World Bank Document

Report \ () -)I 'l) Energy Issues and Options in Thirty Developing Countries Public Disclosure Authorized August 1984 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Report of the joint UNDP/World Bank Energy Sector Assessment Program JOINT UNDP/WORLD BANK _N:RGY SECTOR ASSESSMENT PROGRAN REPORTS ALREADY ISSUED The First Thirtv Reports Countr-y Date No. -.ndonesia November 1981 3543-IND Naurltius December 1981 3510-.MAS Ken-ya May 1982 3800-KE Sri Lanka May 1982 3792-CE Zi; June -bae 1982 3765-ZIM HaIti lune 1982 3672-HA ?aoua New- Guinea June 1982 3882-?NG Pr_.d june 1982 3778-BU Rwanc-a June 1982 3779-RW -2 a-~i August 1982 3903-YA.L Ba-giadesh- October 1982 3873-BD Zan3ia January 1983 4110-ZA f (.=ree Fe'Dr-ar i1983 3877-TU 2ADr'l983 4213-80 June 1983 4462-FTJ SoLomon. slan ds June 1983 4404-SOL Senegat. _uiy 1983 4182-SE Sudan July 1983 4511-SU Uganda Ju1 y 1983 4453-UG N:iger:a August 1983 4440-UNI NeoaL August 1983 4474-NEP Gambia Novenber 1983 4743-GM Peru January 1984 4677-PE Costa R ca Jan4uary 194 4655-CR .ess::n jan_ary -984 6676-LSO Seyche',es January 1984 4693-SEY MOr-sooc984 March 4157-MOR Po r tua .ur-iL 1984 4824-PO '. i ge r M.ay 1984 46S342-'i.R Ethionzaa xA., 8, 7 1--T FOR OFFICIAL USE ONLY Report No. 5230 ENERGYISSUES AND OPTIONS IN THIRTY DEVELOPINGCOUNTRIES August 1984 MIERGY ISSUES AND OPTIONS IN THIRTY DEVEWPINGCOUNTRIES Preface In November 1980, the United National Development Programme (UNDP) and the World Bank launched the Energy Sector Assessment Programme to assist governments in evaluating the main energy issues and options in 60 countries and to serve as a framework for multilateral and bilateral technical assistance in the sector. This volume presents summary material drawn from the first 30 country reports prepared under this programme. These countries are: Bangladesh, Bolivia, Burundi, Costa Rica, Ethiopia, Fiji, The Gambia, Haiti, Indonesia, Kenya, Lesotho, Malawi, Kauritius, Morocco, Nepal, Niger, Nigeria, Papua New Guinea, Peru, Portugal, Rwanda, Senegal, Seychelles, Solomon Islands, Sri Lanka, Sudan, Turkey, Uganda, Zambia, and Zimbabwe. For some of the assessments completed early in the programme, a review of recent energy sector developments (prepared under the follow-up UNDP/World Bank Energy Sector Management Assistance Programme) has been included. In addition, a recent Energy Balance and an overview of the economic situation in each country is given. To introduce the summaries, this volume begins with an overview of worldwide priorities for dealing with the challenges of the energy transition in developing cc,ntries and a brief description of the Energy Sector Assessment Programme itself. The 30 reports, as well as this volume, have a restricted distribution and their contents may not be disclosed without authoriza- tion from the UNDP or the World Bank. Further information on the Joint UNDP/World Bank Energy Sector Programmes is available from: Division for Global and Energy Assessments Division Interregional Projects Energy Department United Nations Development or World Bank Programme 1818 H Street, N.W. One United Nations Plaza Washington, D.C. 20433 New York, N.Y. 10017 Table of Contents The Energy Transition ...................... i The Energy Assessments . ............. ix Bangladesh ....................... 2 BoLivia .................... 24 Burundi .................... 42 Costa Rica . ................. 52 Ethiopia . .................. 60 Fiji ... 80 The Gambia ............... .......... 88 Haiti ... 96 Indonesia . ....... 110 Kenya ........ 124 Lesotho ........ 140 Malawi ........ 146 Mauritius ...... 154 Morocco. ...... 162 Nepal .......... 172 Niger ...... 180 Nigeria ................. ... 194 Papua New Guinea ........... 204 Peru ................. 218 Portugal ............... 234 Rwanda ............... 246 Senegal ................... .. ....... 260 Stychelles............... 274 Solomon Islands . ............. 280 Sri Lanka .......... 288 Sudan . ............. 300 T'urkey.................. eo...........*s* 310 Uganda ............... 322 Zambia . ............. 338 Zimbabwe ............... 