FORTNIGHTLY MAGAZINE, VOL 10, ISSUE 6, SEPTEMBER 1-15

Editor Mollah M Amzad Hossain Advisory Editor Anwarul Islam Tarek Saiful Amin International Editor Dr. Nafis Ahmed Contributing Editors Saleque Sufi Dr. A Rahman Islam Sharif Khondker Rezaur Rahman Managing Editor Afroza Akther Pervin Reporters Jannatul Ferdushy Nahid Anjum Siddiqui Design & Graphics Md. Monirul Islam Photography Bulbul Ahmed Farzana Karim Chowdhury Magazine Administrator AKM Shamsul Hoque Production Mufazzal Hossain Joy Computer Graphics Md. Uzzal Hossain Technical Support Laser Scan/Colour Touch Circulation Assistant Khokan Chandra Das Editorial, News and Commercial 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: ep@dhaka.net energypower@gmail.com 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

Chittagong, which is considered as the lifeline of Bangladesh economy, has been facing acute energy crisis for a long time. Operations of the countrys top seaport and numerous heavy industries are being hampered. Gas supply is almost half of the citys demand. Electricity supply falls short of demand as well. Both power and gas demand are increasing in the busy commercial city where new gas connections remained suspended for the last three years. There is hardly any sign that the situation would improve in the foreseeable period of time, at least during the remaining period of the present government with only a little more than one year left. However, government officials are still confident that it would be possible to mitigate the energy crisis of Chittagong through importing LNG, an initiative taken to implement by this year. They now hope to import LNG from January 2014. Experts stressed the need for a coordinated long-term initiative to solve the crisis ensuring that the bureaucracy would not cause any delay in implementation of the projects. They think it may be possible in the long run to solve the power crisis through importing coal, but there is no alternative to increased gas supply for maintaining industrial production.

Chairman 45 Khalilur Rahman, Industries KDS Group of

of & President of Chittagong Metropolitan Chamber of Commerce & Industry realized that the present energy crisis in the port city of Chittagong cant be resolved only through local sources. He expressed his valuable views about Ctg energy crisis in an interview with EP.

According to an analysis, it is possible to quickly solve the gas crisis in Chittagong through bringing gas from the middle part of the country. Bakhrabad-Chittagong gas pipeline can at best transmit 250 MMCFD of gas, which can be supplied entirely to Chittagong if the demand of Comilla and Noakhali can be met with local supplies. But there is a concern whether Chittagong would again have to face gas deficit if gas has to be supplied through the new pipeline from Bakhrabad to Siddhirganj. GTCL managing director Aminur Rahman said the gas production is increasing with the growing demand while pipeline capacity would be increased after installation of two compressor stations by 2013.

COVER

Green Page

The Energy & Power had introduced Green Page marking its stepping 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
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WORLD WATCH Latest Development in World SNAPSHOT Latest Development COVER Chittagong Energy Crisis not to Be Solved Soon COVER PLUS Kutubdia Gas Field: EMRD Rejects Santos Request COVER ARTICLE

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How Long Ctg to Suffer From Energy Crisis SPECIAL ARTICLE Maintaining Electricity Price within Bearable Limits ARTICLE Why Cyber Security is Critical for Smart Grid? REGION Coalgate Rocks Delhi SPECIAL REPORT Rampal Power Project Uncertain REPORT Obama Spars With Romney on Energy TAPI Train Moving Smoothly Greater Probability From Risk Potential 800,000 Tonnes Furnace Oil For Rental Plants India's Grid Chief Shifts Blame for Blackouts COLUMN Coal Deals Strike Blows to Manmohan Singh GREEN PAGE Focus More on Renewable Energy: Analysts $155m Additional Fund From WB Likely Generation of Renewable Energy in Khulna Stressed Chicken's Litter a Cheap Source of Power: IFC INTERVIEW Khalilur Rahman, Chairman of KDS Group of Industries & President of Chittagong Metropolitan Chamber of Commerce & Industry (CMCCI).

