive operational losses last fiscal, said the official.

Bangladesh did not increase domestic petroleum prices for most part of the last fiscal, in line with the uptrend of the oil prices in the international market, notwithstanding repeated urgings by the multilateral capital donors for going for appropriate adjustments of domestic prices of oil products.

The government, however, raised last time the domestic petroleum prices on May 6 this year to help reduce losses of cash-strapped BPC and to offset the impact of higher oil prices in the international market on the domestic economy.

Since then, diesel is being sold at Tk 46 per litre, kerosene, at Tk 46 per litre, petrol, at Tk 76 per litre, octane, at Tk 79 per litre and furnace oil, at Tk 42 per litre in the domestic market.

BPC Chairman Md Muqtadir Ali expressed the fear that the corporation’s loss might mount further as the country would require to import more petroleum products in future to meet the growing domestic demand.

Officials said in the past ten years of its operation, BPC made profit only in fiscal 2008-09 and fetched then Tk 3.22 billion in operational profits when oil prices in the international market showed a downward trend, following global economic meltdown.

BPC incurred losses of Tk 95.53 billion in fiscal 2007-08, Tk 26.28 billion in fiscal 2006-07, Tk 31.67 billion in fiscal 2005-06, Tk 28.99 billion in fiscal 2004-05, Tk 9.67 billion in fiscal 2003-04, Tk 5.21 billion in fiscal 2002-03 and Tk 6.45 billion in 2001-02, statistics revealed.

Earlier, the corporation’s loss in fiscal 2007-08 was significantly at a higher level, as domestic petroleum prices were then disproportionately low, despite a steep rise of oil prices in the international market, said a BPC official.

Bangladesh’s petroleum imports have been rising significantly as it is trying to diversify its electric power sources by setting up dozens of diesel- and furnace oil-run power plants to reduce dependence on natural gas for electricity generation.

Country’s natural gas-supply shortfall of around 500 million cubic feet per day (mmcfd) is also forcing many industries to convert their gas-burnt generators and boilers into diesel- or furnace oil-fired ones. This has been inflating the domestic petroleum demand, industry insiders said.

Currently, around 81 per cent of the country’s power plants are now running on natural gas and the remaining 19 per cent are using furnace oil, coal, hydro-power and gas oil.

Electricity generation by renewable energy sources like solar panel, windmill and biogas is still negligible.

The overall generation is now hovering around 4,500 megawatts (mw) against the demand for over 6,500 mw.

http://www.thefinancialexpress-bd.com/more.php?news_id=143035&date=2011-07-16

Donors can fund CCS for coal-fired power plants: UK envoy

Britain’s climate change envoy has said energy-starved Bangladesh could lobby donor partners to finance coal-fired power stations that are part of the first wave of “carbon capture and storage” (CCS), a means of mitigating the effect of fossil fuel emissions on global warming, reports UNB.

John Ashton, who acts as the British foreign secretary’s special representative for climate change, believes it is “clearly not reasonable” to expect countries like Bangladesh to bear the additional costs that arise from implementing the technology for CCS, but that the funds becoming available to tackle climate change in the form of “fast-track funds” can be used to finance “one of the first demonstrations of CCS” in the world here.

“That would be an interesting proposition to make to the World Bank, DFID. I would encourage it, I would do what I can to support it,” said Mr Ashton, who has been actively involved in climate change issues for almost 15 years now.

While acknowledging the supply of electricity to meet rising demand as a “particular bottleneck” for the Bangladesh economy, Mr Ashton would not lose sight of the fact that coal is “right at the heart of the problem” as far as climate change is concerned. According to him, countries face two choices for a sustainable future: either stop using coal, or move towards technologies that will “make coal carbon-neutral”.

CCS is part of the second choice, and with Bangladesh sitting on top of 2.5 billion tonnes of high quality coal in its northern districts, may contain the answer to unlocking some of the obstacles that have stood in the way of many coal-based projects getting off the ground.

Mark Muller, an experienced mining geophysicist, carried out an independent technical review of the country’s coal reserves recently that put the total figure between 3.2 and 4.7 billion tonnes. Some say that is enough to serve the energy needs of the country for the next fifty years. But a lack of vision and political commitment has held back the development of this abundant resource.

Well into its third year now, the present government has still not finalised a new national coal policy to replace the provisions in the national energy policy formulated by the last BNP-led government in 2004, even though it has consistently said that it is close to doing so.

Mr Ashton, who was talking to the media on the second day of his first visit to Bangladesh on Friday, believes that with CCS, a way to move forward with coal-based projects that deals with the argument that they contribute to global warming, has opened itself up for the country.

“The technology is proven, it’s just that they haven’t been combined with power generation on an industrial scale. But it’s not something that’s over the horizon. As long as the geological conditions are there to support CCS, we know how to do it,” Mr Ashton said.

http://www.thefinancialexpress-bd.com/more.php?news_id=143050&date=2011-07-16

Search for hydrocarbon moves at a snail’s pace

Shahiduzzaman Khan

Bangladesh’s hydrocarbon reserve is depleting fast. It is likely to face acute energy crisis after 2015 if no new reserve is found immediately. The situation has gone to such an extent that all concerned appear to have accepted the likely devastating effect of the gas supply crunch on the country’s economy as a fait accompli.

According to a conservative estimate, the national demand will be around 50,000 mmcf by 2020, if the target of 7.0 per cent growth in GDP is to be met. For that reason, around 24 trillion cubic feet (TCF) hydrocarbon resources need to be discovered by 2025. Very recently Petrobangla said that supplying gas to the industries was creating a gas crisis of around 250 mmcf in the country. Even after gas rationing in the CNG filling stations and the fertilizer factories, the situation is not improving.

