PM for further review of draft coal policy

R Akter

Prime Minister Sheikh Hasina has asked the energy division to further review the draft coal policy, especially of the possible impact of mining on the people and environment.
The energy officials at a meeting with the PM recommended open-pit mining of the north side of the Barapukuria coalfield in Dinajpur, but Hasina said that she would not make any hurried decision on open-pit mining, said sources present at the meeting.
Energy officials and prime minister’s adviser Tawfiq-e-Elahi Chowdhury, state minister for power and energy Enamul Haque, energy secretary Mohammad Mohsin and Petrobangla’s chairman Muqtadir Ali made presentations before Hasina on the latest developments in the energy sector at the Prime Minister’s Office.
Finance minister Abul Mal Abdul Muhith, prime minister’s economic affairs adviser Mashiur Rahman and state minister for land Mustafizur Rahman were also present at the meeting.
The energy officials told the PM that non-resident Bangladeshis as well as the latest draft of the coal policy prepared by the caretaker government had recommended open-pit mining at Barapukuria.
The PM, however, told the energy officials that they needed to ascertain the possible impact of open-pit mining before they could come to a decision on the matter.
“Nothing is to be done in a hurry,” she is learnt to have said.
Hasina asked the energy officials to further review the draft policy before placing it again before her.
She also wanted to know whether the people affected by underground mining at Barapukuria were getting due compensation and at what stage was the plan to establish a mining city in Dinajpur.
The energy officials said that they had taken up a taka 300 crore project to compensate the affected people, acquire land and create a mining city. The officials also briefed the PM about the gas supply situation.

Bill puts in Parliament on gas trading

ET Report

The government Tuesday put forward a bill in parliament for commercial handling of gas extracted from Bangladesh territory, including its offshore blocks. The put new law, if passed, would allow commercial bodies to construct domestic pipelines in designated areas for transmission, distribution, supply and storage of gas subjected to licensing by the Energy Regulatory Commission. They would also have authority over the pipelines, the proposed law says. Mohammad Enamul Haque, state minister for energy and power, proposed the Bangladesh Gas Bill 2009, which was sent to the parliamentary standing committee on energy. The committee was given six weeks for scrutiny of the bill before its passage. “There is no law on commercial transmission, distribution, marketing, supply and storage of gas in the country,” Haque told parliament in justification of the bill. The bill comes in the wake of contracts awarded by the government earlier this year to two foreign companies-US-based ConocoPhillips and Irish firm Tullow Oil-for oil, gas exploration in the Bay of Bengal. The contracts sparked controversy in the country as a left-leaning and very vocal action group, the National Committee on Protection of Gas, Oil, Electricity and Port, alleged that the deals would allow the foreign companies to export most of the gas out of the country. The government rejected the allegation saying there was no deal with the companies to export gas out of Bangladesh. According to the production sharing contract, the government would have first option to buy any extracted gas. The local market would have second option, and only if the domestic market cannot take the gas would the two foreign companies have the right to export it in the form of LNG (Liquefied Natural Gas). Much of the opposition to the PSC involved the fact that there was no facility in the domestic market for commercial handling of extracted gas. The newly proposed law could be a step towards establishing such facilities. The bill proposes allowing “any person or commercial entity to trade in gas, associated liquid hydrocarbons and derivatives by transmission, distribution and marketing subject to licensing”. The licensed bodies would also be able to store the hydrocarbon, the bill says. “We feel the necessity of a bill like this with a view to facilitating transmission and storage of locally extracted gas,” the minister said. “Besides, the bill will also help the government regulate sale of gas and establish rights on unmeasured gas resources.” The bill also proposes up to one year imprisonment or Tk 100,000 penalty for those who cheat consumers by selling CNG in violation of the government fixed gas pressure or by tampering with gauges. For “acts of sabotage” in the gas industry in any form, the bill also stipulates a maximum five years in jail and a Tk 1 million penalty for those involved destructive activities.