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W O R L D WAT C H

Geneva Trader Takes Stake in Russian Coal Giant

Geneva energy trader Gunvor bought a 30 percent interest in one of Russia's leading coal producers which plans to boost production five-fold. The deal, described by Gunvor as its "first foray into Russian coal mining", gives it a stake in Kolmar, a coal mining and processing company with reserves of more than one million tonnes of high-quality coking coal. The price of the transaction was not disclosed. Gunvor's interest is through a 50-50 joint venture with Luxembourg-based investment company Volga Resources for a 60 percent stake in Kolmar, it added. "Kolmar is focused on the development of a long-term strategy aimed at bringing the annual production volume from current two million tonnes to 10 million tonnes per annum," said Kolmar chief executive Andrey Churin. British energy group BP sai that it had agreed to sell its Carson refinery in California to US peer Tesoro Corporation for $2.5 billion (2.02 billion euros). The sale is part of BP's previously-announced plans to sell $38 billion of assets by the end of 2013 to help pay the clean-up bill and compensation costs from the devastating 2010 US Gulf of Mexico oil spill. The troubled energy major has agreed to sell $26.5 billion of assets since the start of 2010, including the latest deal. "BP announced today it has reached agreement to sell its Carson, California refinery and related logistics and marketing assets in the region to Tesoro Corporation for $2.5 billion in cash," the group said in a statement. BP said that the Carson sale would allow it to focus its investment and operations on the British group's three refineries in the northern United States.

U.S. Lauds Prospects for TAPI Gas Pipeline

Natural gas needs from India are driving the momentum behind a multilateral natural gas pipeline from Turkmenistan, a U.S. diplomat said. The government of Turkmenistan signed agreements in May to sell natural gas to its Asian partners through the 1,043mile Turkmenistan-Afghanistan-Pakistan-India pipeline. U.S. Assistant Secretary of State for South and Central Asia Robert Blake, on a tour of Central Asia, said the project was an important regional energy bridge. "There is now a real market in India and they can afford to pay for the gas," he was quoted by the Press Trust of India as saying. "Turkmenistan has sufficient gas to fuel this pipeline." Turkmen President Gurbanguly Berdimuhamedov said the planned natural gas pipeline would ensure the safe delivery of more than 1 trillion cubic feet of Turkmen natural gas to downstream consumers. The pipeline has financial backing from the Asian Development Bank. Prospects are complicated, however, by security concerns in war-torn Afghanistan. Blake acknowledged were there "a lot of risks to participating in such a pipeline." TAPI is seen as an alternative to a similar network planned by Iran.

BP Sells US Refinery For $2.5b to Tesoro

CA-China Gas Pipeline

Construction of the Southern Line of the Central Asia-China Gas Pipeline, an energy co-operation project between China and Kazakhstan, has started in Qyzylorda, Kazakhstan. The project includes the engineering, procurement and construction (EPC) of a 571.6 km pipeline with a diameter of 1,067 mm. The EPC contract was awarded to CNPC affiliated China Petroleum Pipeline Bureau (CPC). Along the coast of the Aral Sea, the pipeline traverses the Gobi Desert, sand dunes and saline and alkaline lands. CPC has completed preparation works within one years time, including campsite construction, CRC crew and equipment relocation, and testing of full automatic welding equipment, etc. The pipeline is listed in Kazakhstans ten priority projects. Once operational, it will deliver natural gas to dozens of cities and hundreds of villages to help optimize the countrys energy structure, and improve the living standard for people in South Kazakhstan.

Gazprom, Four Turkish Companies Ink Gas Imports Deal

The Russian energy giant Gazprom and four Turkish companies have signed an agreement to supply Russian gas to Turkey via the Western Route, the Zaman newspaper reported quoting a source in the Turkish Energy Market Regulatory Authority (EPDK). The document was signed by Akfel Gaz, BosphorusGaz, Kibar Holding and İndex Holding. The previous gas supply agreement between Gazprom and Turkish Botas expires in September 2012.

