FORTNIGHTLY MAGAZINE, VOL 9, ISSUE 2, JULY 1-15

Editor Mollah M Amzad Hossain Advisory Editor Anwarul Islam Tarek Saiful Amin International Editor Dr. Nafis Ahmed Contributing Editor Saleque Sufi Dr. A Rahman Managing Editor angladesh has finally made a long awaited deep-sea gas exploration deal Afroza Akther Pervin B with US company ConocoPhillips awarding them two blocks in the Bay of Design & Graphics Md. Monirul Islam Bengal. Although it was done through a standard production sharing contract, a section of citizens raised protests and even called hartal saying Photography ’ Bulbul Ahmed that the country s interests have not been protected in the deal. They Farzana Karim Chowdhury particularly protested the export option arguing that the country would be Magazine Administrator deprived of much of the gas to be explored. On the other hand, the AKM Shamsul Hoque government has not made a clear cut statement to refute this particular Production allegation. Therefore, the debate is going on. And the people are a bit Mufazzal Hossain Joy confused. They don’t know whether the protests are justified or the Computer Graphics Md. Uzzal Hossain government is correct. The situation arose just because of lack of Technical Support transparency in making the deal. The government must make it clear all the Laser Scan/Colour Touch provisions made the contract and let people know that the country’s interests Circulation Assistant are well protected, otherwise the government will have to face agitation Khokan Chandra Das while making such deal in future. The country badly needs gas and there is Editorial, News and Commercial no alternative to explore all the options to increase gas production. Room 509, Eastern Trade Center 56 Inner Circular Road (VIP Road) Naya Paltan. GPO Box : 677 Dhaka-1000, Bangladesh Tel & Fax : 88-02-8354532 Email: [email protected] [email protected] Website: www.ep-bd.com Price Bangladesh: Tk 25, SAARC: US$ 3, Asia: US$ 5, Europe: US$ 6, North America, Africa & Australia: US$ 7.5

At present four IOCs are pro- ducing gas from five 9Bangladesh gas fields. The Jalalabad, run by US company Chevron, produces 150 MMCFD. Bangladesh’s share is 78 percent of the gas while Chevron 22 percent. If the production is more than 150 The Bangladesh PSC has MMCFD and less than 300 43 ensured the ownership of the MMCFD, Petrobangla owns 80 per- people on the oil and gas resources cent and the rest 20 percent as well as protected the sole author- Chevron. Bangladesh gets 83 per- COVER ity of Petrobangla in controlling the use of oil or gas to be extracted. The cent if the production at Jalalabad is contracting company under the PSC more than 300 MMCFD. does not have this authority. Associate Professor of Law of Chittagong University Dr Abdullah Al Faruque has expressed the view in an exclusive interview with EP. Green Page The Energy & Power had introduced Green Page marking its step- ping into the 7th year to campaign for efficient use of energy, energy conservation and using environment-friendly energy. Encouraged by the readers and patrons, the EP decided to continue with the pages as it is stepping into the 8th year. The EP would make its best effort to keep up the campaign

Page: 31, 33, 34

5 WORLD WATCH Latest Development in World 6-7 SNAPSHOT Latest Development 9 COVER PB`s PSC with ConocoPhillips COVER PLUS 15 PSC: Setting the Records Straight 16 Negative Intentions & Reality DEBATE 19 Disclose PSC, Clear Confusion SPECIAL ARTICLE 27 Offshore PSC - Cynicism Vs. Facts COVER ARTICLE 29 PSC Amendment & Offshore Petroleum Exploration GREEN PAGE 31 Call for Green Energy Fund to Enhance Energy Capacity 33 BD Achieves Marked Growth in Renewable Energy Use 34 Solar Power Must For New SME, Agriculture Branches: BB ARTICLE 35 Ailing Electricity Sector REPORT 37 Samutang Gas Field Goes Into Operation 38 Govt to Set Up Plant to Generate Power from Gas Condensate SPECIAL REPORT 39 Fix Energy Problem to Attract FDI REGION 41 SAARC Power Grid INTERVIEW 43 Dr Abdullah Al Faruque Associate Professor of Law of Chittagong University TECHNOLOGY 46 Protecting A Supercomputer From Power Grid Disturbances WORLDWATCH

India to Press Ahead India's ADB Pledges The Asian Development on Nuke Power Commerce US$ 120M For SL Bank (ADB) has agreed Minister called to provide financial for more cooperation with the United States on nuclear assistance of US$ 120 million for the implementation of energy and brushed aside talk of scrapping ambitious Sustainable Power Sector Support Project in Sri Lanka in plans in the wake of Japan's Fukushima crisis. line with the government’s target of providing electricity On a visit to Washington, Commerce Minister Anand to all households by end of 2012. Sharma said he has faced questions on whether India The project will contribute to a reliable, adequate and should rethink its nuclear energy policy and responded affordable power supply for balanced and sustainable flatly: "My answer was no." economic growth in Sri Lanka and increase electricity India's fast-growing economy is heavily dependent on connections in rural areas, specifically in the Eastern, highly pollutant coal and imports of crude oil. Less than North Central, Southern and Uva Provinces. three percent of India's electricity comes from nuclear power but it hopes to raise the figure to 25 percent by In this connection, Secretary, Ministry of Finance and 2050. France, Russia and private US and Japanese firms Planning, on behalf of the Government of Sri Lanka and are in fierce competition to sell new reactors to India. on behalf of ADB, Candice McDeigan Head Portfolio Management Unit of the Sri Lanka Resident Mission of Power Crisis to End The Pakistan feder- ADB, signed two Loan Agreements. by 2030 in Pakistan al government has The total investment cost of the project is US$ 162.03 approved an energy million (Rs 17,553 million) of which US$ 42.03 million security action plan that targets an end to the power crisis (Rs 4,553 million) will be provided by the government of by 2030. Sri Lanka. The total loan from the ADB includes a loan The plan also envisages production of additional of US$ 10 million (Rs 1,083 million) from the Asian 8,800MW through nuclear power plants coupled with Development Fund (ADF) and a loan of US$ 110 million promotion of alternative energy resources for production. (Rs 11,917 million) from Ordinary Capital Resources Officials said that a new nuclear power plant will start pro- (OCR). ducing 340MW in June while construction on two similar The Ceylon Electricity Board (CEB) and Sustainable projects is also under way. Another 1,000MW project is Energy Authority (SEA), under the Ministry of Power and proposed to be set up in Karachi, according to the plan. Energy will be the project implementing agencies. The They said that talks with nuclear plant suppliers are in project is scheduled to be completed by April 2014. process for the promotion of nuclear power plants in Pakistan. The government is also trying to encourage local investors and companies in energy production. Sri Lanka to Monitor Sri Lanka will set up a body to The officials said that the plan will help Pakistan overcome Radiation from India the prevailing energy crisis and also reduce energy cost. deal with radia- The officials said that sites for more nuclear power plants tion emergencies that may arise in the event of any acci- were being reviewed. dent at nuclear power plants in neighboring India. They added that the plants will bring billions of rupees of The cabinet approved the setting up of the Atomic investment amid helping social and economic develop- Energy Regulatory Council, said a government state- ment in Pakistan. ment. "Since Sri Lanka is in close proximity to the nuclear India Increases Coal Electricity utilities power stations in south India, it has been found neces- Imports by 43% in India increased sary to establish an independent regulatory arm in keep- imports of coal by ing with the advice given by the International Atomic 43 percent in May to 2.97 million metric tons from a year Energy Agency," the statement said. earlier, reported India Coal Market Watch. Sri Lanka and India are divided by a narrow strip of sea, Imports in April were at 2.34 million tons. known as the Palk Straits. The recent nuclear disaster in The Central Electricity Authority, a supervisory body, has Japan put Sri Lanka on alert over the threat the island set a target of 35 million tons of imported power-plant coal may face if a similar disaster occurred in India. for the year ending March 2012, the newsletter said. The government will replace the country's existing Domestic coal supplies to power plants fell 7 percent to Atomic Energy Act in order to introduce nuclear power 28.54 million tons in May from a year earlier. technology in the country, the statement added.

5 SNAPSHOT

Chevron to Drill 18 Chevron to Drill 18 Titas Gas Launches The state-owned Wells to Increase Project to Improve Titas Gas Wells to Increase Gas Production Transmission and Gas Production Chevron, the USA Gas Supply Distribution based oil and gas Company Ltd Company, is set to drill 16 development wells and two (TGTDCL) is going to undertake a project to improve its exploratory wells at Jalalabad, Moulvibazar and Bibiyana gas supply efficiency with the consultancy support of gas fields in the next one year. Pegasus International (UK) Ltd. The international oil campany has been asked to increase The TGTDCL has signed a deal with the UK-based com- gas production by 1,000 mmcfd from these three fields by pany on June 14. 2012 to enhance country's gas output from 2200 to 3300 The total estimated cost of the 'Supply Efficiency mmcfd. Improvement Project' is over Tk 555.20 million. Among "Chevron will drill 16 development wells in Jalalabad, the cost, the Asian Development Bank (ADB) will provide Moulvibazar and Bibiyana, however two exploratory over Tk 347.02 million, and Bangladesh government will wells would be drilled at Jalalabad and Bibiyana to assess provide over Tk 208.18. the reserve of these two fields," said Petrobangla Chairman TGTDCL Managing Director Muhammad Abdul Aziz Dr. Hossain Monsur. Khan said that they were going to run the project to According to Petrobangla, Chevron submitted a US$ 350 improve gas supply efficiency in Dhaka and adjacent million capital budget to carry out the plan. areas under the Titas coverage, and ensure cost-effective use of gas. "To conduct the drilling operations we need one year as we have to construct concrete drilling pit, mobilize He said the project envisages improvement of supply effi- drilling rig and associated equipment, management and ciency through reducing wastage of gas by domestic cus- treatment of waste and decommissioning of rig and mate- tomers, combating gas pilferage by dishonest industrial rials," said a Chevron official. consumers and captive power plants, and ensuring effi- cient utilization of gas in gas-based industrial units and He said the crucial issue related with this development power generation. plan is pipeline constraint. According to the Petrobangla, to improve the gas flow Padma Oil Submits The state-owned oil from north to south it needed to implement some pipeline Papers to SEC company-Padma project. Oil Company Limited-has submitted all necessary documents to the Chevron is producing nearly 920 mmcfd from three gas securities regulator related to resumption of its shares trad- fields in Moulvibazar, Jalalabad and Bibiyana which is half ing. of the country's daily gas production A top official of the Securities and Exchange Commission (SEC) said the regulator will discuss the issue at its next Energypac Power Energypac Power meeting. Signs Deal with CPA Generation (EPGL), one of On March 30 last, Dhaka Stock Exchange (DSE) suspend- the leading companies in energy and power sector of ed the share trading of Padma Oil as the Board of Bangladesh, has signed a contract with Chittagong Port Directors of the company halted its earlier recommended Authority (CPA) for installation, testing and commissioning of dividend by breaching the securities rules. 20 High Mast Lighting System at different locations of the In December 2010, the board of the company recom- yard. mended 100 percent cash dividend for the year that ended Captain Anwarul Hoque Chowdhury, (E), psc, BN, MEMBER on June 30, 2010. (Engineering) and Commodore Anwarul Islam, ndu, afwe, On January 2, 2011, the High Court issued a three-month psc, BN, Chairman, CPA signed the deals. stay order on distribution of recommended dividends fol- On behalf of Energypac Power Generation Ltd. Engr. Md. lowing a writ petition filed by an investor challenging the Irteza Hossain, Head of Project Division (BPR) signed the declaration. paper. Then on March 21, 2010, the board halted its previous Engr. Abdul Khaleque, DGM, Energypac Engineering Ltd, declaration and recommended 50 per cent cash and 50 Engr. Md. Abu Ismail, Director (Elec & Mech), Chittagong Port per cent stock dividends. Authority and other key officials from both organizations Under the circumstances, the DSE suspended the trading were also present on the occasion. of the company's shares following a directive of the SEC.

6 SNAPSHOT

Standard Chartered Standard Govt to Provide 6Lacs The gov- to Finance $20m Chartered Bank New Power Connections ernment has become the has decid- Power Plant Project sole facilitator for ed to provide prospective consumers with over 600,000 a 5-year term new electricity connections by December this year. financing of $20 million for the Khanjahan Ali Power The decision was taken at a meeting of the Ministry of Company Ltd for its 40 MW power plant in Noapara of Power, Energy and Mineral Resources at Bangladesh Jessore. Secretariat, with State Minister Muhammed Enamul Huq in Jim McCabe, CEO of Standard Chartered Bank, the chair. Bangladesh, and K. M. Ahsan Shamim, Director of Prime Advisor Dr Tawfiq-e-Elahi Chowdhury, Power Division Khanjahan Ali Power Company Ltd, signed a deal in this Secretary Md Abul Kalam Azad and managing directors of regard at the head office of United Group in the city power distribution agencies attended the meeting. recently. Hasan Mahmood Raja, Chairman of United Group, BPC to Pay 3.3% Bangladesh Ayesha Aziz Khan, Finance Director and Jafer Ummeed Premium to Kuwait Petroleum Khan, Director, of Summit Group, Venkataramanan Petroleum Corporation (BPC) Anantharaman, Head of OCC, India and South Asia, will pay 3.30 per- Nirukt Sapru, Head of Growth Markets, South East Asia cent premium to Kuwait Petroleum Corporation (KPC) for and South Asia, Milan Mehra, Head of Regional the next six months. Structured Trade Finance and Financing Solutions, Abrar "We will pay 3.30 percent premium to KPC for July - Anwar, Head of Origination and Client Coverage, December period. However, they (KPC) asked for five per- Mahfuzur Rahman, Head of CTA, Arif Ainul Suman and cent premium", said a top BPC official. Director-CTA, Syed Shadman Rahim, Associate Director, The new rate will be effective from the month of July. Financial Market Sales of Standard Chartered Bank, were also present at the signing ceremony. BPC has a deal with KPC under which the Kuwaiti oil com- pany will provide 520,000 tonnes of diesel at a premium of Jim McCabe said “We are proud to be the sole financer for US$3.15 per barrel and 140,000 tonnes of jet fuel at a pre- this 40 MW power plant and once again be a partner in mium of $4.40 per barrel. Kuwait is the major supplier of progress for Bangladesh.” diesel and jet fuel to Bangladesh. BPC settled the premium rate issue last week at Dubai under which the KPC will United Group Chairman Hasan Mahmood Raja said “We ensure the supply of diesel on 60-day delayed payment are very pleased to have contributed to country’s power basis during July-December 2011. supply and we thank Standard Chartered Bank who came forward to finance a viable project and has provided us BPC officials said it has also fixed the premium with the right financial package with pertinent currency and Emirates National oil company and Malaysian Oil interest rate hedging tools.” Company at the same rate. BPC projected to raise its annual oil import by over 40 per- BKMEA Asks Govt Bangladesh Knitwear cent to 4.85 million MT from the current 3.70 million MT to Cut Furnace Manufacturers and from next year as the country has moved to tackle the Exporters Association power crisis installing diesel- based power plants. Oil Prices urged the government to reduce the prices of The gov- furnace oil to be used as an alternative to high-cost fossil Two Power Projects Get ernment fuel. Nod for Foreign Funds has In a statement, BKMEA also asked the government to keep approved tax at source at 0.40 percent instead of pushing it up to 1.50 proposals of two power projects for receiving foreign funds, percent on all exportable goods and withdraw 15 percent involving $45.5 million. and 9 percent value-added taxes on rented industrial hous- Standard Charted Bank will provide the loans in foreign cur- es, effective from June 11, 2009 and January 1, 2011. rency, said a Bangladesh Bank (BB) press release. The leaders of the association at a meeting at Narayanganj The scrutiny committee for foreign loans, headed by BB Club welcomed the budget proposal for fiscal 2011-12 for Governor Atiur Rahman, gave the approval. proposing cuts in duty on import of chemicals used for run- ning the effluent treatment plants, increasing the period of United Ashuganj Power Limited is taking $26 million loan bond license renewal from one year to two, special incen- repayable in 34 months and Khanjahan Power Company tives to the knitwear sector and duty reduction on cotton Limited has got a sanction of $19.5 million for 56 months waste, potassium nitrites and potassium carbonates. respectively at an interest rate of LIBOR+4.0 per cent.