PM promises end to power crisis by 2011

Staff Correspondent
Prime Minister Sheikh Hasina on Wednesday last said the country would get rid of power crisis by 2011 as 1,487MW of power will be generated and added to the national grid by then.
“Bangladesh will be self-sufficient in power by 2021 and 100 percent people of the country will get electricity facility according to the government’s vision,” Hasina said while replying to lawmakers’ queries in parliament.
Hasina said as per her government’s current plan 667MW of additional power would be fed to the national grid by 2009 and another 820MW through picking power plants by 2011.She said the government has already floated tender for setting up of the picking power plants considering shortage of gas.
Processes are also underway to generate 900MW of power by 2012 and 1,895MW by 2014, she added.
Requests for proposal have been invited for setting up rental power plants in private sector in the first phase to generate 530MW of power by August 2010, she said, adding, “A process is underway to set up another rental power plant with the capacity of generating extra 970MW of power.”
Hasina also spoke about the feasibility study for setting up coal-based power plants in Chittagong, Khulna, Shariatpur and Meghnaghat by 2014 with a capacity of generating 2,000-2,600MW.
The government has taken up plans to set up wind power units and solar power plants to generate 280MW of power by 2013, she added.

AES to sell stock, wind-power stake to CIC

ET Desk
AES Corp., the US power producer with operations in 29 countries, agreed to sell stock and a 35 percent stake in its wind-power business to China Investment Corp. for $2.2 billion to raise cash for expansion.
A CIC unit will buy 125.5 million in new shares for $12.60 each, or $1.58 billion, Arlington, Virginia-based AES said in a statement. CIC will own about 15 percent of the power company. AES also signed a letter of intent to sell a 35 percent interest in its wind-power operations to CIC for $571 million.
The transactions will give AES greater financial flexibility and allow the company to move more quickly on project developments, Chief Executive Officer Paul Hanrahan said. AES, which will need approval from the Committee on Foreign Investment in the United States to close the stock sale, also will gain cash for acquisitions.
“This just gives us a war chest of dry powder to execute on mergers and acquisitions,” Hanrahan said in a telephone interview. Access to capital markets has been “choppy,” he added, and any investment AES makes would need to be funded with equity or cash flow.
AES rose 17 cents, or 1.2 percent, to $14.03 in New York Stock Exchange composite trading. The stock has jumped 70 percent this year.
The company sees a number of “attractively priced” acquisition prospects around the world, Hanrahan said, without identifying any specific targets. AES is looking to expand its generation capacity in Asia, where power demand is growing faster than in the U.S., he said.
“This will be a great way for us to do business in Asia,” Hanrahan said.
Earlier, AES posted a 28 percent gain in third- quarter profit after gains from its operations in Latin America and Asia made up for a demand slump in the U.S. The CIC transactions will reduce 2010 earnings per share from continuing operations by about 12 cents, the company said.
CIC, China’s sovereign wealth fund, said last month that it has $110 billion for overseas investments and will focus on buying into commodities companies and property to protect against accelerating inflation.
On Sept. 30, CIC said it bought an 11 percent stake in JSC KazMunaiGas Exploration Production, the London-traded unit of Kazakhstan’s state-run energy company, for about $939 million. A week earlier, it bought $1.9 billion of debt from PT Bumi Resources, Indonesia’s biggest coal producer, and paid $850 million for a 15 percent stake in Noble Group, a Hong Kong-based commodity supplier.
Overseas investments by Chinese companies surged 190 percent from a year earlier to $20.5 billion in the third quarter, according to the nation’s Commerce Ministry. AES gets more than 80 percent of its revenue from outside the U.S.
“The Chinese government has a lot of money to invest globally, and investing in AES is a great way for them to do this,” said Ryan McLean, an analyst at Morningstar Investment Services who rates AES shares at three stars out of five and owns none.
AES got 7.5 percent of its 2008 revenue from Asia, according to data compiled by Bloomberg. To the extent CIC’s investment gives AES more access to China, the world’s most populous nation, the transactions will be a positive for the power producer, McLean said.
AES said it expects regulatory approvals for the stake sale in the first half of next year.
The CIC transactions shouldn’t raise any concerns over national security, AES’s Hanrahan said. CIC’s investment will help fund purchases of wind turbines and solar panels in the U.S., he said. The company plans to use U.S. suppliers.
The Obama administration should bar a $1.5 billion Texas wind-farm project from receiving government stimulus funds because most of the turbines will be made in China, U.S. Senator Charles Schumer, a New York Democrat, said. A-Power Energy Generation Systems Ltd., developer of the Texas wind farm, said its project doesn’t involve stimulus funds.
Hanrahan said he doesn’t expect CIC’s involvement to affect AES’s access to stimulus funds. “Anyone can buy our equity, and this is just new capital coming into the company,” he said.
The company applied for stimulus money for a renewable- energy-storage project, Hanrahan said. AES has 1,300 megawatts of wind-power projects under development. One megawatt is enough power for about 800 average U.S. homes, according to an estimate by the Energy Department in Washington.
“A lot of the value that we have, I think, is in the development pipeline,” Hanrahan told investors on a conference call.
AES spokesman Meghan Dotter said the company was advised by Deutsche Bank AG on the stock sale and by Citigroup Inc. on the wind-power deal.
China’s Cnooc Ltd. bowed out of a 2005 battle with San Ramon, California-based Chevron Corp. to acquire Unocal Corp. after concluding U.S. lawmakers would scuttle any deals on national security concerns.