354 The Energy Transition 1/ 1. The world entered an era of higher energy costs a decade ago. The transition was an abrupt one and most developing countries have still not adjusted their energy consumption and production patterns fully to reflect the higher costs of energy, and particularly imported oiL whose price has increased fivefold in reaL terms since 1973. This adjustment process entails a wide range of actions: increasing the efficiency of energy use through rationa'lpricing and other demand management measures; undertaking a vastly expanded and more diversified program of investments to develop indigenous energy resources where these are cheaper than imported energy; reorienting industrial, agricultural, and transport development strategies to take account of the higher costs of energy; and strengthening the institutional and management capability in the energy sector to carry out these tasks effectively. The Global Setting 2. The transition process is particularly difficult for the oil importing developing countries. They must raise the resources for an expanded program of energy investments to reduce their dependence on oil imports while, at the same time, continuing to pay for these imports until the investments mature. The issues are similar in several oil exporting developing countries. They, too, must restrain the growth of oil consumption and promote the utilization of other energy resources in order to maintain the flow of oil export revenues. 3. Developing countries account for one-fourth of the world's production and one-fifth of the world's consumption of commercial energy. Their shares of both consumption and production are rising rapidly. By 1995, they will account for one-third of the worLd's production of commercial energy and one-fourth of the world's consumption. Thus, as a group, the developing countries will continue to be net exporters of commercial energy to the rest of the world. These projec- tions are, of course, subject to many uncertainties and assume that developing countries will take strong action to improve the efficiency of their energy use and wiLl be able to undertake the necessary investments to exploit economic opportunities for substituting imported oil by other cheaper energy sources--domesticor imported. 4. The urgency of these measures is not alleviated by the recent softening in international oil prices. Although oil prices have dropped sharply from their peaks, they remain considerably higher than the prices that prevailed only four years ago. Moreover, while the movement of oil prices remains unpredictable over the short term, most analysts agree 1/ Adapted from the World Bank Policy Paper, The Energy Transition in Developing Countries, August 1983. - iL - that oil prices are likely to rise again in real terms during this decade. Energy strategy and investment planning decisions must be made on these expectations about price in the last 1980s and the 1990s. Hence, a temporary decLine in the price of oil should not distract atten- tion from the longer-term importance of reducing dependence on imported oil that is considerably more expensive than many available alternatives. 5. Different countries in the developing world face very different energy problems and prospects, and have correspondingly different priorities for action. One classification is shown in the table beLow. It distinguishes oil exporters, who have seen a major increase in inflows of foreign exchange but who generaLly face the macroeconomic challenge of maintaining the production of exportable goods other than oil, from oil importers, who have had varying degrees of difficulty and success in coping with the impact of higher oil prices on their balance of payments. About half of the oil importers, including many of the poorer ones, rely on imported oil for over three-fourths of their commercial energy requirements; these countries have been especially badly affected by higher oil prices. Low and middle income economies are distinguished on the tabLe because it is the poorest countries which have in general the least scope for reallocating resources from other parts of the economy to pay for energy imports and the least flexibility in borrowing commercially to pay for higher oil import bills in the short run or to develop their own energy resources. The magnitude of economically developable commercial energy resources relative to the country's energy needs forms the basis, admittedly imprecise, for the classificationshown in the table between "limited," moderate," and "substantial" energy resource groups. Increasing Energy Efficiency 6. Recent experience and analysis have shown, however, that in spite of the many variations there are a number of priority areas for action that are common to most developing countries in all groups, and among the most important of these is to take advantage of opportunities to improve the efficiency with which energy is used in virtuaLLy all sectors. This requires a wide range of measures, of which rational energy pricing has proved to be particularly important. A review of the current state of energy pricing shows that oil importing developing countries have, in most cases, already passed on the higher costs of imported energy to final consumers. But most oil exporters continue to price oil, in their domestic markets below its opportunity cost. In both groups of countries, there are still imbalances

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