7 COVER

Zahid Newaz Khan

roduction Sharing Contract (PSC) is again a matter of national debate in the country after Pthe state-run Petrobangla signed PSCs with US-headquartered ConocoPhillips for oil and gas exploration in two deepwater gas blocks offshore Bangladesh in the Bay of Bengal. Such a debate in Bangladesh is nothing new although it’s not between the two major political parties who take opposite position to almost every other issue.

Once again the opposition came from a small group of people who have extended the name of their organization from oil-gas protection commit- tee (OGPC) to “national committee to protect oil- gas, natural resources and power-port”. Even the Prime Minister Sheikh Hasina herself reacted to their claim that the national interest was not protected in signing the deal with the ConocoPhillips that the group claimed to be

9 “anti-state”. She also accused the com- Had Bangladesh invested the money the ensured selection of a company only mittee of not taking the side of people country would have counted the billion through competitive bidding interna- when the country was facing severe dollars simply as wastage. tionally. crises of electricity and gas that her gov- The critics of PSC argue that Bangladesh The critics, including the OGPC, ernment inherited from the past regimes could have hired the technology for off- claimed that 80 percent of the gas will and is trying hard to solve it. shore exploration. Apparently it sounds be owned by the IOC while 20 percent Under the PSCs, ConocoPhillips won good. But, in making the point they for- by Bangladesh. A simple data will clari- the right to conduct hydrocarbon explo- get the fact that the country not only fy that it’s a misconception. ration in DS-08-10 and DS-08-11 span- lacked in technology but also in According to the daily gas report of ning a total area of 5,158 square kilo- required huge investment. If the technol- Petrobangla, the supply on June 21 was meters (1,992 square miles), 280 km ogy and human resources are hired and 2002 MMCFD. Of the supplied gas, 953 (174 miles) off Chittagong, where water no discovery takes place finally MMCFD (48 percent) was by NOCs depths are 1,000-1,500 meters. Bangladesh would have bear the huge while 1,048 (52 percent) MMCFD by The US-based company can explore investment cost. In case of PSC the cost IOCs. Bangladesh is getting 60 percent 70% of DS-08-10 and 85% of DS-08-11, is totally of the IOC. of the IOCs supplied gas as profit gas. with the rest in limbo until the maritime Also, globally PSC is now the most Bangladesh’s Share boundary dispute with India and accepted way of international contracts At present four IOCs are producing gas Myanmar is resolved. for oil and gas exploration as it ensures from five Bangladesh gas fields. The The OGPC’s arguments are: the ownership of the state. On the other Jalalabad, run by US company Chevron, 1. Country should explore its natural hand, the previous practice of conces- produces 150 MMCFD. Bangladesh’s resources by its own companies instead sion and royalty made the company share is 78 percent of the gas while of PSC. owner of a block. Chevron 22 percent. If the production is more than 150 MMCFD and less than 2. If gas is discovered it will be exported Moreover, the model PSC of 2008 under 300 MMCFD, Petrobangla owns 80 per- in the form of LNG. which Bangladesh signed PSC with cent and the rest 20 percent Chevron. 3. Bangladesh has to purchase gas from ConocoPhillips has certain changes Bangladesh gets 83 percent if the pro- ConocoPhillips at a higher price. compared to previous ones that protect- duction at Jalalabad is more than 300 4. Offshore natural resources will be ed more interest of the country. MMCFD. destroyed at the hands of the foreigners. Cost Recovery 5. The country will not be able to realize Bangladesh is getting higher share in the If an IOC, under a PSC, discovers oil and produced gas as the field was discov- compensation in case of any accident. gas by totally its own investment, and if 6. The offshore exploration will create ered earlier. Almost similar sharing takes the reserve is commercially viable for place for Moulvibazar as PSC was political and military tension in the production the company again by its region. signed with the Chevron after the field own investment goes for development was identified. However, the government refused each and production program. Once the pro- In Moulvibazar field, the country gets 70 and every apprehension and claimed duction starts, the company gets a share percent and Chevorn 30 percent if the that every clause of the PSC protected of oil or gas for cost recovery of its production is 150 MMCFD. If produc- Bangladesh’s interest and benefit. investment. tion is 150 MMCFD plus, but less than PSC The company is bound to sell to the gov- 300 MMCFD, Bangladesh and PSC is an agreement between a govern- ernment at the price mentioned in the Chevron’s share is 73 and 27 percent ment and an international oil company PSC from its share found as cost recov- respectively. And Bangladesh’s share (IOC) for exploration, development and ery. The rest is distributed between the becomes 75 percent when the produc- production of oil and gas. government and the IOC as profit gas. tion is 300 MMCFD plus. Countries not having financial and tech- The PSC signed with the ConocoPhillips But, Bangladesh’s share is not less in the nical capacity to explore oil and gas sign is more balanced as the 2008 model gas fields discovered by the IOCs them- such PSCs. Even some countries, includ- PSC, prepared after reviewing the PSCs selves. ing Saudi Arabia, having the capacity go of India, Pakistan, Malaysia, Vietnam, Bibiyana was discovered by Chevron. for such contracts to avoid the risk of Trinidad, East Timor and some other According to the PSC, Bangladesh owns investment in case “no discovery”. :countries, has two major developments 68 percent and Chevron 32 percent for One can take even the example of 1. It ensured that the contracting com- 300 MMCFD plus production. At pres- Bangladesh. The IOCs invested US$ 2.2 pany will pay all taxes and duties. ent, the production is much higher than billion in Bangladesh since 1992. But, According to previous PSCs, the 300 MMCFD mark. the companies had the scope of cost Petrobangla had to bear the tax-duty Not only with Chevron, similar sharing recovery of only US$ 1.25 billion as costs. takes place for other IOCs, too. they didn’t find any recoverable reserves 2. It cancelled the provision of negotia- Bangladesh’s share in Bangura field of by the investment of rest US$ 1.0 billion. tions alongside bidding. The model PSC Irish company Tullow during the cost

11 recovery period was 61 percent. After metric ton HSFO has been fixed at US$ and price of LNG. the cost recovery, the country gets 66-85 180 (ceiling price) and lowest price US$ The rising demand of gas in the country percent, subject to volume of produc- 70 (floor price). and its lower price compared to interna- tion. Again the price of HSFO in Singapore tional market clearly show the chance of In offshore Sangu, Bangladesh and market is always higher than that is men- export by ConocoPhillips is very thin. Australian Santos share 50 percent each tioned in the PSC. It will be crystal clear It’s a misconception that the Petrobangla if the production is up to 100 MMCFD. if one considers the recent price of will allow export keeping huge demand If the production is up to 150 MMCFD, HSFO in Singapore which is from US$ inside the country. Bangladesh gets 55 percent while 65 550 to US$ 600. Again if the export takes place it has to percent for production up to 250 Price of HSFO in all the PSCs signed by be in the form of LNG. But, an LNG MMCFD, 75 percent for 350 MMCFD, Bangladesh is lower than the actual project is not viable if the reserve is less 85 percent for 450 MMCFD and 87 per- price. And that’s how the country always than 15 TCF cent for 450 MMCFD plus production. gets gas at much lower price than its History said that all the PSCs of 1974, Sharing with ConocoPhillips international price. The ConocoPhillips 1988, 1992 and 1997 had the option of According to the PSC, ConocoPhillips is not an exception, too. export, but no export took place. The will get at best 55 percent of total pro- LNG & Export Row main reason is that the country itself has duced gas during the cost recovery peri- The OGPC and some civil society mem- huge market. od of its investment. The rest 45 percent bers in one side argue that Bangladesh will be distributed between the The 1988 PSC had the option of both will have to buy gas from ConocoPhillips and the Petrobangla as pipeline and LNG export. The 1992 PSC ConocoPhillips at a higher price, and on profit gas. The distribution will take had also allowed the LNG form of the other they say Bangladesh will not place as per daily production. export. Moreover, it had not compulsion be able to purchase gas from the IOC as After the cost recovery, Petrobangla will of selling gas to a third party within the the company will go for export as the country in case of refusal by the get 50 to 80 percent of total gas and 60 Bangladesh’s offer is lower than the to 85 percent of oil or condensate. Petrobangla to purchase gas. The 2008 price the US company will get from PSC has made it mandatory. So, possi- Another argument by the OGPC is that if export. bility of export has also lessened. Bangladesh can invest for pipeline why Both versions are based on misconcep- Apprehension of Military Tension not for exploration. Apparently this is a tion. good point. But, again it’s the question Bangladesh is lagging behind India and of risk investment. From the pricing analysis, based on Myanmar in offshore exploration. While HSFO price in Singapore market, it’s the neighbors had a good number of dis- The question is as to when Bangladesh clear that Bangladesh is getting gas from coveries, Bangladesh is yet to start. One will spend money from the offshore the IOCs at a much lower tariff than the main reason of being “late Latif” is lack pipeline. The answer is when there is a international market. It will also get gas in farsightedness of the policymakers. commercial discovery, not before that. from ConocoPhillips, if any offshore dis- ’ Then it witnessed a setback when the So, it s not a risk investment as the covery by them, at a much lower price. investment will take place only when it’s caretaker government took practical certain that there is enough gas reserve On the other hand, the ConocoPhillips action for offshore exploration, due to and Bangladesh can transmit its profit has no option of exporting gas if opposition by the OGPC. At that time gas (55%-80%) or from the portion of Bangladesh buys from them. the group argued that the caretaker gov- ernment has no right to sign PSC and it ConocoPhillips which is bound to sell its According to the PSC, the gas the share to Bangladesh from the offshore has to be kept for an elected govern- ConocoPhillips will get for cost recovery ment. field. and as profit gas, has to be offered to sell While pipeline investment is totally risk- to Bangladesh under the price men- But, when the elected government took free, the investment for exploration is a tioned in the PSC. Petrobangla will get the decision to sign PSC with six months time to make a response. If ConocoPhillips for two offshore blocks total gambling. After spending millions ’ of dollars for exploration the country Petrobangla is not willing to buy the gas, now they are saying it s anti-state. can get nothing. But, if the investment is the ConocoPhillips will then be able to Also, the OGPC leaders in one side made by an IOC under the PSC, initiate steps to sell the gas to a third claimed that the government suspended Bangladesh doesn’t need to be worried party within the country. exploration in some areas of the two at all. If the two options, at first purchase by blocks following objection by India and Price of Gas Petrobangla and then domestic third Myanmar, to protect interest of the two The price of gas to be purchased from party, are exhausted only then the com- countries. On the other hand they ConocoPhillips in case of a commercial pany will get the opportunity to go for claimed that the exploration in two discovery has been fixed based on high export in LNG form. Still, it has to take blocks will create political and military sulfur fuel oil (HSFO) price in Singapore Petrobangla’s approval for selecting tension. market. However, highest price of per buyers as well as conditions of export It’s not clear that what’s their real