$1b WB grants for power projects on condition of quickening reforms

ET Repot
The World Bank (WB) has agreed to extend financial assistance for 10 new power projects in Bangladesh with strings attached. The multilateral lender, in response to a request from the government to provide a loan of about $1.0 billion for the power projects to be set up mainly in southern and northern parts of the country, wants the government to carry out the much-needed reforms in the state-owned enterprises (SOEs) and ensure transparency in public procurement, according to finance ministry sources.
The Bank has recently clarified its position to the finance ministry following a request made by the Economic Relations Division (ERD) to make available $947.27 million for setting up 10 power plants. The ERD has also sought an additional $23 million from the WB to finance the second phase of the Compact Fluorescent Lamps programme. An energy sector mission of the Bank is set to visit the country during the middle part of the current month to hold talks with the government policymakers and know the latter’s positions on SoE reforms and public procurement transparency.
“The WB wants the government to carry out comprehensive reforms in both financial and non-financial SOEs, restructure the public enterprises and ensure transparency in public procurement”, a top finance ministry official said. “The issues raised by the lending agency will come up for discussions during the scheduled meetings between the government and the WB energy mission,’ he added. He, however, said the policymakers would have to determine whether they want the WB lending for power sector or not.
“The public sector enterprises need reform and, at the same time, the country desperately needs power”, another high official in the ERD told. The government will have to opt for a few unpopular steps if it really wanted to build up power plants with WB assistance, he added. The WB’s Acting Country Director Robert L. Floyd, in a recent communication to the finance ministry, has identified four major areas where the government would have to bring about changes if the latter wanted to secure about $1.0 billion worth of assistance for the power sector, a source in the ERD said.
The Bank wants the government to create an enabling and commercial environment in the SoEs, strengthen the regulatory agency concerned, over time, with a view to ensuring accountability on the part of service providers, financial restructuring to attract investments and make the procurement processes, for both public and private projects, transparent, fair and predictable.
Currently, the country generates between 3700mw and 3800mw, leaving a shortfall of about 2000mw. Officials in the ERD said the proposed 10 power projects, to be built mostly in the country’s northern and southern regions, would generate about 2700mw of power.
Presently, the WB has extended loans to two projects. They are the Rural Electrification and Renewable Energy Development Project at a cost of $130 million and Siddirganj Peaking Power Project at a cost of $350 million. The Ministry of Industries officials said the government has to provide about Tk 10 billion to SOEs as subsidy every year.
There are 45 non-financial public enterprises in the country. Their net loss in 2007-2008 was Tk 56.37 billion. The total debt service liability up to June 2008 of the SoEs stood at Tk 48.69 billion, according to the Bangladesh Economic Review 2008. Outstanding bank loan against 30 SOEs up to June 2008 stood at Tk 170.16 billion, including the classified amount of Tk 15.22 billion.
The government has recently relaxed the public procurement regulations (PPR) to accommodate inexperienced contractors and suppliers to take up contracts valued at Tk. 20 million or less. The multilateral lenders, including the WB and the Asian Development Bank have expressed their serious reservation against the PPR amendments.

Minister signals green after visiting German open-pit coal mining

Special Correspondent

The government on Monday requested Germany to assist Bangladesh to extract coal by the open-pit mining method. The commerce minister, Faruk Khan, called upon the German ambassador, Holger Michael, to provide some expert advice as the government is still in doubt about the possible impact of open-pit mining on the environment.

Holger met Faruk at his secretariat office and discussed investment in the renewable energy sector and dredging to deepen the rivers and increase their navigability. ‘We are examining the pros and cons of open-pit mining in the country which is densely populated and suffers from scarcity of land,’ Faruk Khan reportedly told Holger. Holger said that the German government would provide all technological and investment support to Bangladesh through the GTZ, the German technical agency.

From the very beginning of Awamileague government, a move regarding this, has been underway to use the open-pit mining system in the country, and the UK-based company, Asia Energy, has demanded to get permission to use the open-pit mining system at Phulbari coal field in Dinajpur.