With the current reserve being at around 15 TCF in the country, the national demand can be met until 2025 without providing it to the industries. However, if the industries continue to be supplied with gas, half of this stock will reportedly be finished within four years. In fact, the entire reserve of gas will be entirely consumed by 2019 if it goes on like this. The situation may aggravate further as gas demand is rising while production remains the same.

It’s a fact that the country has failed to undertake new gas exploration drive over the last couple of years, except taking up some initiatives to increase gas production from the existing fields on a fast tract basis. On the contrary, the government is serious about power sector and has already awarded contracts to generate more than 2,500 megawatts (mw) electricity. The search for discovering hydrocarbon by Petrobangla and its subsidiary organisations has been moving at a snail’s pace since long.

The government is now importing Liquefied Natural Gas (LNG) from Qatar to meet the gas supply shortage. A project to build an LNG terminal has also been taken to receive LNG containers and transmit gas to the national pipeline. It is scheduled to be completed by next year. Yet all indications suggest that 100-kilometre pipeline to transmit the processed gas to the national grid would not be ready within the stipulated timeframe.

Indeed gas crisis is creating a ripple effect on the country’s economy, as hundreds of factories could not go into operation and many power plants still remain idle, hindering its industrial growth. Fertiliser production is being jeopardised as many producing units are failing to operate due to gas supply crunch. Compressed National Gas (CNG) filling stations are being forced to remain closed for four hours daily to divert gas to such factories. Six-hour shutdown will be in force during the month of Ramadan. Still the situation is unlikely to improve.

Lack of adequate pipelines to transmit the available gas is a stumbling block to streamlining its supply countrywide. Early last year, some contracts were reportedly awarded to transmit gas to the country’s gas-deprived western zone. Until now, construction of these pipelines is going on at a snail’s pace. It was scheduled to be completed by now.

The country signed an agreement with US oil giant ConocoPhillips for offshore hydrocarbon exploration. Another IOC, Santos, has started work to drill three wells in the Bay from October next. It has awarded Seadrill a contract for jack-up drilling rig ‘offshore resolute,’ to conduct drilling programme in the offshore gas structures. There is also a move to award several deep-sea blocks and a shallow water block to foreign oil companies. But the process of awarding the blocks is yet to gain momentum.

Geologists believe that the Bangladesh territory in the Bay holds the biggest oil and gas prospect. Apparently, the country is now exposed to a regional oil and gas politics. However, according to foreign ministry source, the maritime boundary is expected to be fixed by next year. Country’s move to mark its maritime boundary has so far been limited to ‘plans’ to take expert help from the US, the UK and Australia for the job.

Both Myanmar and India began oil and gas exploration in their offshore zones in the Bay several years ago and both succeeded in discovering large gas fields. Bangladesh remains miles away in the race and failed to find its deep sea emerging as a new frontier. Nevertheless, fixing maritime boundary is a tricky matter as the coasts of India, Bangladesh and Myanmar follow a curve, which implies overlapping of territory. As per the international practice in such a case, the neighbours should inform each other and reach a mutual understanding before exploring such areas.

More than 97 per cent of the country’s total gas output comes from the onshore gas fields while only 3.0 per cent comes from the lone offshore gas field Sangu. Production in Sangu is depleting fast. International Oil Companies (IOCs) were awarded 12 hydrocarbon blocks, both offshore and onshore, since gas exploration began in the country in late ’90s. But they now hold only six blocks after recently giving up rights on the rest.

All IOCs operating in Bangladesh sell their gas output to Petrobangla, which later sells it to public and private companies through state-owned distribution firms. Recently Santos won the right to sell gas to private companies. On the ground of poor gas reserves in Sangu and lower price, it got the rights to sell gas directly to the private parties. Allowing such right to the IOCs may prove disastrous if all IOCs demand similar facilities. The activities of BAPEX and its subsidiary organisations may be severely constrained then. However, as most of the renowned IOCs are reluctant to take part in hydrocarbon bidding at a large scale, the government has little option to go for alternative in this connection.

Unless BAPEX makes major stride for exploring gas in Netrokona-Sunamganj belt early next year, chances of overcoming the gas crisis within 2014 are very slim, according to experts. Magnama and Hatiya structures have reportedly a large presence of gas which was evident after conducting a 3D survey there. Gas exploration in most of the country’s 46 onshore blocks remained frozen since 1998 after the High Court injunctions.

At a recent roundtable, the energy adviser was upbeat about tapping the coal and gas resources in the country. Besides, he said the government is planning to acquire some coal and gas fields abroad to ensure long-term energy security. As the country is planning to generate 30,000 to 50,000 megawatts of power in the next two decades, the government is contemplating acquiring assets in other countries.

There is no denying that Bangladesh reels under severe energy crisis. The present government has already passed its half of its term. Many gigantic tasks have to be accomplished during the rest of the period. When the country’s domestic energy resources are yet to be tapped to their full potentials, how far is it logical to go for exploiting energy resources abroad? It is really unwise to acquire gas and coal fields abroad without fully exploiting the country’s own underground resources.

The situation demands extensive exploration on both onshore and offshore blocks in the wake of soaring gas crunch, caused mainly by lack of drilling in prospective fields. Harnessing gas along with power is of crucial importance at this critical time of huge energy crunch.

szakhan@dhaka.net

http://www.thefinancialexpress-bd.com/more.php?news_id=143067&date=2011-07-17

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

The Financial Express – 15.11.2011

Underground coal gasification

open pit mining planned for Barapukuria