12 position on the matter. or damage or bodily injury suffered by their respective entitlements to If the nation wants to meet the growing any third party in the course of Petroleum at the relevant time. demand it has no alternative but to go Petroleum Operations. Real Critical Point for offshore exploration. But, at the same e) The cost of cleaning up pollution fol- The real critical point for Bangladesh in time it can’t explore the disputed areas lowing an accident in the course of or as overseeing the PSCs, including with claimed both by Bangladesh and a result of Petroleum Operations. ConocoPhillips, is running the joint Myanmar as well as Bangladesh and f) The cost of removing wreck or debris management committee (JMC) properly. as a result of an accident during India as the decision is pending with the Like other fields, Bangladesh lacks in United Nations following claim on the Petroleum Operations. ’ real experts who represented the offshore blocks by the neighboring g) The Contractor s and/or Operators lia- bility to its employees engaged in Petrobangla in the JMC. So, if anything countries ’ Petroleum Operations. goes against Bangladesh s decision by ’ It s now clear that neither India nor h) Cost of well control and re-drilling the JMC it might be due to lack in Myanmar has any objection on the areas expenses in accordance with the expertise. So, a good option might be ConocoPhillips will go for exploration. Standard London Energy Exploration hiring real experts to represent the Also, ConocoPhillips has no objection and Development wording (E.E.D.8.86) Petrobangla in the JMC. as some areas of their awarded blocks or such other form in common use in the A group like OGPC can really works as will remain out of exploration due to the International Petroleum Industry and as a pressure group if they keep the JMC pending decision by the United Nations. may be agreed by Petrobangla. under monitoring. A good sign is that the Compensation Row It said: Insurances specified in clause energy sector officials are now more ’ ’ It s alleged that the PSC doesn t have 10.19 (a) to (h) above to be concluded careful in every deal and operation due enough protection in case of any acci- with local insurance companies in to presence of such a pressure group. dent. However, confusion will be over if accordance with Bangladesh Insurance But, unfortunate part is that a section of clause 10(19) is read which is: The Law as long as coverage is available as people talk in one way when serve the Contractor shall obtain insurance cover- above and in accordance with government, but take a U-turn when age during the term of this Contract, for International Petroleum Industry they are not in the government machin- and in relation to Petroleum Operations Standards. ery. for such amounts and against such risks ’ as are specified below and/or as may be The PSC further said: In case of Just take one example. Bangladesh s specifically agreed by Petrobangla, and Petroleum that has been produced to the energy sector saw the first controversy shall furnish to Petrobangla policies/cer- surface, Contractor shall ensure against when a discovered field, Jalalabad, was tificates evidencing that such coverage such risks of loss and damage for such awarded to Occidental (Now Chevron) is in effect. Such insurance policies shall amount and with such insurer or insur- in 1992 with SKM Abdullah was include Petrobangla as additional name ers as may be agreed with Petrobangla, Chairman of the Petrobangla. His argu- insured and shall waive subrogation and shall nominate Petrobangla and ment was that small fishes have to be rights against Government and Contractor as joint beneficiaries under sacrificed to get big fishes. But, the same Petrobangla. The said insurance shall, such insurances. Any benefits arising man joined the OGPC following his without prejudice to the foregoing, there from shall be divided between the retirement and started campaign against cover: Parties in proportion to their respective the IOCs. a) Loss or damage to all installations, entitlements to Petroleum at the relevant Without questioning anyone’s patriotism equipment and other assets for so long time. Insurances specified in clause it’s better for the country if real experts as they are used in or in connection with 10.19 (a) to (h) above to be concluded talk about on real ground. That might Petroleum Operations, provided howev- with local insurance companies in bring fruit for the nation. Emotional and er, that if for any reason the contractor accordance with Bangladesh Insurance irrational demand will only hinder the fails to insure any such installation, Law as long as coverage is available as energy sector development that will cre- equipment or assets it shall replace loss above and in accordance with ate sufferings for people. thereof or repair damage caused thereto International Petroleum Industry Standards. But, the government should also try to without benefit of Cost Recovery. avoid unnecessary controversy and b) Loss, damage or injury caused by pol- In case of Petroleum that has been pro- debates. The present debate on lution in the course of or as a result of duced to the surface, Contractor shall ConocoPhillips deal is getting ground Petroleum operations. ensure against such risks of loss and due non-disclosure of the PSC signed c) Loss of property or damage or bodily damage for such amount and with such with the US company. The government injury suffered by any third party in the insurer or insurers as may be agreed should immediately disclose it. course of or as a result of Petroleum with Petrobangla, and shall nominate Operations for which the Contractor Petrobangla and Contractor as joint ben- EP may be liable. eficiaries under such insurances. Any d) Any claim for which Petrobangla may benefits arising there from shall be divid- Zahid Newaz Khan, be liable relating to the loss of property ed between the Parties in proportion to News Editor, Channel I

13 COVER PLUS PSC: Setting The Records Straight

Mohammad Mejbahuddin

he recent debate over signing of Enhanced supply of energy will be a exporting gas from our currently pro- the Production Sharing Contract sine qua non for increasing the energy ducing fields. The export provision can (PSC) with a US company, intensity to reach a double digit GDP only trigger if our full domestic require- T growth rate for Bangladesh.We may ments are met and there is no buyer for ConocoPhillips, has been driven main- ’ ly by inadequate information and mis- choose to delay but time will not the contractor s share of gas. In all like- understanding of the provisions of the (Benjamin Franklin). lihood, the export window will remain a theoretical possibility. It not only pre- contract. In the midst of confusion, we We must act now and explore all supposes a big commercial discovery have also seen objective reporting by a avenues to ensure energy security for in the range of 6/7 Tcf but also huge number of major print and electronic Bangladesh. We cannot afford to wait investment, if government agrees, of media, which helped to remove some when the country is reeling from severe between US$ 2.5- 3.0 billion for a of the confusions surrounding the PSC. energy shortage. Any delay on our part medium-sized liquefaction plant. The PSC has been concluded protect- to tackle this crisis head-on will be akin ing our national interest keeping aside to the historical spectacle when The argument against export comes not any other considerations. It is a com- Emperor Nero fiddled when Rome was from economic considerations. Rather mon knowledge that our proven burning. the desire is to keep our energy reserve of natural gas is about 8 Tcf, The debate and controversies have resource for future consumption by us. ’ which can supply energy for a maxi- centered around two aspects of the For argument s sake, if we are lucky to mum of 7 years. PSC, namely, export of gas and share of strike a big reserve in deep waters, we can always avoid export by foreign The imperative of energy security for Bangladesh. companies through conserving and Bangladesh demands ensuring access It is a matter of record that all previous controlling production in the fields run to all forms of energy resources, includ- PSCs have provision for export with by our national companies. ing the natural gas -- the energy of prior permission from the government choice for the country. In order to should Petrobangla and other prospec- The most outrageous part of the debate exploit the untapped energy potentials tive customers decide not to take gas involves assertion by some quarters of our extended continental shelf, a from the contractor under the PSC. that Bangladesh will get only 20 per- renowned oil and gas company has Despite inclusion of the export provi- cent of gas if there is commercial pro- been assigned the responsibility of sion, we have not had any occasion of duction. exploration at the deep sea consti- tuting blocks 10 and 11. This only exposes the soft underbel- ly of their mathematical reasoning. Some people have expressed the Nothing can be far from the truth. view that we could have engaged We must not lose sight of the fact our national company BAPEX to do that actual benefit must be assessed the same work. While I fully only after we take into account the empathize with this feeling, it must cost incurred in developing and be clearly understood that BAPEX is operating any field. The accounting yet to attain technical prowess and of the cost must be done not only for financial muscle to venture into the IOC but also for national company. hydrocarbon exploration at deep sea. A day will definitely come in Once cost recovery is done our future when BAPEX like Petronas of share of profit gas (free) will range Malaysia will be equipped to under- between 55 to 80 percent depend- take drilling activities in our deep ing on level of production. More sea blocks. production will mean greater share for us. To take one example, But, if we choose to wait for our Petrobangla currently gets about 75 national companies to grow in percent of production from Bibiyana strength and then explore our energy field being operated by Chevron as resources it will be suicidal. Mohammad Mejbahuddin profit gas.

15 However, the profit sharing arrange- ment will be different in case of blocks Negative Intentions & Reality 10 and 11 given significant differences in cost implications of developing and Prof. Dr. Md. Hussain Monsur operating a gas field located in our extended continental shelf. Ultimately angladesh, so far, dependent by techno- Bangladesh’s share will depend on the has explored a logical nature itself. actual size of the reserve as well as cost limited quantity of Specialized expertise, that need to be incurred to bring the B equipment, technology indigenous natural gas hydrocarbon resources to the doorsteps and manpower are nec- of consumers in Bangladesh. reserves. Proven gas reserve is not enough to essary. Till to the tenure It is premature to pass judgment about sustain long. Already of the recent past gov- our share of profit gas other than the connected natural gas ernment, country's only range mentioned above let alone put- supply to power, indus- oil and gas exploration ting any definite number at this point in try, fertilizer, commer- company BAPEX was to time to indicate our share. cial, domestic and other drill wells with 22 to 32 The PSC that the government signed sectors is worriedly years' old rigs. Present Md. Hussain Monsur with ConocoPhillips is a balanced one looking for the gas government has already based dominantly on the provisions of abundance to meet procured one onshore Model PSC 2008. future demand. If gas reserve is not deep drilling rig and one more is to be enhanced through exploration and procured very soon. Offshore technology One major improvement over other development, the further expansion of all oriented rig, equipment and experienced operating PSCs is that Conoco will be these sectors will either be stagnant or be manpower are not at all available in paying its corporate tax if there is a bound to find import markets for primary BAPEX. It is not in the state of the art commercial discovery whereas energy sources. In such case, the import- stage to conduct so highly technological Petrobangla pays tax of companies cur- ing cost will be much higher than the and risk oriented exploration jobs in the rently working under already signed deep sea. Moreover, exploration job PSCs. domestic gas price and may cause nega- tive impact on the gas consuming sectors does not guarantee to find oil/gas. It is In respect of price of gas at which con- and the economy of the country. The dependent on the existence of oil/gas in tractor will be obligated to sell to consequences shall have to be borne by the sub-surface. It can be confirmed only Petrobangla, the PSC with the country's end users that are the gen- upon drilling upto the reservoir depth ConocoPhillips puts a price cap eral public. Therefore, considering diver- after spending of huge money as appli- indexed to price of HSFO. This implies sified challenges and to ensure energy cable by nature of the job. If no gas is that Petrobangla will be buying con- security by 2021, the country has no found, the whole efforts will go in vein ’ tractor s share at a relatively stable alternative but to go for immediate hunt and the money is lost. Therefore, the price irrespective of prices obtaining in for exploring new gas fields irrespective steps as have been taken to signing international market. of offshore or onshore areas. Production Sharing Contract for Bangladesh Deep Sea Blocks DS-08-10 The current estimate is that purchase Country's onshore gas resource/reserve and DS-08-11 appear justified and for price of gas will hover around US$ status is well addressed and has got a the sake of the country. 4.50/Mcf. If we consider the fact that momentum, but it is not enough to cope Some Contract Highlights of the the contractor will have to pay corpo- up with increasing gas demand. Deep PSC With ConocoPhillips rate tax at the going rate then the price offshore area is still virgin and this huge Contract area is located about 280 kil- of per unit of gas will be even lower. area is left unattended. It deserves imme- lometers distance from the Chittagong As against this, Indian PSC allows arms diate hunting to know whether any oil port. Water depth varies from 1.00km to length sale by contractors where price and gas reserve exists in the offshore sub- the 1.50 km. Tentative drilling depth is determined by the interaction of the surface or not. from the sea bed is minimum 2.20 km, market forces. It is obvious that our Our neighboring countries India and and from the water surface it stands to be PSCs including the one with Conoco Myanmar have been conducting oil/gas from 3.20 km to 3.70 km deep. Until oil/ provides protection from unpredictable exploration operation under PSCs near upward movements in energy prices. gas is discovered, the contractor will the respective deep sea borders. bear all technical and financial risks and EP Disputes are there in regard to maritime liabilities. Petrobangla or the govern- boundary. Bangladesh's right has to be Mohammad Mejbahuddin, ment will not bear any of such risks and established in the deep sea. Deep sea Secretary, finance. If gas is discovered, then contrac- exploration is risky and huge cost Energy & Mineral Resources Division tor should prove that the reserve is

16 commercially viable. The ownership of the unlimited. The Floor and Ceiling prices Right at this moment, government has gas reservoir will remain with Petrobangla, are limited within $70 to $180 to be cal- decided to import LNG to meet country’s thereby with the govt./nation which is culated based on HSFO Singapore for nat- demand. Accordingly its infrastructures ensured in the contract. Contractor will ural gas, and on the 3 selected crude in including construction of FSRU and LNG then be allowed to recover its cost from a Singapore market FOB prices basis for terminals are under construction process. share of gas to be produced which is maxi- Oil/Condensate. Since Bangladesh itself has decided to mum 55% of the produced gas per year. Contractor is bound to deliver its own import LNG, in that case the question of Remaining portion is termed as the "Profit share to Petrobangla and Petrobangla will exporting LNG does not arise. Share", out of which Petrobangla's share pay the price of contractor's share gas as Therefore, applicability of LNG conver- will be from 60% to 85% for oil/condensate per contract rate. Contractor may consider sion and export step will arise only when and from 55% to 80% for gas production. selling of gas to 3rd party within the coun- the country's gas demand is completely That means, the more the daily production try only when Petrobangla will find no met and it is surplus. Nevertheless, will be there, Petrobangla's share will consumer within the country and as such Petrobangla has the right to have a contin- increase as per slabs indicated in the con- refuses to get this gas. Here, Petrobangla's gent stock of maximum 20% gas out of tract. consent is a must. If no 3rd party con- surplus exportable gas in LNG form. A Contractor's exploration and development sumer within the country is found, the minor corner explains it as the 20% of the programs including financial involvement contractor may consider to covert the gas total producible gas, which is completely will require Petrobangla's prior into LNG to export after Petrobangla's wrong, misconception and misleading. I approval/consent. Mandatory exploration approval. It may be noted that, some por- think, conscious people of the country will jobs (seismic surveys and exploration tion of such LNG will have a share of understand the reality and the national drilling) are defined in the contract. Petrobangla’s profit share gas and its price interest of the Deep Sea PSC signing. Of Failure to drill exploration wells will result will be of the same price of LNG and be course, they will nullify the negative inten- the contract termination after 3 years. the Petrobangla’s own share. However, it tions of the vested corners. Gradually Bangladeshi minimum employ- is remarkable to note that present govern- EP ment is 50% during exploration period ment has decided not to export gas/LNG and minimum 70% by 10th production until 50 years of contingent stock is Prof. Dr. Md. Hussain Monsur year. Contractor cannot claim gas prices ensured for country’s future demand meet. Chairman, Petrobangla