State minister for environment Hasan Mahmud visited Germany on September 6-9, reportedly to acquire some knowledge of open-pit mining and coal-based power plants. An official of the environment ministry, who had accompanied the minister, told reporters on Monday that the minister’s visit was arranged by the GTZ and they had visited many coal-mines and power plants including that of German company RWE.

The official said that after Hasan Mahmud’s visit, he submitted a report to the government saying that they had seen nothing wrong in open-pit mining in Germany and that it was successfully generating electricity from coal. ‘We have collected still pictures, videos and other materials in favour of open-pit mining. We have seen that Germany was doing a tremendous job in operating open-pit mines. The RWE is producing around 7,000MW of electricity from the coal from two mines. We have seen nothing wrong with open-pit mining, but some people in Bangladesh are against the system as they do not want the development of the country,’ said official of the environment ministry.

The energy ministry last month recommended that Prime Minister Sheikh Hasina allow open-pit mining at Barapukuria coal-field, and she told the ministry to carry out a detailed study and present the findings to her after which she will decide what to do.

Coal less costly power source, says Mohammad Enamul Haque

R.Akter

The State Minister for Power and Energy Mohammad Enamul Haque said recently in generation of electricity from diesel and furnace oil is very costly. He termed coal as the only option for generating electricity at low costs and emphasised the need for its immediate extraction. Power generation has reached a point where the economy is seriously hampered for shortage of electricity by about 1,500 megawatts.

He said, production falters in many industries where gas is either a fuel or a raw material or both. Gas supply to some sectors has to be suspended to meet demands of others. The crisis is such that some big investment proposals for gas-based industries have been deferred for at least three years. This happens due to short supply of natural gas that fuels about 80 percent of power generation. The existing recoverable gas reserve is estimated to last a few years.

Against this backdrop, coal can be the best option for power generation. Solar, wind and nuclear energies are the other options but those would take longer time to harness in bulk. The country has a proven reserve of 2,086 million tonnes of quality coal, which is equivalent to about 19 TCF of natural gas. According to experts, this coal is enough to generate 5,000mw of electricity for up to 90 years. The local coal is safer as it contains less sulphur and carbon than the imported coal. It will also save about US$500 million that Bangladesh spends annually to import this fossil fuel. Bangladesh should therefore go for quickest possible extraction of the coal resource in a cost effective and environment-friendly way. Coal is still the source of world’s 30 percent energy. But a day may come soon when use of coal might be discouraged as part of global action to reduce greenhouse gas emission.

Power generation, transmission top priority: state minister

ET Report

State minister for power, energy and mineral resources Mohammad Enamul Haque told the parliament recently that the government’s first priority is power generation and transmission before going for expansion of the electricity network across the country.

He said that there is gap of 1,500 megawatt (MW) of electricity between production and distribution of power across the country. Responding to a supplementary question from engineer Mosharraf Hossain, Enamul told the House that the government is considering installation of digital metres and introduction of pre-paid billing system to reduce system loss of the Power Development Board and Rural Electrification Board, which are 15 percent and two percent respectively.

In reply to a question from AL lawmaker Nurul Islam Sujan, Haque said the government has taken up an extensive programme for generation of electricity through using solar power sysytem. Responding to another question by AL MP AKM Rahmatullah, the state minister informed the House that against a total demand of 2,200 million cubic feet of natural gas, nearly 2,000 million cubic feet is being produced per day now, while use of gas is between 1,980 and 1,990 million cubic feet because of system loss in gas supply.

Haque, while replying to a question from AL MP Harunur Rashid, told the House that the government has active plans to develop gas fields and enhance production. In this regard, he added, the government has taken short, middle and long term plans. Under the short-term plan, he said 100 MCF gas would be added to the system by 2009, under the mid-term plan 208 MCF gas would be added by 2011 and under the long-term plan 300 to 500 MCF gas would be added to the transmission system by the year 2016.

Responding to a query from Jatiya Party lawmaker Salma Islam, Haque informed the House that the government has designated the year 2021 as the target for electrifying all the villages across the country. Answering a question from AL MP Illias Uddin Mollah, he said the government is planning to install new power plants under Public Private Partnership (PPP). There is a plan to set up 2000 MW coal-fired power plants, each having 500-MW capacity, in Khulna, Chittagong, Meghnaghat and Jajira (Mawa). The state minister hoped that the power plants under the PPP would go for production within 2014.

