N E DO- I C-00ER38 Feasibility Study on Energy Conservation and Modernization of Chhatak Cement Company Ltd. March, 2 0 0 1 New Energy and Industrial Technology Development Organization (NEDO) Entrusted to Japan Consulting Institute 020005072-2 Feasibility Study on Energy Conservation and Modernization of Chhatak Cement Company Ltd. Japan Consulting Institute March, 2001 Page: 160 Study purpose; The objective is to conduct a feasibility study on energy conservation and modernization of Chhatak Cement Plant, and to study the possibility of the future Clean Development Mechanism Project. This Project is expected to contribute to energy saving in industries and the abatement of the greenhouse gas emission in Bangladesh through the introduction of Japanese energy-saving technology. In addition, the Project is intended to contribute to industrial modernization required for sustaining the economic development in Bangladesh with the future implementation of CDM Project. PREFACE This report concerns the results of the Feasibility Study on Energy Conservation and Modernization of Chhatak Cement Plant in the People ’s Republic of Bangladesh. The Study was organized by NEDO (New Energy and Industrial Technology Development Organization affiliated to the Ministry of Economy, Trade and Industry of Japan) in conjunction with the “Basic Study for Promotion of Joint Implementation, etc. in 200(7’, which was entrusted by NEDO to Japan Consulting Institute (JCI). Japan intends to achieve Greenhouse Gas reductions to help the prevention of global warming through positive use of the Joint Implementation or Clean Development Mechanism (CDM) adopted under the Kyoto Protocol, a flexible mechanism within the United Nations Framework Convention on Climate Change. The study was conducted to evaluate the project as a possible CDM Project. The Project is expected to contribute to energy saving in the plant and the abatement of Greenhouse Gas emissions through the introduction of Japanese energy saving technology. In addition, the Project is intended to contribute to industrial modernization required to sustain economic development with the future CDM project. JCI would like to express sincere appreciation for the kind support from the Ministry of Industries and the Ministry of Environment and Forest in Bangladesh and for practical cooperation extended by the Bangladesh Chemical Industries Corporation and Chhatak Cement Co. Ltd. March,2001 Japan Consulting Institute CONTENTS Page OUTLINE................. 1 Chapter 1. Fundamentals on the Project 1.1. General Situation of the People ’s Republic of Bangladesh ..............................1-1 1.1.1 Political, Economic and Social Situation ........................................................1-1 1.1.2 Energy Conditions .............................................................................................. 1-7 1.1.3 Needs for CDM Project ......................................................................................1-14 1.2. The Importance of Energy Conservation Technology ..................................... 1-16 1.3. Significance, Needs, Effects of the Project and Dissemination of Results over Other Industries ............................................................................................. 1-17 Chapter 2 Project Materialization 2.1. The Project ............................................................................................................... 2-1 2.1.1 General................................................................................................................. 2-1 2.1.2 Details of the Project .......................................................................................... 2-3 2.1.3 Greenhouse Gases to be targeted .....................................................................2-4 2.2. Outline of Chhatak Cement Co. Ltd. (CCCL)...................................................2-5 2.2.1 Interest and Intention at Execution Site........................................................... 2-5 2.2.2 Conditions of Relevant Equipment (Outline, Specifications, Operation, etc.)....................................................... 2-6 2.2.3 Project Execution Ability of the Site............................................................ 2-11 (1) Technical capacity...............................................................................................2-11 (2) Management system...........................................................................................2-11 (3) Management foundation and management policy.........................................2-13 (4) Capability of sharing necessary fund ................................................................2-13 (5) Capability for supply of manpower ..................................................................2-13 (6) Implementation system.......................................................................................2-13 2.2.4 Project Details and Equipment after Modernization ..................................... 2-15 2.2.5 Assignment of Job, Funding, Procurement of Equipment and Other Services, which are required for Project Implementation, to be shared by both Parties .................................................................................................. 2-18 2.2.6 Prerequisite for Implementation of the Project and Points at Issue, etc.* * 2-23 2.2.7 Project Implementation Schedule....................................................................2-25 2.3. Realization of Financial Plan ............................................................................... 2-28 2.3.1 Financial Plan for Project Implementation (Required Fund, Raising Fund, etc.)................................................................2-28 2.3.2 Prospect for raising Fund ............................................................................... 2-29 2.4. Conditions relating to CDM................................................................................ 2-30 2.4.1 Issues to be settled with Bangladesh Government for Realization of CDM regarding Conditions and Job Assignment for Project Implementation based on the Practical Situation at the Site .............................................................. 2-30 2.4.2 The Possibility of Agreement on CDM of the Project on the Side of Bangladesh ............................................................................................2-31 Chapter 3 Effects of the Project 3.1. Energy Conservation Effects............................................................................... 3-1 3.1.1 Technical Ground for Producing Energy Conservation Effects..................3-1 3.1.2 Baseline for estimating Energy Conservation Effects.................................3-3 3.1.3 Actual Volume, Production Period and Accumulated Volume of Energy-saving Effects................................................................................... 3-6 3.1.4 Practical Method to confirm Energy Conservation Effects......................... 3-8 3.2. Reduction Effects of Greenhouse Gas..................................................................3-9 3.2.1 Technical Ground for producing Reduction Effects of Greenhouse Gas.................................................................................................. 3-9 3.2.2 Baseline for estimating Reduction Effects of Greenhouse Gas..................3-11 3.2.3 Actual Volume, Production Period and Accumulated Volume of Reduction Effects of Greenhouse Gas....................................................... 3-12 3.2.4 Practical Method to confirm Reduction Effects of Greenhouse Gas (Monitoring Method) ........................................................................................3-13 3.3 Effects on Productivity ............................................................................................3-16 Chapter 4 Financial Evaluation 4.1. Fund Efficiency of Investment ............................................................................. 4-1 4.2. Cost Reduction Effects in this Project .................................................................4-10 4.2.1 Energy-saving Effects........................................................................................4-10 4.2.2 Effects of Greenhouse Gas Reduction .............................................................4-11 Chapter 5. Extension of Technology 5.1. Possibility of Spread of the Technology introduced in the Project ................5-1 5.2. Benefits of Extending Technology ....................................................................... 5-2 5.2.1 Energy-saving Effects.........................................................................................5-2 5.2.2 Effect due to Greenhouse Gas Reduction ........................................................5-2 Chapter 6 Influences to Other Aspects 6.1. Influence to Environmental Aspects..................................................................... 6-1 6.2. Influence to Economic and Social Aspects..........................................................6-2 CONCLUSION..................................................................................................................C-l ANNEX-1: Financial Analysis ANNEX-2: Field Survey Report ANNEX-3: Reference Data OUTLINE OUTLINE The People ’s Republic of Bangladesh (hereinafter called as Bangladesh) is located in the northeastern part of the South Asian subcontinent with an area of 147,570 sq. km and a population of approximately 130 million. The annual population growth rate is nearly