17 DEBATE Disclose PSC, Clear Confusion

Nahid Anjum Siddiqui

he production sharing contract covered from the deep offshore blocks Bangladesh wants to buy the gas, it is (PSC) with US company 10 and 11. likely that the company will never be ConocoPhillips has become one Following are the excerpts from the able to recover its cost. Even then, if T they go ahead (extremely unlikely), for of the most debated issues in the coun- opinion as expressed by the experts: try. The debate would perhaps rank Bangladesh, a minimum of 25% of the Dr. M. Tamim next to the debate over the amendment entire gas as profit gas is ensured in the Professor, Department of Petroleum and to the Constitution of the country. It is contract. The present ceiling fixes the Mineral Resources, BUET now well evident that the people of all gas price at $4.5/MCF. After recovering Export is the main issue of opposing this section, particularly the conscious and tax from the company, the effective gas contract. Hypothetically, if a small field politically sensitive ones, often and price is about $4/MCF. The final cost of (1 TCF or less) is found spending $110 again are locking in arguments and the gas including our profit gas would million, the decision of development counter arguments on the issues at be $3/MCF. This would be a fantastic that may run up to 500-600 million US every corner of the country. The nation deal. In case Bangladesh refuses to buy dollars will depend on the economics even witnessed a half-day hartal in it, there is absolutely no chance for the of the project. If the company declares September 2009 when the government company to invest $2 billion for an off- it as commercial discovery and approved the Conoco proposal on the shore LNG plant. deep offshore blocks. The National Committee on Protecting Oil, Gas, Looking at the other extreme of proba- Mineral Resources, Power and Port bility, let us say that 5-10 TCF gas is (OGPC) also announced a half-day har- found. Each TCF is capable of produc- tal program on July 3, protesting the ing 200 MMCFD for 15 years. So, 5-10 signing of the agreement. TCF gas will allow production of 1,000 MMCFD to 2,000 MMCFD. Presently The Energy & Power took an initiative Bangladesh is producing 2,000 to seek opinions on the PSC from the MMCFD with a deficit of 500 MMCFD. informed society — be they politicians or The projection is by next 10 years the civil society members. The news survey demand will easily exceed 4,000 suggested that the opinion leaders have MMCFD. Even in case of a quick suc- expressed almost a similar view that the cess, the offshore development will take government should disclose the agree- at least five years to come on stream. ment to clear the confusion created With a large discovery and the same or over the issue. They also tried to look at little higher development cost, the cost the concerns over the provision of gas recovery will be realized in 4-5 years exports and the share of gas to be dis- Dr. M Tamim time. In the long run, Bangladesh’s

19 the other hand, OGPC is damaging the interest of the country in the name of protecting the resources as they are forcing the country into a crisis. Meanwhile, we are wasting gas through generating electricity. So we should extract coal for this purpose. Otherwise, it would be a criminal offense. And there is no alternative to extract coal through open-pit mining method. We should keep in mind that the OGPC is opposing exploration of the resources not for the interest of the country, but for their publicity and increasing their importance. They are hatching conspir-

AKM Mosharraf Hossain acy to create an energy crisis of big Maj Gen (Retd.) Subid Ali Bhuiyan, MP nature through forcing the government cumulative share in a large discovery to keep the resources underground. pletely failed to remove the people’s will be over 60% (conservatively). As a confusion over the PSC. Mahmudur Rahman result, the effective gas price will be Former Energy Adviser I did not have a look at the PSC. But only $1.6/MCF. There is no alternative to explore oil there are saying that we will have to The next question is will Bangladesh be and gas through PSC to meet the mas- buy the gas at international market able to buy 2,000 MMCFD gas? It will sive demand for gas in the country. In price. If it is so, we are the losers. I do be extremely difficult for Petrobangla to this consideration, the PSC signed with not also think that the rights given to the maintain even the present level of pro- Conoco was positive. We have had company to sell gas to third party is duction for the next five years as many arranged withdrawal of the court’s right. I think, there is a huge demand for of its fields are gradually declining. embargo to initiate offshore bidding. gas in the country and Petrobangla is There is no other alternative to discov- But the confusion created among the capable to distribute the gas after buy- ering new gas fields - whether onshore people over the PSC due to the selec- ing it from the company. or offshore to meet the future demand. tion process that was not transparent. However, foreign companies should The question of being unable to buy That means, the selection process was not be allowed to explore the onshore even 2,000 MMCFD at an effective not open to the people as to why the blocks. BAPEX should be assigned to do price of $1.6/MCF does not arise at all company was selected. Many think that it. On the other hand, I do not support because the present import option of the government signed the agreement the stance of the OGPC because they LNG price is not less than $10/MCF. with a US company to cover the affect- are opposing investments in this sector Any contract may be questioned on ed relationship with USA over the issue which are coming only from the west- many issues but that must be based on of Dr Yunus. The government is com- ern countries. They are not sparing a facts and rationale, not cynicism. On single word when the ports and transit the basis of the PSCs being carried out facilities allowed to our next door for the last 13 years in the country, the neighbor. It seems to me based on the offshore 2008 contract is well balanced situation that they are working for the and protects the interest of the country. interest of a special country. On the Petrobangla has handled the existing other hand, the committee is opposing contracts fairly well (there is always foreign investment in the energy sector, room for improvement) and I believe but not recommending any realistic that with proper monitoring and atten- alternative. What alternatives they are tion they will do a good job in the suggesting are utopian or unrealistic. future too. Maj Gen (Retd.) Subid Ali Bhuiyan, MP AKM Mosharraf Hossain Chairman, Parliamentary Standing Former State Minister for Energy Committee on Ministry of Power, I don’t see any problem in the PSC if the Energy and Mineral Resources company is selected through a transpar- The PSC with ConocoPhillips is the best ent bidding system. However, I am not one so far Bangladesh signed for explo- sure whether it was international stan- ration of gas and oil. The overall inter- dard. If so, it was a good initiative. On Mahmudur Rahman est of the country as well as the people

20 produced from the blocks. And there is a huge demand for gas in the country. So, it’s nothing but a propaganda that the gas is going to be exported in LNG form. Rashed Khan Menon, MP President, Bangladesh Workers Party If you want my opinion, I strongly oppose this agreement signed by the government and Petrobangla with ConocoPhillips. In this agreement, two parts are conflicting -- 80:20 profit shar- ing is one of them. This profit sharing ratio is completely serving the foreign company’s interest instead of Bangladesh. Foreign investors invest Rashed Khan Menon, MP here for their interest, no doubt of it. Prof. Anu Mohammad This is business. Where the question is was completely protected in this case. business, we must think of our interest pipeline. So, if ConocoPhillips denies You all know that the people will have first. But in this agreement, it seems we construction of the pipeline and if the to be provided with power and to do will serve for ConocoPhillips. situation arises, Bangladesh must have that gas and coal must be there. We do constructed it to supply gas from deep not have any information about the Moreover, in this clause, sea to land. It will cost high. reserve in the deep offshore fields while ConocoPhillips will offer the govern- Meanwhile, LNG import by Bangladesh huge investment, experience and tech- ment when it would be discovered. If is under process. The gas field will be nology needed to know the informa- the government denies purchasing gas, fully controlled by ConocoPhillips. tion. So, the government had not an ConocoPhillips will offer the local com- BAPEX should have been a control part- option to take an initiative better than pany. What will happen if ner in this agreement. I oppose the the PSC. However, we have a failure ConocoPhillips’s tariff is out of the gov- agreement as well. that we could not let the people know ernment capability? What will happen Prof. Anu Mohammad the fact through media and a certain if local company cannot afford purchas- Member Secretary , OGPC group took the advantage to mislead the ing the gas? Ultimately, the result is Since 1997, Bangladesh’s gas sector is people. clear. It will export gas outside Bangladesh and the country will be going through a critical condition. I think, the government is taking every loser. American and Indian missions, the single decision in the energy sector in a World Bank, ADB and many interna- transparent manner for the welfare of The second thing is pipeline construc- tional organizations were involved in the people and advancement of the tion. In the agreement it is not manda- conspiracies over the sector. Some country. For this reason, the parliamen- tory for ConocoPhillips to construct clauses of the PSCs can be used against tary committee has suggested the min- the National Interest. Energy specialists istry to let the people know the ration- have showed and alerted the govern- ality of every agreement in this sector, ment about the inconsistencies of the not only the PSC with ConocoPhillips. contract and clauses against the nation- al interest repeatedly. A government, which is working for the welfare of the country, should not have From the beginning of this procedure, any reservation in this regard. We the National Committee on Oil-Gas should keep in mind that not only Protection (OGPC) showed the logics Bangladesh, all our neighboring coun- and information why we should not tries like India, Myanmar, China and sign the agreement. But the government Malaysia are exploring gas and oil and Petrobangla have ignored all these through PSC. The recently signed PSC and signed the agreement. The clause has ensured 100% of our ownership on 15.5.4 says, “where Petrobangla has the oil and gas to be discovered in the installed necessary facilities to transport fields and use of 100% of the oil and and use gas to meet domestic require- gas will be controlled by Petrobangla, ments, Petrobangla shall be entitled at which has all the rights to buy, apart its option to retain in kind any natural from its share, all the gas and oil to be Sharif Nurul Ambia gas produced up to Petrobangla's share

21 about the agreement, this is contempo- We know that we have a supply short- rary for our huge demand of gas in age of energy and there is no discov- households and industries. Moreover, to ered gas field in hand to increase pro- explore gas from deep sea, we need big duction. Whatever resources we have, amount of investment, which is not pos- we do not have the financial and tech- sible by the local investors. And the nical capability to explore them. So, the government cannot bear this huge PSC signed with ConocoPhillips was an money alone. Most of the oppositions appropriate initiative. There is no doubt of the agreement argued about the prof- that it has been possible to sign an inter- it-sharing ratio. Every investor wants to national standard PSC, which has pro- secure their money and this clause of tected the interest of the country. agreement is not more than this. They Even then, the so-called oil, gas protec- just want a security of their investment. tion committee is misguiding the peo- ’ So, from Bangladesh s point of view, ple through propaganda. The govern- this agreement is revolutionary. ment should publish the PSC through Abdul Awal Mintoo the parliament to make people under- Abdul Awal Mintoo Former President, FBCCI stand that the campaign on excuse of Any natural resource like oil and gas exporting gas is a mere propaganda. I of profit gas, but in no event more than cannot become a resource until it is do not think it would be rational that twenty percent (20%) of the total used for the welfare of the people after Marketable Natural Gas.” It means, exploration and extraction of the ownership of the rest 80% of the cost resource. Exploration is so highly tech- recovery gas will be going to the nical and expensive that Bangladesh ConocoPhillips’s pocket through the does not have the capacity to meet. deceptive way. These activities are being carried out And this pipeline will cost a minimum through PSCs across the world. In this of US$ 350 million, which is more than consideration, the signing of the PSC three times of ConocoPhillips’s primary through following the international investment of US$110 million. Many practice of bidding is positive. We ’ argued that we have not enough power, should keep in mind that we don t have technology and capital. What should the capability to extract the resource on we do rather than this? This tendency our own initiative. So there was no makes us weaker. I strongly oppose this alternative to sign the PSC. agreement. Those who are saying that the contract is not balanced they have not com- Sharif Nurul Ambia pared the features of the PSC with those General Secretary, JSD Asif Ibrahim of other countries. If they are saying the I have not gone through the agreement contract is lopsided without having a very well. From my level of knowledge comparative analysis, we don’t need to the government would delay coal response to their demands. I think the extraction amid fears of criticism. oil, gas protection committee is the cre- Asif Ibrahim ation of Awami League. The current President, DCCI Petrobangla Chairman has had working There is no alternative to explore gas as relation with them. The Petrobangla the country is suffering from energy cri- Chairman should now explain to the sis. In this consideration I welcome the people whether the PSC is unequal or PSC with ConocoPhillips if it is in the not. interest of the country. We don’t know the details of the contract as the gov- Aftab-ul-Islam ernment did not make it public yet. President, AmCham Those who are opposing it have also No resources can be treated as asset the right to protest against the contract. unless those can be extracted and uti- However, there is no time remains idle lized for the welfare of the people. And to explore gas as the country desperate- utilization of the resources is the ly needs energy. responsibility of the government, not those who are opposing the move in the AKM Shamsuddin Aftab-ul-Islam name of protecting the oil, gas and coal. Chairman & CEO, E-zone

23 assumption. Whispering about the agreement, there comes four changes in it. Firstly, the authorities of Petrobangla gave further concessions so that the measurement point could be decided unilaterally by the ConocoPhillips. Secondly, the court about arbitration or obligation can be located in Singapore, which was restricted in the previous original model PSC. The third point is about the clause of payment of inefficiency damages, which was omitted by the new commit- tee in the agreement. And lastly, the committee will work on joint approval, which indirectly may limit the AKM Shamsuddin Petrobangla’s control. Mortuza Ahmed Faruque

There is no meaning to keep resources If these four changed clauses are really the contractor to go for export, jeopard- underground. So, there was no alterna- included in the new agreement, the izing our energy security. tive to sign the PSC for exploration of oil thing is going to make anxiety, no and gas. In this consideration, the gov- doubt. But the original promise was not Mortuza Ahmed Faruque ernment has done an appropriate job of to change any clauses. Even in the orig- Managing Director, BAPEX late. inal PSC, the clause says, It was very good to sign the PSC as it would facilitate starting exploration Those who are demanding that BAPEX ‘ConocoPhillips may construct that pipeline’. It means that Conoco Phillips activities in the offshore, which should should perform the exploration activi- have been started much before. And the ties they do not have actual perception can construct the pipeline if the author- ities of ConocoPhillips think to do so. It PSC with ConocoPhillips has protected about BAPEX. However, there is no the country’s interest much better than alternative to the government to is not mandatory to ConocoPhillips. It is true indeed that they will have to offer the previous ones. This PSC ensured enhance the negotiation skills of the 100 percent ownership of the people, manpower in this sector. I would like to the gas first for sale to us under the agreement, but given the huge opportu- not the company. On the other hand, pose a question why people are not Petrobangla will decide how the gas to vocal against profit repatriation by the nity cost and past corruption heritage, I think Petrobangla will not be able to be discovered will be used. We should foreign power producers and mobile keep in mind that the gas can be export- phone operators operating here. withstand the pressure to allow to export. Further so because they may ed in LNG form if there is a huge dis- Instead, a certain group is opposing the produce in excess of our demand and covery and only when there will be no move to attract foreign investment in capacity to buy. With all these, I can say room for utilizing the gas in the country. exploration of primary energy. Their that this contract gives ample scope to Meanwhile, BAPEX is strengthening its main objective is not protecting the capacity gradually to explore oil and interest of the country, but to push the gas in the onshore. But it has not the country into a crisis through delaying financial and technical capacity to assured supply of energy. Overall, they explore even in the shallow offshore. To are in a mere campaign against the attain the capacity to explore in the PSC, but not giving any rational alterna- shallow offshore, it will have to work tive. with foreign companies through joint Prof M M Akash venture. It is irrational to think that off- Department of Economics, shore exploration will have to be car- University of Dhaka ried out when BAPEX would achieve This agreement is made according to the capacity. the Model PSC 2008, which is reported Those who are opposing the PSC, they to have been changed 1% or so which are doing it on a pre-set irrational was not disclosed and there is another assumption. They should refrain from clause in the agreement itself not to dis- the campaign against the contract close the final agreement for the peo- ple! So, we can comment on this final EP agreement only on the basis of Prof M M Akash