The pipeline, connecting central Asia & China

SNAPSHOT
Standard Chartered Bank and Midland Power Company Ltd have signed a financing agreement to facilitate implementation of 51 MW gas fired power plant at Ashuganj. Standard Chartered will provide a Structured Trade Finance facility for US$ 32 million for setting up this 51 MW natural gas based Independent Power Plant (IPP). Standard Chartered Bank is the Sole Arranger and Lender of this landmark facility and is proud to be associated with Midland Power for this prestigious transaction that will assist in adding new power generation capacity in the country. The Bank will provide a USD 21 million term facility for financing the capital expenditure of the project. Midland Power is a joint venture company of two large local corporate of Bangladesh - Viyellatex Group and Youth Group. These two entities came together to implement the project under the IPP (Independent Power Producer) policy of the Government of Bangladesh, where Bangladesh Power Development B o a r d (BPDB) is the power purchaser under the relevant P o w e r Purchase Agreement (PPA).
Standard Chartered Bank & Midland Power Company Ltd have signed a financing agreement

Stan Chart to Finance $32M to Midland Power

Power Division is set to ink the final deal with Energy Holdings International INC and its subsidiary EHII MENA DMCC, Dubai, UAE next month. According to the power division, the power development board (PDB) in June inked a memorandum of understanding (MoU) with the UAE Company to build two 225 megawatts (mw) each capacity combined cycle power plants at Bibiyana and Fenchuganj. If they could successfully complete the task of installing 225 MW Bibiyana power plants in next six months then they will get the opportunity o install Fenchuganj 225 MW power plant, A senior official of the division said. According to the MoU the Energy Holding will install the combined cycle power plant at a cost of 3.85 cent per unit. The plant would be installing at BOO basis.

Deal on Bibiyana IV Soon

Diploma Engrs Asked to Ensure Power Supply

S t a t e Minister for Power and Energy Mohammad Enamul Haque asked the diploma engineers to work hard to provide better electricity supply to the people. Addressing a pre-iftar discussion at the Institute of Diploma Engineers Bangladesh auditorium, he said the government is committed to ensure the best electricity supply to people. DPDC Diploma Engineers Association hosted the program. Diploma engineers can play an important role in reaching electricity to the con-sumers, he added. T h e government is planning to hire 250 locomotives and tank wagons of different size from India to ensure fuel supply to power plants. Power Division has forwarded a proposal to the Ministry of Finance for approval to procure the bulk amount of railway equipments, the official said. The Power Division has already formed a high-powered committee comprising officials from power and railway divisions. Besides, the Power Division on March, 2012 approved a proposal to hire some railway equipments from India. The division submitted a requirement for around 190,000 tonnes of diesel and furnace oil to run its nearly three dozens of fuel-oil based power plants.
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The multi-national plant Karnaphuli Fertilizer Company (KAFCO) went into production with the resumption of gas supply by the Karnaphuli Gas Distribution Company limited (KGDCL). The KAFCO went into annual overhauling on March 16. With the annual overhauling of KAFCO, more than 50 MMCFD saved gas had been supplied to Power Development Board for power generation. KAFCO, a multinational plant was set up in 1992 with the production capacity of 5.61 lakh tonnes and is currently producing more than 5 lakh tonnes of fertilizer annually. Bangladesh government is supposed to purchase KAFCO fertilizer at international rates.