In response to a question from AL lawmaker Sheikh Afil Uddin, Enamul Haque said the outstanding power bills of PDB to the tune of Tk 28.14 crore remained unpaid by the municipalities while outstanding power bills of REB to 61 rural electrification societies under 185 municipalities are about Tk 1.91 crore till August this year. The state minister for power, replying to a question from Nasimul Alam Chowdhury, told the House that PDB disconnected 3,628 illegal power lines within a fortnight from July 1 to July 15 this year.

Govt to fund extra Tk 1,000 crore for gas exploration

Energy adviser Towfiq-e-Elahi Chowdhury on Sunday said government had decided to provide Tk 1,000 crore, in addition to the budgetary allocation, for gas exploration.
Measures have been taken for exploring additional 200-300mmcft gas by the next two years, the adviser said while inaugurating the Onshore Gas Compression Project at Sangu Gas Plant at Fouzderhat in Chittagong as chief guest.
Chittagong city mayor ABM Mohiuddin Chowdhury attended the inaugural function as special guest which was also addressed by Petro-Bangla chairman Major (retd) M Muktadir Ali and Cairn Energy acting managing director Ian Wright.
Two compressors were installed under the project to extend life of the Sangu gas field and ensure uninterrupted gas supply to Chittagong till December 2011 by increasing the pressure in main pipeline of Bakharabad Gas Systems Limited.
The adviser said the government was mulling to import liquid natural gas to ease crisis as a short-term measure.
‘We are also planning to set up power plants using alternative energy like coal and furnace oil for generating additional 1,500MW of power,’ he said.
The additional amount of Tk 1,000 will come from the recently hiked gas tariff, he said, adding that funds would also be collected from the stock market in this regard.

Private oil refining policy by Sept | BPC monopoly to remain intact

A Z M Anas

The government has started drafting a policy to allow private investors to refine oil and then sell in the domestic market on a limited scale, rolling back an earlier restrictive regulation, energy officials said Friday.If approved, the first Private Oil Refinery Establishment Policy-2009 will empower private refiners to export petroleum products, but restrict wider sales within the country, thereby keeping the marketing monopoly of the state-controlled Bangladesh Petroleum Corporation (BPC).The Bangladesh Petroleum Act 1974 bars private companies from “selling, distributing, transporting and otherwise disposing of petroleum and its refined products.”"Basically, the BPC will have an upper hand,” energy secretary Mohammad Mohsin said.”The new policy will have, however, flexibility. If needed, the government can buy products from private oil refiners,” he said.The top energy official said the policy is expected to boost investment in oil refinery, but will not give private investors a larger edge over the state agency in influencing the domestic petroleum market.The Chittagong-based Eastern Refinery Limited (ERL) is now the country’s only refinery, refining less than the country’s yearly demand for petro products.The move came as the Energy Division received at least two proposals from Bangladeshi business groups to set up oil refineries.Local conglomerate Bashundhara Group is planning to establish the country’s largest oil refinery in Chittagong investing as much as US$ 700 million with an annual capacity of 2.5 million tonnes of crude oil.The embattled business group’s proposed refinery would be built on 112 acres of land it acquired on the south bank of the river Karnaphuli and will dwarf investments by any Bangladeshi private investor.East Coast Group, another business group, has also unveiled a plan to invest $110 million for a refinery in Chittagong to produce octane.Energy officials said the private refining policy is crucial as many Gulf investors have backed off mainly in absence of such a policy.They expect the policy to be finalised sometime in September, although the first draft has been reviewed.Energy experts say the existing Petroleum Act is highly restrictive and does not provide room for participation of any private investor.Mr Mohsin said that the policy would make it mandatory for private refiners-local and foreign-to maintain quality of international standards and environmental safeguards.”But if the government needs refined oil, it can purchase from the private refiners,” he added.He said the Energy Division has already reviewed the first draft of the policy and work is now going on to modify the version.The policy will allow private refiners to import crude oil and refine it, but will be barred from selling the petroleum products widely in the local market.Energy experts have chided the draft policy’s major provision, saying it would unduly protect the interest of the state agency, which lacks capacity. It will encourage more imports, they said.Currently, ERL can refine 1.2 million tonnes of crude a year, about 30 per cent of the country’s total demand. BPC buys the rest of the amount mostly from the Gulf nations.Several Middle East refiners had earlier expressed their willingness to set up the capital intensive plants in Bangladesh, but they stepped back after getting no positive response from the government.