26 SPECIAL ARTICLE Offshore PSC-Cynicism Vs. Facts

Dr. M. Tamim

he main issue of opposing the from the company, the effective gas of a quick success the offshore devel- Offshore 2008 contract is the price will be about $4/Mcf in the new opment will take at least five years to issue of export. Let us examine contract which is actually only margin- come on stream. With a large discovery T ally more than the older contracts. The and the same or little higher develop- the two extreme cases. A very likely case is nothing will be found from these final cost of the gas including our prof- ment cost, the cost recovery will be two blocks. In that case the entire it gas would be $3/Mcf (0.75x$4). This realized in 4-5 years time. In the long investment by the oil company will be is the worst case scenario and would run, Bangladesh cumulative share (after a loss to them with Bangladesh having be a fantastic deal. In case Bangladesh paying cost recovery) in a large discov- no financial responsibility. That is the refuses to buy it, there is absolutely no ery will be over 60% (conservatively). principal reason behind signing a PSC chance for the company to invest $2 As a result the effective gas price will for most of the countries - to avoid the billion for an offshore LNG plant with a be only $1.6/Mcf (0.4x$4). one tcf reserve. high financial risk. Hypothetically if a The next and a very critical question is small field (1 trillion cubic feet or less) Looking at the other extreme of proba- “will Bangladesh be able to buy 2000 is found spending $110 million (mini- bility, let us say that 5 to 10 tcf gas is MMcfd gas in next ten year time?” It mum work requirement?), the decision found. Each tcf is roughly capable of will be extremely difficult for of developing that may run up to 500 to producing 200 MMcfd (million cubic Petrobangla even to maintain the pres- 600 million dollars will depend on the feet per day) for 15 years. So 5 to 10 tcf ent level of production for the next five economics of the project. If the compa- gas will allow production of 1000 years as many of its fields are gradually ny declares it as a commercial discov- MMcfd to 2000 MMcfd. Presently declining. There is no other alternate to ery and Bangladesh wants to buy the Bangladesh is producing 2000 MMcfd discovering new gas fields - whether gas, it is likely that the company will with a deficit of 500 MMcfd (there are onshore or offshore to meet the future never be able to recover its cost ($700+ additional suppressed demand at the demand. The question of being unable million). Even then if they go ahead present low price of gas). The projec- to buy even an unlikely 2000 MMcfd at (extremely unlikely), for Bangladesh, a tion is that by next ten years the an en effective price of $1.6/Mcf at the minimum of 25% of the entire gas as demand will easily exceed 4000 measurement point does not arise at all profit gas is ensured in the contract. MMcfd (Ref. Petrobangla). Even in case because the present import option of The present LNG price is ceiling fixes the not less than gas price at $10/Mcf. At that $4.5/Mcf (thou- kind of low gas sand cubic price which feet). The new needs to be sold contract says at $4-5/Mcf to that the compa- the customers nies will pay for future sus- their income tax tainability, which is cur- development rently paid by projects will Petrobangla for boom like the existing mushrooms. contracts. The The high price current gas speculation that price is about piped offshore $3.6/Mcf (base gas will be price $3 + tax more expensive $0.6). After than the import- recovering tax Sangu offshore gas platform ed gas is mere

27 propaganda. The large Bombay height Despite all the praise of BAPEX suc- stood why Bangladesh being one of the gas discovered by Reliance Energy of cesses, it has its limitations. First of all, poorest countries should venture off- India is being sold at $5/Mcf in the until the last caretaker government shore drilling capabilities? It will only Indian domestic market. The Myanmar none of the previous governments seri- waste money and time and the eventu- offshore gas was bought by the Chinese ously supported BAPEX development. al cost will be much higher. Moreover, at $4.25/Mcf. If the government or The seven year vision plan, proposed what the country will achieve by doing Petrobangla keeps selling gas at the by BAPEX, was approved in its entirety so? Just to avoid or for the fear of current weighted average price of by CG including the gas price increase export, if all exploration by IOCs are $1.6/Mcf, the Bangladesh gas sector to Tk 25/Mcf from Tk 8/Mcf (old gas). stopped, what would be the price to will not be able to survive because That would eventually be raised to Tk pay? To construct a very tangible low domestic transportation, distribution 50. Instead of lip service and rare risk venture like ‘Padma Bridge’ the and other infrastructure will require at example of continuity the present gov- government had to go to World Bank, least the average price to be $3.5/Mcf ernment is sticking to that plan. BAPEX IDB, ADB and Jaica to raise a mere $2 to the consumers. The cost of finding hopes to add 200 MMcfd by 2014 (not billion. Any suggestion that Bangladesh and producing gas has increased ten sufficient for the country) and become is capable of doing its own exploration folds than early sixties when most of self sustaining. Accordingly they have is not only irrational but also ill inten- the Petrobangla fields were discovered. acquired a new rig and presently fully tional. Not a single country in the Any comparison with that cost is equiv- occupied for the next three-four years. world has developed its oil-gas sector alent to demanding a Dhanmondi resi- BAPEX has so far drilled relatively low by itself and without foreign help. dential plot at taka ten thousand today. risk areas and enjoyed a 3:1 success With the scanty exploration in the In the really extreme case of a 15 tcf ratio but the ten BAPEX discovered onshore blocks, IOCs discovered only discovery, the chance of LNG export fields have only about 3 tcf reserve in about 5 tcf gas in the last 15 years becomes a reality. In that case place out of which 2 tcf is recoverable. where the prospects are much higher. Bangladesh will have the right to use a It simply couldn’t take chance with the Two wells in two frontier offshore maximum of 20% of the entire gas for more risky areas principally due to blocks, where no seismic data is avail- domestic use that can be raised to 30% financial risk. Apart from money, it also able, are extremely unlikely to produce after ten years. Although the lacks technology and strong manage- even a 5 tcf discovery. Let us pray for Bangladesh share of the entire gas will ment. Even for onshore, it is not possi- the country’s sake that a miracle like not be less than 70% for the life of the ble for BAPEX to embark on explo- that happens. Moreover, awarding just project (Bangladesh share keeps ration work outside its present plan these two blocks allows us to develop increasing as the size of the discovery is although they are in the right track to our offshore prospect in phases. bigger). That means even if the compa- attain higher international standard. To Hopefully by next year the maritime ny sells 80% of the gas at a very high suggest that BAPEX should do offshore border dispute with Myanmar and price, Bangladesh will get at least drilling is preposterous. Even with third India will be resolved and a quick seis- 62.5% (100x50/80) of that export rev- party contract, as suggested by some mic survey of the entire offshore area enue. Higher the company can sell the quarters, the financial risk is too high. will give us clear idea of the future gas bigger will be the revenue for the Moreover they do not have the prospects. We may then proceed country in billions of dollars. Now the required management skill engaging a accordingly in steps. equation for the 20% (3 tcf) is simple. third party. Ridiculing Petrobangla for Any contract may be questioned on That part will have to be brought inefficiency/corruption, poor manage- many issues but that must be based on onshore by Bangladesh. The pipeline ment and at the same time to suggest facts and rationale, not cynicism. On and a processing plant will cost in the that BAPEX be engaged in a multi-mil- the basis of the PSCs being carried out range of 500 to 600 million dollars. If lion dollar deal with a third party is for the last 13 years in the country, the ’ the excess capacity of Sangu s Salimpur unreasonable. offshore 2008 contract is well balanced plant can be used, this cost will come We are importing cars, cutting edge and protects the interest of the country. down. This gas is part of the profit gas telecommunication technology, several Petrobangla has handled the existing for Bangladesh costing nothing. The power plants, airplanes and many other contracts fairly well (there is always transportation and processing will be in very expensive types of machinery. room for improvement) and I believe the range of $1.0/Mcf. The daily supply Should we attain the capability to man- that with more attention and monitor- of 600 MMcf gas even at $2/Mcf will ufacture all of them? The author only ing they will do a good job in the future be a bonanza for the country (compare has the experience of Economics 101 too. EP that with the proposed 500 MMcfd (a real novice) but clearly understands LNG import at $10-15/Mcf). the theory of ‘Comparative advantage’. The alternate to PSC contract, is being After space technology, the next cutting Dr. M. Tamim, Professor, suggested that BAPEX should do all the edge engineering and technology is Dept of Petroleum & Mineral activities, both Onshore and Offshore. used in offshore drilling. It is not under- Resources, BUET

28 COVER ARTICLE PSC Amendment & Offshore Petroleum Exploration

Engr Khondkar Abdus Saleque

n the backdrop of the persistent power pay sands. PSC with Shell-Cairn and energy legal counsel] also vetted the and gas supply crises, Bangladesh gov- Holland Sea research signed in mid- draft document. Finally, the draft PSC ernment has recently taken two deci- 1990s included a gas price mechanism was approved by the council of advisors I which even was lower than the prevail- sions on offshore exploration of petrole- of the caretaker government. Bidding um in the Bay of Bengal. Santos, the ing gas price at international market at round was invited on the legally Australian exploration company has that time. Over the last 12 years, the cost approved PSC during the caretaker been given the right to sale its share of of offshore drilling has increased mani- regime. Several companies took part in fold. To continue further development of profit gas to willing third party end users the pre-bid road show held in Sangu field, Santos requested inside the country. The Production Bangladesh. Some logical incentives Petrobangla to revise cost or give them Sharing Contract [PSC] has been signed were included in the draft PSC to attract among US oil giant ConocoPhillips, authority to negotiate marketing their major investors for deep water drilling in Petrobangla and GOB for exploration in share of profit gas with third parties prospective offshore frontier of two deep sea blocks [excluding areas inside Bangladesh. We have been told Bangladesh. But the response to the bid under disputes neighbors]. Both the deci- that several industries in gas-starved sions have been disputed by a section of Chittagong are willing to negotiate with was extremely discouraging. Some peo- civil society claiming itself as the “Oil, Santos directly if they get stable supply of ple thought that the strong protests by Gas and Port Protection Committee gas. Santos proposal indicated some India and Myanmar discouraged most of [OGPC]”. This group, also claims to have early gas by January 2012 and gradually the IOCs and even those working in exclusive proprietary right of patriotism, more and more subsequently. There are Bangladesh to stay away from the bid- is agitating against the mining of indications of gas in south Sangu, ding. But the reason was very different. Bangladesh’s own high heating value Magnama and Hatiya. Successful explo- Major IOCs while considering bidding sweet coal for a long time. But conspicu- ration and development campaign of anywhere undertakes series of risk and ously import of dirty polluting coal from Santos in Chittagong is major option to other analysis and always go for a bank- gas supply to Chittagong in near future. neighboring country does not bother able document. While preparing the ’ There is nothing wrong in the commer- them or they never protest government s financial model on the basis of draft PSC cial decision of government in allowing extremely difficult to implement initiative 2008, it appeared to most of the leading Santos to third party market access of its of importing expensive LNG or coal. PSC operators that it would be extremely They oppose Bangladeshi efforts in share of gas. But significant works in the risky under present terms to invest in exploring petroleum resources in the Bay mid-stream may need to be done to Bangladesh offshore. That is the reason of Bengal. What they are up to? Who are account for the gas in Chittagong system. why Chevron, Exxon Mobil, Shell BV, BP, sponsoring them? Are they really acting for the people of Bangladesh? What is its The model PSC was first used in 1974 by Oil Search, PETRONAS stayed away. representative strength? The situation the then Bangabandhu government Even Santos submitted conditional bid. demands some brain storming on PSC when six IOCs were engaged in 8 off- But surprisingly ConocoPhillips and Irish provisions amendment with Santos and shore blocks of the Bay of Bengal to Company Tullow submitted a little bit signing of PSC with ConocoPhillips. explore oil. The model PSC underwent aggressive offer and were considered the several updating and amendment as the evaluated bidders for offshore blocks. Santos which bought interest of Shell- country acquired experience through After thorough evaluation the committee Cairn of blocks 15 and 16 including pains and gains over the last three recommended for ConocoPhillips for 8 operations of Sangu offshore gas field. decades. The PSC 2008 was formulated blocks and Irish company Tullow for 2 The PSC signed in mid-1990s has been by a properly constituted government blocks. The caretaker government did amended. After 12 years of operation, company taking references of many PSCs everything but to make award and left it Sangu gas field is on the verge of deple- in operation in the regional countries. An for an elected government to take deci- tion. In the recent times, Santos carried sion. The present government took out 3D seismic survey in its allotted accredited international expert examined almost two and a half year to re-evaluate blocks. Some potential small pay sands its pros and cons. Dr Kamal Hussain, the and examine all pros and cons of the around present Sangu wells and south then Minister of Law & Parliamentary Sangu has been located. Relatively huge Affairs and later on Minister of Energy matter and finally signed PSC with investment is required to tap into these [who is also an internationally reputed ConocoPhillips for the two blocks.