KAFCO Resumes Production

Govt. to Hire Locomotives, Tank Wagons from India

Karnaphuli Gas Distribution Company Ltd

SNAPSHOT

Russia May Provide 85pc Fund for Nuke Power Plant

Russia is willing to provide a credit up to 85 percent of the estimated cost of Tk 12,000-15,000 crore needed for setting up of the firstever nuclear power plant in Bangladesh. It will initially provide around Tk 4,000 crore (US$500 million) for conducting necessary studies and preparing the design for the 1,000 MW plant. The agreement was reached during a two-day meeting between Dhaka and Moscow recently in the Russian capital, officials at the Science and Technology Ministry said. A formal agreement is expected to be signed by the end of this year. Bangladesh offered an interest of three percent on the loan. State Minister for Science and Technology Ministry Yeafesh Osman, who was in the delegation, said Russia would submit a proposal on the loan agreement within a month. Russian officials assured Bangladesh that Moscow would consider Dhaka's proposal for a reduced interest rate, he added. He said the Russian delegation asked for completing in two years all the 60 studies required for setting up the plant, but Bangladesh would try to do so before that. Bangladesh has already conducted 12 studies, Russia will conduct 22 studies and then Bangladesh will do the remaining 26. A conference on nuclear power plant will be held in Dhaka at the end of this year. Experts from home and abroad, including those from the International Energy Agency, and different stakeholders would participate. The stateo w n e d Bangladesh Petroleum Corporation (BPC) incurs a loss of more than Tk 100 crore in the name of system losses in handling imported fuel oils. As the countrys lone importer and distributor of petroleum products, BPC incurs the loss due to rampant pilferage and corruption at terminals and depots. A nexus of BPC employees and dishonest traders is allegedly involved in a practice of manipulation to pilfer huge quantities of costly imported fuels at the time of handling and distribution.

Bapex's Output Doubled in A Year

The output of natural gas by the country's lone oil and gas exploration company -- Bapex -- has more than doubled in the past one year, which is considered one major achievement in ensuring future energy security of Bangladesh. The Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) is now supplying around 82 million cubic feet per day (MMCFD) of gas to the national grid. The supply was only 38 MMCFD a year ago. "The stepped-up exploration activities and funding assistance by the government are contributing to enhance our capacity," said Bapex Managing Director Mortuza Ahmad Faruque. Apart from drilling new wells and working over the old wells, the Bapex brought two new gas-fields on-line last year, resulting in augmentation of its overall production. He said the company is also developing a group of new and energetic professionals to carry out the country's future gas exploration activities. The Bapex is producing around 82 mmcfd of gas from 10 producing wells in five gas-fields. Semutang and Sundalpur, two new gas-fields of the Bapex, are now supplying around 11 mmcfd and 10 mmcfd of gas respectively, Faruque said.

Sundalpur gas field

HC Questions Rampal Power Plant

BPC Incurs Loss of Tk 100 Crore in the Name of System Loss

The High Court (HC) asked the government to explain in two weeks why filling up of Moidara river in Rampal upazila of Bagerhat near the Sundarbans for setting up a coal-fired power plant should not be declared illegal. The court came up with the rule following a writ petition filed by Save the Sundarbans, an environmentalist organization, saying that the government authorities concerned have been filing earth in the Moidara river to set up the power plant violating the environment laws. Earlier on March 22, the HC in response to another writ petition issued a rule upon the government to explain why it should not be directed not to set up the proposed 1,320 Megawatt coal-fired power plant at Sapmari-Katakhali Mouja of Rampal. High Court
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COVER

Mollah Amzad Hossain

The energy crisis is not unique to Chittagong as it is applicable to the country as a whole. But what is different for Chittagong is that the problem there has not improved when compared against some improvements in other parts of the country...

hittagong city is home to the major seaport of Bangladesh. It also hosts some, heavy industries, power plants and other commercial establishments. However, it is suffering from an acute energy crisis that is forcing the economic activities to run at less than their true potential. The city is getting little more than half of its gas demand of 400 MMCFD (new gas connections have remained suspended for the last three years, suppressing actual demand) and 75-80 MW short of its electricity demand for 675-700 MW. The Korean EPZ located in Chittagong wants 30 MMCFD of gas while new demands for industrial and commercial connections are piling up when only half the existing demand can be met at present, according to Jamil Ahmed Alim, Managing Director of Karnafuli Gas Distribution Company Limited (KGDCL). The extent of the short supply of energy has been visible during the holy month of Ramadan when the city had to suffer a lot although other parts of the country experienced hardly any load shedding or shortage of gas supply. Thanks to the contingency measures the government had taken to jack up gas production to its peak at 2240 MMCFD and maximum power generation of 6,350 MW. However, Chittagong was deprived of the benefits. The energy crisis is not unique to Chittagong as it is applicable to the country as a whole. But what is different for Chittagong is that the problem there has not improved when compared against some improvements in other parts of the country. There is hardly any sign that the situation would improve in the foreseeable future, at least during the remaining period of the present government, with only a little more than one year. Its not that the government does not have the plans to overcome