29 Meantime, the model PSC remains on and IOC. It is at this stage Bangladesh ture [opex]. One must remember Petrobangla website as a public docu- needs experienced professionals and Bangladesh does not have capacity [techni- ment. experts to assess IOC proposal technical- cal or financial] to carry out exploration in As neutral observer, we find nothing ly and financially. Petrobangla and gov- offshore. No bi-lateral or multilateral donor wrong in concluding the PSC with a ernment may lose if it fails to identify cost or development partner provides grant or leading IOC in a legal manner. This elements professionally and evaluate loan for exploration. Bangladesh could not writer had the opportunity to review and costs efficiently. Upon commencement explore petroleum in deep waters of the Bay compare Bangladesh PSC with some of production, IOC recovers costs over of Bengal despite of aggressive exploration other PSCs in operation in the regional and agreed period from a part of the gas campaign of neighbors in adjacent territori- countries. In many aspects like corporate selling the gas to Petrobangla under al and disputed waters. The opposition to tax, profit sharing matters Bangladesh agreed price formula. Rest of the gas is Bangladesh efforts will strengthen the hands PSC has much stringent conditions called profit gas. The profit gas is shared of neighbors who, according to many, have which, however, should have been taken between Petrobangla and IOC. The prof- already encroached Bangladesh territory. into consideration by so called civil soci- it share split changes as more and more The resolution to maritime boundary dis- ety. Unfortunately, a part of our civil soci- costs is recovered. The Petrobangla share pute may take 5-7 years. In the meantime, ety always opposes FDI and private sec- may vary from 65-80%. This gas Bangladesh must try and explore in undis- tor investment in exploring and exploit- Petrobangla gets free. In this scenario, it puted areas. The PSC 2008 has lot of safe- ing our domestic energy resources. On is unwise to even think that any IOC can guards of Bangladeshi interest. The provi- the other hand, some beauracrats never take 80% gas under any PSC. sions are well drilled successes in regional PSCs. explain important national contracts like Now what happens if ConocoPhillips PSC to general people in a transparent discovers a huge gas reserve in its allot- But our concern is whether Petrobangla manner. In this situation, ill motivated ted block? If that happens where else in its present shape can effectively moni- agitators and some section of ill-informed than Bangladesh has huge hungry market tor PSC operations in matters of technical media create gossip. for the IOC with least investment? Will auditing and cost control? Do they have The PSC 2008 has not created any provi- Bangladesh refuse to accept IOC share of financial experts to carry out financial sion for 80% export of discovered gas gas without using it for its own econom- model or evaluate financial model of resources in the form of LNG. One must ic development? Desperate Bangladesh IOCs development plan submission. It know how PSC operates. Our PSC has government is planning to import expen- needs qualified experienced cost two parts. Cost recovery gas and profit sive LNG and coal. Will it not use its first accountants and petroleum/ reservoir gas. Any PSC operator has to make huge right of refusal? Bangladeshi and foreign and production engineers. Does upfront investment in survey and explo- industrial entrepreauners are willing to Petrobangla have such expertise? ration to try and discover significant buy basic fuel at higher costs if available. Bangladesh loses under PSC due to its resources. After extensive study, IOC has So why worry? Any question of export to lack of capacity in managing and moni- to provide credible evidences for a signif- anywhere arises only if Petrobangla toring PSC operation. The government icant commercial discovery. If not, IOCs refuses to buy and third party users inside must arrange training and capacity build- expenses are not covered under cost Bangladesh cannot buy it. Such situation ing of gas sector professionals for reaping recovery. Offshore drilling is like a pure is inconceivable for Bangladesh at this benefits under PSC. gamble. For winning something, investor stage and in near future. Provision for OGPC excesses backed up by some loses in many cases. Bangladesh offshore export of Gas in the form of LNG is in peripheral left leaning political parties is largely unexplored. Even not much sur- existence in all PSCs in Bangladesh. But are among other reasons for the present vey works have been done. Hence huge it never happened. gas and energy crisis. By creating unnec- pre-exploration works and substantial essary barriers and impediments to Some people have raised question about investment is essential. If some incentives national efforts of exploring and exploit- costs involved in building expensive and some market signals are not given, no ing own fuel resources, OGPC is serving 250KM+ submarine pipeline to bring gas IOC will consider it prudent to take risks. the energy mafia syndicate which is to onshore. IOC even to set up LNG plant Bangladesh PSC has not included any thriving on import of dirty polluting coal onshore will invest in case of substantial provision which cannot be seen in other from across the border. They are confus- discovery. Offshore floating LNG termi- PSCs in operation. ing society and misguiding government nal concept will not work here. Reliance policy makers. The elected government IOC after commercial discovery will sub- discovered a large gas field in KG basin. must work for the greater interest of the mit development plan to Petrobangla It has not set up LNG plant or not export- country and the people. and government. At this stage, Gas ed gas. EP Purchase and Sales Agreement (GPSA) will be negotiated. The first portion of the Bangladesh in PSC 2008 included provision PSC gas comes under cost recovery by of corporate tax to be paid by IOCs. It will IOC. Any cost included in the budget increase investment and prolong cost recov- Engr Khondkar Abdus Saleque under PSC is approved by a joint man- ery. One must remember IOCs will recover Energy Specialist, AEAI, agement committee comprising of equal any investment made whether it is capital Sheberghan Gas Fields Development number of members from Petrobangla expenditure [capex] or operating expendi- Project, Kabul, Afghanistan

30 Call for Green Energy Fund to Enhance Energy Capacity

EP Report

ndustries Minister Dilip Barua has Bank, Vincent Kitio, chairman of UN- He said Bangladesh government has proposed formation of a Green Energy Africa, NH Ravindranath, set targets for developing renewable ’ Energy Fund for climate change in chairman of Global Energy Facility s energy resources to 5 percent of total I Scientific and Technical Panel, also power demand by 2015 and 10 per- order to enhance energy capacity of the developing countries. addressed the program. cent by 2020 to achieve the goal. He also informed that Bangladesh Addressing at the program, industries “The government also exempted tax government has taken a number of minister said considering the reality on solar energy equipment to make steps on attaining energy safety in the Bangladesh government has given the use of solar energy more popular country. top priority on green industrialization and has formulated an energy in the country. roadmap to increase the power gen- The minister was speaking at a eration to 20,000 MW by 2020 to “We encouraged setting up knowl- roundtable titled “energy for all-time ensure uninterrupted and quality edge based hi-tech industries with for action” at the Vienna Energy power supply for all through ’ zero pollution. Our government has Forum 2011 in Vienna s Hofburg improvement in generation, transmis- adapted renewable energy policy Hotels. sion and distribution system,” Barua and extended renewable energy said. UN Industrial Development technology to the rural people to Organization (UNIDO) in association meet their energy needs,” he said. The world leaders in their speeches with Australian emphasized on 3 Federal Ministry pillars--economic, of European and environmental International and social sus- Affairs and tainability and International energy–for sus- Institute of tainable develop- Applied System ment and poverty Analysis (IIASA) reduction efforts. organized the pro- The 3-day round gram. table is likely to Reneta Christ, adopt a working Secretary of plan on how to Intergovernmental eradicate dilem- Panel on Climate ma of energy sec- Change, Rohit tor created by cli- Khanna, Program mate change. Ministerial meeting on Energy & Green Industry at the Vienna Energy Forum 2011 in Vienna’s Manager of World Hofburg Hotel. Photo: Internet EP

31 Bangladesh Achieves Marked Growth in Renewable Energy Use

he country has achieved a signifi- Secretary S.M. Formanul Islam. The IDCOL is now installing 42,000 more SHS every month, he said. Tcant growth in renewable energy Infrastructure Development Company use especially of solar energy with the Limited (IDCOL), a state-run non-bank- The IDCOL receives grants and loans number of solar home system (SHS) ing financial institution, is the main from different multilateral donor agen- installations crossing over 1.0 million lender to local renewable energy com- cies including the World Bank (WB), until last month. panies. the Asian Development Bank (ADB), the Islamic Development Bank (IDB), Supportive multilateral donor agencies, The IDCOL initiated funding to its part- the United Nations Development proactive role of local firms and moti- ner organizations to install SHS for Program (UNDP), the German KfW to vation by a pool of professionals are rural people in 2003 with a target to provide funding assistance to its partner leading the surge in renewable energy install 50,000 SHS by 2008. use across the country. organizations. "But we have achieved the target with It lends funds to some 30 partner organ- In 2003, the country had only some support from our partner organizations izations offering interest rates between 20,000 units of SHS installed, which three years before the deadline in 6.0 per cent and 8.0 per cent to soared by 50 times within eight years, 2005," said Islam. available data revealed. encourage renewable energy use The IDCOL alone has helped installing across the country. Utilization of wind energy, biomass 940,000 SHS across the country until Among the renewable energy firms, the energy and micro hydro use are also May 2011, he said. getting pace in Bangladesh where 51 performance of Grameen Shakti, one of per cent of the total households still do "Encouraged by the recent success we the 30 partner organizations of IDCOL, not have power connections. have set a target afresh to enhance has been outstanding in promoting installation of SHS to 2.5 million by renewable energy use. EP "The growth in SHS use in the country 2014," said the IDCOL company secre- is amazing," said IDCOL Company tary. India Set to Green Architecture Seen to Produce 700 MW Save National Energy Solar Power in 2011 ndia is on track to produce 700 tate minister for Energy and Power Department of Architecture at Imegawatts of solar power at a cost of SMuhammad Enamul Haq has said Bangladesh University of Engineering $2.2 billion by December, ahead of an that promoting green-architectural and Technology (BUET) organized the initial target for an ambitious plan that design of building particularly in workshop at the Council building of seeks to boost green power generation readymade garment (RMG) and textile the university in collaboration with from near zero to 20 gigawatts (GW) by industries could save a significant size Deutsche Gesellschaft fuer 2022. of the national energy. International Zusammenarbeit (GIZ). Under India's Solar Mission, investors bid to build solar power plants and the “More than 40 percent of total energy The state minister said that energy sav- winning bids are determined by the is being used in industrial buildings. ing basically means saving the cost by electricity tariff that they accept as This amount can be minimized signifi- adopting green strategies in the indus- viable. Such has been the interest that cantly by using green architectural tries that ultimately could help mini- the government has been flooded with design in the industrial belt specially mize manufacturing cost and help investment pledges for the first batch of RMG and textile sector,” he said. boost the economy. projects rolling out in December. BUET pro vice-chancellor (VC) Prof M Enamul Haq, as chief guest, was inau- Habibur Rahman, Prof Dr Zebun India's 20 GW solar plan is likely to gurating a two-day workshop titled, Nasreen Ahmed, chairman of the attract overall investment of about $70 ‘Performance Based Design: Architecture department, among oth- billion, the government has estimates. Introduction to Computer Based ers, addressed the inaugural session Issued in 2009, the plan envisages Lighting Simulation Techniques,’ a while BUET VC Prof SM Nazrul Islam India producing 1,300 megawatts training program on promoting green (MW) by 2013, another up to 10 GW presided over the session. EP architecture concept in the country. by 2017 and the rest by 2022. EP

33 Solar Power Must For New SME, Agriculture Branches: BB EC Renews Push for

he Bangladesh Bank in a circular tion of solar power panels. 2030 Renewables Tmade it mandatory for banks which The circular containing the new direc- want to finance the SME and agricul- tive has been sent to all the chief exec- Target tural projects to set up solar power utive officers of the banks. he European Commission has put its panels for providing electricity. The circular said that the new branch- Tfull weight behind a new target to BB’s circular mentioned that if any es should be environment-friendly, and raise the share of renewables in the con- bank plans to open a new branch to should prioritize the effective use of tinent's energy mix by 2030. finance projects in the agriculture or sunlight, the use of renewable energy, The security that this would provide to small and medium enterprise sectors, energy-efficient bulbs and machinery, potential investors was "more important they should inform it whether solar along with proper use of water. than ever", EU Climate Action power panels are available there to The new directives are in line with the Commissioner Connie Hedegaard told a provide power to the branch. implementation guideline of ‘green launch of the Intergovernmental Panel on The BB will not allow any bank to banking’ which was announced last Climate Change (IPCC)'s renewable ener- February. gies report in Brussels. open any such branch without installa- EP Hedegaard spoke favorably about a recent call by the renewables industry for Fishermen in Kurigram a legally-binding target of 45% renew- ables by 2030, but stopped short of Chars Get Benefit endorsing it. "Where exactly the figure will be, we ishermen in the char areas are now The villages are West Dhanirum, Kuti should discuss and analyse," she said. "But I will say that I will do whatever I enjoying solar power in three upazi- Nagorajpur, Bhangamor, Ajoatari, F can to get this discussion reflected in the las -- Phulbari, Nageswri and Chilmari. Anatapur and West Phulmati under Phulbari upazila, Kumandopur, Katgiri energy roadmap that will come out later At least 70 ultra-poor families at 13 vil- and Char Kapna under Nageswari this year for 2050." lages are receiving the facilities. They upazila and Khamer, Wari, Bhatto Para In March, Energy Commissioner Günther are happy as they got 20-watt power in and Char Bailbandiarkhata under Oettinger told EurActiv that in this docu- each of their houses. Chilmari upazila. ment, the Commission would propose "a long-term target for 2030 and 2040 and RDRS-Bangladesh, an 2050 and there will be a higher target for NGO, did the great job renewable energy". by giving solar power units free of cost among Speaking in a videotaped address to the the families. The market conference, he said that Brussels had to value of each solar unit consider renewables targets for 2030 if is Tk 12,500. clean energy growth was to be contin- ued. Moniruzzaman Monir, 3 "The renewable energy industry has technical officer of the already called for 45%," he said. "Our project of this NGO, current work will review all the literature said "We are distribut- and explore different possible pathways ing solar power units for the European Union." free of cost among the ultra-poor fishermen The European Commission's president, families who live in José Manuel Barroso, added his voice to remote char areas and the fray, telling the meeting that "2020 is who are members of already around the corner and we need our Village Disaster to think of intermediate steps up to Management 2050". Committee (VDMC)." "We need not only to think but to act," he Fishermen in the char areas are enjoying solar power EP added. EP

34 ARTICLE

whims. All such decisions must be made Ailing Electricity Sector on proper feasibility studies. Constructing a gas pipe line from Bibiyana to Ashugonj and installing a Shamsul Islam power plant of adequate capacity at Ashugonj would have reduced the total lectricity Sector is certainly one of other such ailments. At present the investment very considerably. Several the most important infrastructures employees do not know where they high voltage transmission lines already Efor our sustenance and steady stand and what the future holds for them. exist to transfer power to load centers growth as a developing country. An Integral Part of The National from Ashugonj. The second east west Neglecting this sector can be very expen- Planning And Efforts interconnector over the Jamuna Bridge sive and can cause serious present and Any sector including electricity sector emanates from Ashugonj. No new trans- future problems. Unfortunately we are cannot be in isolation from the overall mission line construction would have not applying our thoughts and decision needs, requirements and planning of the been needed. Whereas it was decided to making process appropriately. Ad-hoc country. Through installation of so many build a large power plant at Bibiyana and temporary measures are being taken rental power plants at scattered locations leading to construction of two large new to overcome the problems encountered. using imported liquid fuel has increased high voltage line towards load center Whereas all measures including the tem- the import requirement of the country in around Dhaka and Comilla. porary once must fit into a well planned geometrical progression. We cannot Importing coal from abroad for running master plan for the sector. By master plan afford to allow such increase in import power plants is an utopian idea. The coal we do not mean a big book prepared by bill. Our foreign exchange reserve has imported from India for Barapukuria the foreign consultants for 10, 15 or 20 been depleted to a dangerously low power plant remains stored without use. years duration. It is a coordinated action level. Load shedding for 1 or 2 hour is The per unit cost of electricity produced plan to be implemented in phases. We certainly irritating and causes a lot of at Bagrehat or at Chittagong using coal reckon no huge investment is needed for inconvenience but imbalance in trade imported from Indonesia or Australia (if improvement of this sector. A enumerat- and rapid depletion of foreign currency available) would be very high indeed. ed below are some of the suggestions to reserve is causing sliding down of value Whereas ad-hoc decisions were taken to be incorporated in a well produced plan of taka. This is creating numerous prob- install large power plants at those two for the sector. By no means does the lems to the nation as a whole. We must locations instead of installing them near author claim to be an expert on every consider the impact of any such decision the coal mines in Dinajpur. aspect associated with electricity sector. to our not so strong economy. Our export But my long association with this sector performance is primarily based on RMG Electricity sector cannot be operated at involving close and active participation where value addition is not that high. the discretion and whims of amateurs. in electricity sector in several countries I Export of man power is not likely to Training & Education venture to suggest certain points for con- increase soon. Country first then the Unless our engineers and technicians are sideration of those who are in the posi- requirement of a particular sector like properly trained to transport, store, wash tion of authority in the sector at present. electricity. and use coal and to efficiently operate Recruitment of Management Personnel Uncertainty in Reorganization Process coal fired steam power plants we have All members / Managing Directors with- Several years ago a process of reorgani- little future in electricity sector. Using out exception in every corporation / zation making BPDB as the principle indigenous coal for power generation is autonomous body in this sector must be holding company was started. This has the only way to improve power sector. recruited in the same way as is practiced certainly stagnated and consequently no Simple graduate engineers working in at present in some of the company like tangible benefit is being derived. The the office and placing unwilling engi- PGCB, DPDC, DESCO etc.. This is the employees do not know what lies for neers and technicians at the power plants only way to get the services of best of the them in future. They come to the office mostly against their wills will not be able available talents in the country. and without much work leave at the end to improve power sector. Extension of tenure of no Director / of the day. Whereas the entire work force It is essential to make separate, attractive Member shall even be considered. must act in unison to improve every pay packages for the power plant Granting personal favor at the cost of aspect including distribution and sale of employees. Select the best and train improvement of electricity cannot be electricity. them properly if we are to produce large acceptable. Notional Decision Making quantity of electricity using coal as a fuel. It is the leader who leads the organiza- Decisions to install major power plants at I have more suggestions and those I hope tion for its success or failure. Without a a cost of Millions of Dollar are taken on to submit for consideration of readers in good general, winning a war cannot be an ad-hoc basis on the personal impres- future. expected. All the employees, engineers sion of some high up in power. Installing EP and officers must be united to fight a war a large power plant at Bibiyana or power against malfunctioning, inappropriate plants at Bagerhat and Chittagong are Shamsul Islam decision making, procrastination and all based on superficial knowledge and Former Chairman, BPDB

35 REPORT

According to him these power plants Samutang Gas Field Goes are producing around 200 MW elec- tricity against their 857 MW capacity. "We are giving top priority to increasing Into Operation gas supply to Chittagong , so we have taken some augmentation, pipeline installation and new drilling pro- EP Report grammes there," Dr. Monsur said. He said with the help of international he Samutang Gas Field in problems to run their business in oil company Santos, Petrobangla has Khagrachhari went into operation Chittagong due to non-availability of taken up plans to drill three wells. under the management of the gas and power. The power plants situ- "Hopefully we will supply an addition- T ated in Chittagong are not getting ade- Bangladesh Petroleum Exploration and al volume of 50 to 60 MMCF gas per Production Company Limited (BAPEX). quate supply of gas. day from Sangu gas field," he added. Around 17 MMCF (Million Cubic Feet) "Rawzan and Sikalbaha, two big power Sangu field has been supplying only 17 gas per day will be extracted from the plants have been facing severe gas MMCF gas regularly. The Petrobangla field through the new well number 5 shortage and thus failing to generate chairman said Sangu can supply up to reducing existing gas crisis in electricity to their capacity, a Power 500 MMCF per day, but that needs Chittagong Zone, Dr. Hossain Mansur, Development Board (PDB) official said. huge investment. EP Chairman of Petrobangla said. The Karnaphuli Gas Field Company Limited has already completed laying Vienna Nuclear Safety Conference 30 km pipe line for supplying gas to Chittagong from Samutang field. The Dhaka for Crisis Management laying of another 35 kms pipe line would be completed soon, he said. tate Minister for Science and ICT vigorous level of nuclear safety based "Hopefully we would get 20 MMCF gas Yeafesh Osman has urged the on IAEA's safety requirements. from the well regularly that will help Sstates to establish an emergency The conference has been organized improve overall gas situation in crisis management centre to deal to draw on the lessons from the acci- Chittagong region,” the Chairman said with nuclear contingencies for the dent at the Fukushima Daiichi, Japan adding the Petrobangla has taken up a developing countries especially for to strengthen nuclear safety through- massive plan to increase gas supply to LDCs. out the world and contemplate on the port city from next October. He made the call at the ministerial the possible future actions. Dr Hossain Monsur said in order to conference on Nuclear Safety at Earlier, State Minister Yeafesh Osman augment gas supply to Chittagong, they International Atomic Energy Agency met Sergey Kirienko, former prime are installing another 80 kms pipe line (IAEA) in Vienna. All the nuclear minister of Russia and the Director from Samutang gas field to supply 30 powers and important stakeholders General ''Rosatom'', the State MMCF more gas to this zone regularly. are attended the event. Corporation of Russia, the renowned Md Golam Mortoza, Managing The minister suggested exchange of Russian nuclear technology provider. Director of BAPEX said they have a information at the time of emergency plan to drill another well on Samutang Kirienko assured the minister of through an institutional structure gas field for improving the gas supply to Russian full support in the quest of under IAEA to ensure flow of vital the area. He said, hopefully, country Bangladesh towards civil nuclear information. would get 40 MCCF more gas regularly program. from this field in future. He said that nuclear technology is He also had a courtesy call on Dinh The zone needs around 200 million still clean and reliable source of ener- Tien LE, vice minister of Science and cubic feet (MCCF) gas a day to stimu- gy for the humanity. Technology of Vietnam. They empha- late the economic activities in the Yeafesh said Rooppur Nuclear Power sized the mutual cooperation and region. Plant is the flagship project of the exchange of experience and knowl- According to FBCCI, about 200 big government taken to implement edge as both the countries are industries failed to run because of gas soon. He stressed the need for an embarking on the path of nuclear shortage. energy. international and regional coopera- EP The investors have been facing serious tion to ensure the highest and most

37 REPORT

ed outside the country, said a Govt to Set Up Plant to Generate Petrobangla official. A 'strong' syndicate is active in pilfering Power from Gas Condensate condensate by making leaks in the con- densate-carrying pipelines, he said. EP Report State-owned Gas Transmission Company Ltd (GTCL) could not stop he government has decided to owned Eastern Refinery Ltd (ERL) to condensate pilferage even after hiring a generate electricity from natural produce diesel octane. private security firm, said a GTCL offi- cial. Tgas condensate apparently in a Condensate is also being used in desperate move to diversify the coun- Kailashtila natural gas liquid (NGL) or Officials said once appointed, the con- try's energy sources for electricity gen- condensate fractionation plant to pro- sultant will recommend capacity, type eration and ease its mounting demand, duce sulphur and lead-free and envi- and location of power generating units a top official said Sunday. ronment- friendly liquefied petroleum to be run on gas condensate. State-owned Bangladesh Power gas (LPG), motor spirit (petrol) and The firm concerned will also suggest Development Board (BPDB) has diesel. electrical interconnection and power already floated tender to select a con- The capacity of ERL and Kailashtila outflow arrangement for the planned sultant to facilitate installation of the plants is limited, and a significant condensate-fired power plant condensate-fired power plants. quantity of condensate is being export- EP "We are now scrutinizing bids from several firms to appoint as consultant to help set up the country's first conden- sate-based power plant," said BPDB Big Expo 2011 & BACE Expo 2011 Chairman ASM Alamgir Kabir. ver 100 companies including 25 involved in the area of alternate He said the country has huge prospects from overseas will be participat- power generation, transmission and to generate electricity from the gas con- O ing at the twin international distribution to come under one plat- densate, now available at different gas tradeshow on Supplementary Power form to explore the possibilities of fields as by-product. BIG EXPO Bangladesh and 5th edition providing alternate power generating Kabir, however, did not say anything of Architectural, Building & solutions to the trade and industry about the capacity of the planned con- Construction Products & Technology looking for additional alternate power densate-fired power plant. Tradeshow BACE Expo 2011. options. Currently, the country's average daily New products, new materials and The maiden edition of the show is condensate output is around 6,475 bar- machinery with latest technology will being organized by ASK Trade & rels from 19 operating gas fields across on display from some of the leading Exhibitions Pvt Ltd India and Zakaria the country, a senior Petrobangla offi- companies of Bangladesh as well as Trade & Fair International Bangladesh cial said. . exhibitors from overseas countries like At BIG EXPO of Bangladesh, With the augmentation of natural gas India, China, Singapore, Pakistan etc. Companies will be displaying their production, the condensate output is The 4-day long tradeshow will be technology, know-how and products also increasing day by day. held on July 6-9 and services and at Bangabandhu Petrobangla, which is now struggling explore the busi- International with the growing condensate output as ness potential in Conference currently the country does not have Bangladesh's Centre. much scope to utilize this huge gas by- one of the most product, has welcomed the BPDB Saif Power Tech promising and move to build condensate-based power Present BIG highly potential plants. EXPO of industry sector. "It will help check wastage or pilferage Bangladesh, the Nearly 60 com- of a huge volume of condensate," said International panies from Petrobangla Chairman Dr Hussain Batteries, Bangladesh, Monsur. Invertors and Generators Expo of India, china and Singapore are partic- Bangladesh, is being organized to cre- ipating in the show. Currently, a very limited quantity of ate a platform for all the stakeholders EP condensate is being refined at state-

38 SPECIAL REPORT Fix Energy Problem to Attract FDI

EP Reoport

erman federal minister for eco- and extended full support for the coun- nomic cooperation and devel- try's development. They had meetings After the talks, German minister Niebel opment Dirk Niebel has with Prime Minister Sheikh Hasina, said, "Germany has supported G BNP chairperson and opposition leader Bangladesh since its independence. emphasized on creating congenial environment for investment in Begum Khaleda Zia, State Minister for Bangladesh is a very dynamic develop- Bangladesh with no corruption and low Environment Dr. Hasan Mahmoud and ing country. I am deeply impressed by bureaucracy. “We are looking at ways members of the civil society, when the successes it achieved in these past to increase the attractiveness of your issues of mutual interest on invest- years." He said that poverty and child country for our investment,” he said, ments, development cooperation and mortality rates decline and economic after a meeting with finance minister climate change were discussed. growth has been remarkable for 20 years. Through my visit, I would like to AMA Muhith here recently. The visit concluded with field visits to a encourage our partners to continue the number of development projects sup- Niebel led a 32-member delegation to reform path and invest in good gover- ported by Germany and the European Bangladesh, including the European nance in order to realize the huge Union in the fields, including a renew- Union commissioner for development development potential of the country. able energy project in Satkhira. The dis- cooperation Andris Piebalgs, who “I promise our Bangladeshi partners tribution of solar energy plants and the called for fixing energy problem to that the continued support of the use of energy efficient stoves contribute attract long-term foreign investment. German Federal government.” to the overcoming of the energy crisis EU Commissioner Piebalgs added, "The The delegation during their four-day and show new ways of sustainable use EU has been a longstanding supporter visit raised the issues as the Finance of resources — an essential question in of Bangladesh as it has been achieving Minister urged Germany and other EU this country which is highly affected remarkable economic growth, a good countries to invest in Bangladesh's and threatened by climate change. track record for achieving the weak infrastructure sector, including As important trading partners, the Millennium Development Goals, and a energy, power and transportation. European Union and Germany support reputation as a vibrant democracy. It They urged the government of improved social and environmental will continue its support as Bangladesh Bangladesh to expedite implementa- standards in Bangladeshi industries, for aims to become a middle income tion of the donor-funded projects. instance in the garment sector. country by 2021." "We find the implementation process of As they called on the Prime Minister, Piebalg clarified, "As Bangladesh's donor-funded projects to be very slow. Hasina expressed her gratitude for biggest export destination, the EU The government takes much time to European support in holding elections imported 6.6 billion euros worth of give approval to the and requested for it to continue. goods from Bangladesh in 2010. projects," Andris told Investors from the EU a press conference in are increasingly the city. seeking opportuni- ties in and with "We have requested Bangladesh. In order the finance minister to promote even to implement our stronger economic projects fast," he said, cooperation and adding that trade growth, the EU seeks between EU and to assist the Bangladesh is Government of increasing signifi- Bangladesh in its cantly. "We can help efforts to strengthen develop the private democracy, rule of sector in the country." law and the fight against corruption." The delegation held high-level political German Federal Minister for Economic Cooperation & Development Dirk Niebel & European Union Commissioner for Development Cooperation Andris Piebalgs Meet with Prime talks during the visit Minister Sheikh Hasina at her Office EP