the energy problems be it gas supply or power supply -- of the city. The improvements in the other parts of the country during about last four years indicate that the port city has been left out of the development as the plans remaining only on paper. And the prospect for improvement at least in next one year period remains mostly unclear, if not impossible. I think, the situation is due to lack of appropriate initiatives by the government, said Murshed Murad Ibrahim, president of Chittagong Chamber of Commerce and Industry (CCCI). There has not been any mentionable progress in this regard during last 44 months of the government. I dont think the government can do something mentionable in next 16 months only. He said no investment took place in Chittagong during the last three years due to the energy crisis as the existing factories could not maintain production at desired level due to supply shortage of gas. He expressed concern that many entrepreneurs are now about to become bankrupts as they did not get gas connections even after setting up of all machinery at their factories. Official figures show that the energy crisis in the port city is mainly because of shortage in gas supply that restricts power generation to that short of the demand. Problems in furnace-oilbased plants with 355 MW capacity and lack of adequate water flow for hydro-power plants of 230 MW capacity made it difficult for the power plants

to generate half of the total installed capacity of 1212 MW, including gasbased plants of 627 MW. Chittagong has to depend on national grid to get required power supply. KGDCL Managing Director, Jamil Ahmed Alim sees very poor prospect for getting more gas than what Chittagong gets now from the Bakhrabad-Chittagong pipeline. There is no information yet on any new gas supply to the Chittagong gas network. He does not have any solution to the problem for now other than waiting for LNG import or discovery and extraction of gas from the sea bed. Senior officials of the government were still confident that it would be possible to mitigate the energy crisis of Chittagong through imported LNG, an initiative the government had taken to implement by this year. The initiative has not progressed much. A senior official of Energy Ministry claimed that they would be able to import LNG by January 2014. The work-in-progress, however, does not support the claim. A joint-venture of Astra Oil Co. Ltd. Singapore and Hiranadini, India has won the tender for construction of LNG terminal and Re-gasification system. They would be awarded the contract subject to successful negotiation scheduled this month. They need 15 months to implement the project. Meanwhile, land acquisition for the installation of 91KM pipeline from Moheshkhali to Chittagong could not be completed yet. GTCL managing director Aminur Rahman, however, said they have the skill to complete the project within the stipulated timeframe. The government has signed a memorandum of understanding with Qatar to get LNG, but there has been no progress in this regard yet. A Petrobangla official said that they would fix the LNG price considering Japan crude cocktail. It would cost US$ 16 per MMBTU (about a thousand cubic feet) plus LNG terminal charge.
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He said the average price would not be more than US$ 7 per thousand cubic feet if we blend the price of LNG with Petrobangla gas price (US$ 1.5 per thousand cubic feet). I think the local market could afford the price. Special assistant to the past caretaker government and Petroleum Engineering Professor of BUET Dr M. Tamim, however, apprehended that the price of LNG would be far more than what the Petrobangla officials estimate. He does not think that it would be available below US$ 18-20 considering the experience of India and Japan. The local market is not prepared yet to consume LNG. It would not bring any result in the short term, said BUET Professor Dr Ijaz Hossain, an energy and environment expert. Supply of energy is the main concern, not the price, said CCCI president Murshed. The consumers of Chittagong would not protest to buy energy at higher price if the government can supply it. The experts, however, stressed on optimum utilization of local sources of energy to come out of the crisis, instead of depending on LNG import. They suggested reducing gas supply to Bakhrabad Gas Systems Limited areas from the Bakhrabad-Chittagong pipeline, and increasing supply from Onshore Chittagong and offshore. There has been an initiative to increase gas supply to the pipeline while Bapex is working on drilling a development well in Semutang to add 20 MMCFD gas for Chittagong. Meantime, 130 MMCFD of gas could be added to the surrounding areas of Bakhrabad distribution areas from Sreekail, Salda river, Sundalpur and Begumganj, said Bapex managing director Mortuza Ahmad Faruque. The prospect, if any, for oil and gas exploration in the Bay of Bengal is not an immediate solution to the crisis in Chittagong as it would take a long time, perhaps 5-6 years to develop. US company ConocoPhillips has just been contracted to explore the deep-offshore blocks 10 & 11. Sangu recently started