39 REGION

among the SAARC member countries. SAARC Power Grid Each country should have to pay atten- tion to the modality including funding Dr. Kamal Raj Dhungel sources, conducting feasibility study and generating electricity through vari- outh Asian countries are facing surplus electricity could export it to a ous sources (hydro, solar and wind). the power crisis. The demand for power deficit country. In this manner, Development of the sources most electricity has increased over time no country in the region would face the viable in terms of investment cost, rate S possible power crunch. of return, comparative advantage etc. because of industrialization, urbaniza- tion and modernization. But, the sup- Nepal is facing an acute problem of Ideally, India should take the leader- ply has not kept up pace with the power shortage that makes a daily rou- ship to undertake power trade among demands. There obviously is a big dif- tine of load shedding ranging from an the SAARC countries, because it is very ference between the demand and sup- hour to 14 hours a day. rich in resources with almost double ply of electricity. The duration of load The variation in season is also different digit economic growth rate. Despite its shedding could be different in different in each country. It means some are high installed capacity, India faces countries, but is a normal routine that consuming more power than others energy shortages in the range of 10 per slows the efficiency of the economy. during a particular season. For cent during peak hours. As is expected, Some countries like Nepal face an instance, India’s power demand in a credible idea has been floated by acute problem of load shedding, where summer is more sensitive than in Indian Minister of State for Power KC supply of energy varies by season. Venugopal in relation to power trade Seasonal variation makes the power between India, Bangladesh, Nepal, supply under threat, while the demand Pakistan and Sri Lanka. This idea is keeps growing continuously as the use about a construction of regional power of electricity increases in the house- grid linking these countries which has holds, commercial, service and indus- the potential to create 1,00,000 MW trial sectors. The consumption of elec- capacity in the region. To put the idea tricity in most of the member countries into action, SAARC member countries of South Asian Association for Regional should have to take the initiative, and Cooperation (SAARC) varies. Every fully support the idea floated by the country has power surplus and deficit Indian power minister. A regional insti- by season. Some countries in the region tutional hub under the SAARC as the have power surplus such as Bhutan, main implementing agency to under- while others face power shortage. take the initiation to put the idea into Climatic variation in these countries action needs to be created. The body plays an important role in making Nepal, while power demand in winter for such should comprise of one mem- excess/deficit supply of electricity. is more sensitive in Nepal than in India. ber from each SAARC country, and it would be responsible for creating fund, Looking at the pattern of load shed- India has power surplus during the win- construction of regional power grid, ding, the phenomena has become a ter season, while Nepal has it in late coordinating and advising on the mat- regional problem. Non-existence of summer. Both Nepal and India can ters of fund-raising program to the gov- power trade mechanism between the export their surplus energy to each ernment concerned, determination of SAARC countries is the main barrier to other during the respective seasons. cost share to be contributed by each import/export power during deficit/sur- Similar is the case of Bangladesh, participating country on the basis of plus of energy to maximize its use in a Pakistan and Sri Lanka. Every country benefit they will receive. rational and efficient way. Power trade in the region has the realisation that between these countries could facili- energy trade between and across the This idea of SAARC power grid would tate the enhancement of the regional country is a must for accelerating the integrate the regional power market, economy. This trade between and pace of economic development, and and a powerful means to supply power across the countries, if realized, ensure energy security in the region. during the crunch in the entire region, and harmonize ties among the coun- expands the scope of economic devel- For this to happen, countries of the tries of the region. opment of the region. region should have a strong will and Whatever electricity is being generated commitment for power trade through Nepal, which is facing acute power at the present time, and what could be regional cooperation. Each country shortage among the countries of South added in the future in the region calls should have to take the initiative for Asia, should take the initiative to put for optimum utilization. A country with arriving at consensus on the issue this idea into action. EP

41 INTERVIEW “PSC Has Nothing Detrimental to Bangladesh’s Interest”

certain group of the country has opment of hydrocarbon. These are geo- long been pursuing an anti-PSC logical, and commercial risks. movement based on an irra- Geological aspects of petroleum con- Dr Abdullah Al Faruque A tracts may give rise special kinds of tional perception, although there is nothing against the interest of the coun- risks resulting from varying degrees of try. The Bangladesh PSC has ensured uncertainty associated with the physi- the ownership of the people on the oil cal characteristics of petroleum opera- and gas resources as well as protected tions. The main unknown geological the sole authority of Petrobangla in factors and uncertainties in petroleum Bangladesh had gains controlling the use of oil or gas to be exploration relate to the discovery, the from the PSCs. BAPEX extracted. The contracting company size of deposit, and the economic via- has acquired onshore bility of development. Petroleum con- under the PSC does not have this exploration capacity due to authority. Associate Professor of Law of tracts are also vulnerable to commer- Chittagong University Dr Abdullah Al cial risk such as changes due to future the exploration works under Faruque has expressed the view in an price developments, error about the PSCs or technical supports exclusive interview with EP Editor future technology and market develop- from the friendly countries Mollah Amzad Hossain. ments as well as ordinary commercial risks occurring through fundamental Dr Faruque has obtained PhD on changes of circumstances which are Stability and Risk Management in beyond the control of the parties. PSC Petroleum Contracts from the Centre is a better mechanism to distribute the for Energy, Petroleum, Mineral Law and risks and benefits arising out of the Policy (CEPMLP) of the University of petroleum operation. However, most of Dandy in the UK. Following are the the risks are borne by companies, not excerpts from the interview: the host government, under PSC system EP: A certain group within the country until they found commercial discovery both the host states and companies has long been criticizing the efforts to of oil and gas after making huge invest- mainly for its flexibility in its negotia- explore oil and gas through appointing ment. tion process and its proven effective- IOCs under PSC on consideration that ness and adaptability in very different The popularity of the production-shar- it would affect the country’s interest. settings. ing concept amongst the developing What do you think? countries lies for its political appeal of Now the question is that why the for- AAF: It cannot be answered in a single ownership of resources since PSC sys- eign companies are being brought word. Exploration of oil and gas under tem vests all hydrocarbon discovered under the PSC for oil and gas explo- PSC is being carried out in almost all in the host state. Here, the companies ration. Because, petroleum exploration the developing countries. About 60-70 are considered merely as the contrac- is highly capital intensive, risky and countries are following the PSC system. tors. The companies take all the risks requires necessary technological sup- Even developed country like Russia, is and get only a part of the profit gas in port. Bangladesh does not have capac- also following the system. the event of successful commercial dis- ity and required technology to take the There are some risks associated with covery. Bangladesh has adopted this risks, in particular in case of offshore the process of exploration and devel- system. The PSC is also popular for exploration. I do not see anything

43 harmful in the PSC. Rather, the recently by Bangladesh to Occidental under We had invited bids for 28 offshore concluded PSC for exploration of off- PSC. It was not an appropriate deci- blocks. Some companies responded shore fields is more rational from eco- sion. too. But due to the maritime boundary nomic point of view and to meet our EP: How Bangladesh has been benefit- disputes with neighbors, it was possible growing energy demand. It must be ted or lost through allowing IOCs to to conclude PSC with ConocoPhillips admitted that we could not develop operate in Bangladesh under PSCs? for 2 blocks only. This exploration will Petrobangla for lack of political will. assist Bangladesh’s claim for its lawful AAF: Overall, Bangladesh had gains Hence, we have no alternative to IOCs demand over maritime boundary in the from the PSCs. BAPEX has acquired at this moment. ongoing arbitration process in the Law onshore exploration capacity due to of the Sea Tribunal in someway. EP: How do you evaluate the country’s the exploration works under PSCs or first Model PSC formulated immediate- technical supports from the friendly Generally PSC for offshore exploration ly after formation of Petrobangla in countries. Local manpower have got provides more incentives to the compa- 1974, following the PSCs of other the opportunity of higher training as nies due to higher level of risks and countries specially Indonesia? Six com- PSCs have the provisions for training capital involved in such exploration. panies have been awarded for explo- and employment of local people. The Compared to others, our model PSC, ration of gas and oil in the Bay of local manpower got opportunity to 2008 is not too much attractive for the Bengal under the first PSC. work in International Companies. They companies as it offers few incentives to also acquired technical knowledge the companies except provision for AAF: It was very timely initiative. The from the contracting companies operat- export. For instance, under the model PSC system introduced by Indonesia in ing here. PSC of 2008, the ceiling price of gas 1966 had gained instant popularity. indexed to HSFO price at Singapore The then visionary leader of the newly EP: What do you say about the has been fixed as US$ 180 per ton. The independent Bangladesh did not also demands and statements by OGPC gas price in this situation will be US$ hesitate to take the progressive step. against the PSC agreement with 4.5/1,000scf.This is not attractive in the But we could not make much head- ConocoPhillips? context of risks in offshore drilling. way, despite being first in the region to Moreover, companies will have to pay adopt the system. Although it was pos- AAF: They are staging demonstration corporate tax, which in earlier PSCs sible to formulate the Petroleum Act on the basis of a misconception. They were paid by Petrobangla on behalf of 1974, form Petrobangla and procure 5 are arguing that all the gas will be the company. Arbitration will be held gas fields from Shell BV, the progress exported. This is not correct. After com- outside Bangladesh according to inter- could not be continued due to the mercial discovery, Petrobangla will national norm. There is nothing wrong political changes of 1975. We also have the first right of refusal. If there is here. Generally, any dispute settlement could not yet amend Petroleum Act not enough gas demand in the country, under investment contracts such as 1974 to incorporate the environmental or Petrobangla cannot buy the gas for petroleum agreements takes place in and social issues of petroleum opera- any reason, the IOC will have to sale neutral venue of third state. It is now a tions. Petrobangla could not be devel- the gas to third party inside proven reality that FDI is beneficial for oped like PETRONAS or other state- Bangladesh. If that even does not hap- third world countries. owned enterprises. I think these hap- pen, the IOC may export the gas with pened due to lack of political commit- the approval of Petrobangla after con- However, the government should pub- ment. verting it to LNG. Furthermore, estab- lish the recently signed PSC, showing lishment of LNG requires separate full respect to the popular demand. All EP: What do you think about awarding agreement with the Petrobangla. petroleum contracts are published in few blocks to IOCs in 1988, 1992 and Therefore, under the PSC, export of dis- Barrows Supplement published from 1997 through various changes in the covered gas is only remote possibility. New York. I do not consider this as a PSC? I consider that export of LNG after set- classified document. AAF: All the PSCs so far signed in ting up of a LNG plant and associated EP: You have achieved higher degree Bangladesh have been concluded in a facilities will not be commercially fea- on PSC. How do you compare transparent manner. Around 50% of the sible unless 15-20tcf gas is discovered Bangladesh PSC and contract with country’s gas demand comes through in two offshore blocks. LNG is huge those of other countries? the PSCs while developing skills of the investment intensive. We must remem- local manpower. They have definitely a ber that the Bay of Bengal has some AAF: Model PSCs are prepared in dif- positive impact on Bangladesh. There potential for discovery of Petroleum. ferent countries taking into considera- is no justification in this situation to India and Myanmar are exploring for tion the geological conditions, existing demand by a certain group to scrap the Petroleum through engaging IOCs laws and resource potential of the PSCs. However, I don’t think it was under PSC in the region. Why country. Some general clauses are uni- right to hand over Jalalabad Gas Field Bangladesh should in the Bay of versal in all PSCs. However, detailed discovered by Scimitar and later owned Bengal? provisions may vary from country to

44 country depending on onshore or off- US company has been allowed to address potential social and environ- shore exploration, prospectively of export gas through the PSC. What is mental negative impacts of petroleum hydrocarbon and legal traditions. In your opinion about it? operations. my opinion, Bangladesh PSC has noth- AAF: It is an unreasonable claim. The EP: How do you evaluate ing harmful or detrimental to the inter- IOC has been selected through com- Petrobangla’s PSC negotiating and est of the country. But monitoring PSC petitive open bidding. Petrobangla will monitoring capacity? What is a huge challenge. Rate of return of be in total control if gas is discovered. Petrobangla should do to enhance the the company in consideration of dis- Petrobangla will retain exclusive con- capacity? counted cash flow must be carefully trol even if gas is to be exported in the examined. AAF: Petrobangla has learned a lot form of LNG. The people retains its through works. But for enhancing it, Our PSC has scope for renegotiation ownership over resources, IOCs will the government must take the initiative like many other PSCs if IOCs make never assume the ownership. for higher training for employees of huge profit. There is stabilization EP: The government is working on for- Petrobangla. Fresh and competent pro- clause in many PSCs. But our PSC does mulating a model PSC for onshore fessionals must be inducted and their not have that. The inclusion of the blocks. Some people are opposing it capacity must be built through contin- clause means no such law can be for- .What is your view? ued training to fill the gap as and when mulated which may cause additional necessary. Petrobangla’s capacity AAF: All matters should be looked financial obligation to the company should be enhanced for monitoring of into from economic point of view. Any after signing of contract. For example, enforcement of PSC. Negotiation and model PSC for onshore blocks should tax stabilization may provide that bargaining skills must also be accommodate for national company to applicable tax regime will not be enhanced. An efficient cell should be work as a partner. Even some blocks changed throughout the lifetime of the set up for legal and regulatory matters. may be given to BAPEX exclusive for contract. But in our PSC all changes in If necessary, at every stage assistance exploration without PSC. Before final- taxation and other matters will be of specialists can be taken. applicable to the company. izing the model PSC, Petroleum Act 1974 should be amended to create EP EP: A certain group is claiming that a stronger obligations for companies to

45 TECHNOLOGY Protecting A Supercomputer From Power Grid Disturbances

EP Desk

he ABB solution is installed at the that protects sensitive industrial and ously online, monitoring the power National Institute of Water and commercial loads from voltage distur- network and injecting an appropriate Atmospheric Research (NIWA) in bances. An ABB innovation, it provides power correction within 1-2 millisec- T fast, accurate voltage sag and surge onds of sensing a deviation. This is fast Wellington, New Zealand, where it protects the institute’s new climate correction as well as continuous volt- enough to protect even the most sensi- modeling supercomputer and the entire age regulation and load voltage com- tive environments like a supercomputer NIWA site from voltage fluctuations. pensation. or wafer lab from a disturbance. The new IBM supercomputer is the With a system efficiency approaching Storage batteries are also high mainte- most powerful climate research com- 99 percent, the PCS100 offers signifi- nance and have a short operating life of puter in the southern hemisphere. It cant energy savings compared to the between 5-10 years. ABB active volt- can perform 34 trillion calculations a conventional alternative of uninterrupt- age conditioners, on the other hand, second (being require virtually no upgraded to 65 tril- maintenance and lion/sec in 2011), have a much lower and is designed to ABB active total cost of owner- provide fast and ship. accurate weather voltage conditioners ABB AVCs are pro- and environmental Energy efficiency, tecting sensitive forecasting as well as have uniquely high commercial and early warnings of compact footprint industrial applica- severe hazards like levels of system tions in a broad flooding and storm range of applications surge. and efficient power worldwide, includ- efficiency and a ing semiconductor Protection of the factories and wafer $9.5 million super- protection are key footprint that is just labs, solar cell man- computer and its ufacturing facilities, invaluable data from factors in data a fraction of food and beverage damage or destruc- plants, and the tion is vital. The conventional center design process industries. computer is housed in a purpose-built One of the most clean room that is solutions recent installations is designed to with- at Weta Digital’s stand natural and award-winning manmade disasters like severe earth- supercomputer center in New Zealand, ible power supplies (UPS), the efficien- quakes, tsunamis and fire from within. where the AVC is not only protecting cy levels of which typically lie in the the entire facility but significantly mid-90s. This is especially important It is also protected from the equally reducing site energy consumption as for energy-intensive supercomputer devastating effects of power surges and well. Weta Digital is a world-leading facilities, which consume large voltage sags that have the potential to visual effects company whose recent amounts of electricity and require con- shut down the computing facility and successes include the film Avatar, stant cooling to dissipate the heat they damage the highly sensitive which won it the Academy Award for generate. equipment. This is provided by an ABB Best Visual Effects in 2010. PCS100 AVC active voltage condition- Whereas UPS batteries are a power er. storage device that release energy The PCS100 is an inverter-based system when needed, the PCS100 is continu- EP Desk; Source ABB

46