supplying gas from Sangu 11 though the amount is not much. However, they have a plan to explore Magnama and Hatia afresh. Considering exploration in the sea is expensive and it is not commercially feasible to drill a single well, Santos proposed to develop Kutubdia gas field in the block no 16. But the Energy Ministry turned down the proposal, apparently closing one of

the possible options to mitigate the Chittagong crisis. On the other hand, Chinese SinopecShengli was holding discussion with authorities to work jointly with Bapex to work on four exploratory wells in Patia, Joldi, Sita pahar and Kachhalong of Chittagong. Bapex board of directors has not yet approved the proposal. An 0

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official of the Energy Ministry informed that the government has taken a go slow strategy in this regard considering the bitter experience of Bapex-Niko joint venture. If undertaken it would have been possible to complete the works here in only two years and supply the gas to the gas-starved city easily. According to an analysis, it is possible

to quickly solve the gas crisis in Chittagong through bringing gas from the middle part of the country. Bakhrabad-Chittagong gas pipeline can at best transmit 250 MMCFD of gas, which can be supplied entirely to Chittagong if the demand of Comilla and Noakhali can be met with local supplies. But there is a concern whether Chittagong would again have

to face gas deficit if gas has to be supplied through the new pipeline from Bakhrabad to Siddhirganj. GTCL managing director Aminur Rahman said the gas production is increasing with the growing demand while pipeline capacity would be increased after installation of two compressor stations by 2013. So, it is pointless to think about the concern of fresh gas crisis in Chittagong, he said. Meanwhile, GTCL has had a primary route survey few years back to install an alternative pipeline in the Bakhrabad-Chittagong line. But the initiative has been stalled due to giving importance on LNG import. GTCL does not have that plan for now, he added. Whether there is any alternative option to supply most part of the power supply from elsewhere, PGCB director (technical) Tapan Kumar Roy said technically it is not possible as it would create a new problem of low voltage, forcing a shutdown of the power plants. The BPDB has signed a MoU with a Chinese organization to set up 1320 MW coal-based power plant in Chittagong, but the process for implementation has not been started yet. It might take 7-8 years to get supplies from the station. BPDB also signed a contract with Orion Group to install a 382 MW coal-based plant in the city, which is expected to be commissioned in next 40-44 months. The sector experts think that it may be possible in the long run to solve the power crisis through imported coal, but there is no alternative to gas supply to maintain fertilizer production, other industrial production and setting up of new industrial units. It seems to me that the elected representatives from Chittagong have failed to play appropriate role in solving the crisis, said CCCI president Murshed. The sector experts stressed the need for a coordinated long term initiative to solve the crisis by ensuring that the bureaucracy is not the cause for any delay in implementation of the initiative. EP
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EP

COVER ARTICLE

How Long Ctg to Suffer From Energy Crisis

Engr. Khondkar Abdus Saleque

hittagong is the gateway to Bangladesh. It is the second largest city after Dhaka and the largest industrial city of Bangladesh. It handles majority of the export-import activities. The green hills and the blue ocean make it picturesque and eye pleasing to the visitors. But for the last several years, it is suffering from chronic energy crunch, specially natural gas. Two large fertilizer manufacturing plants -- government owned CUFL and multinational KAFCO -- were shut down for several months for lack of gas supply. As soon as they brought into operation recently, load shedding started crippling businesses, commerce and civic life. Two major power generation units at Raujan were to be shut down immediately. Other power plants cannot also be run to their full capacity. CNG fuelling stations, industries, domestic and commercial users were also suffering from poor quality gas supply. New gas connections to industries have been suspended for the past several years. A very potential Korean EPZ situated at Southern bank of Karnafuli River remains almost barren for years. For the last few years, all other connections have also been put on halt. KGDCL, a Petrobangla company responsible for gas supply to Chittagong requiring about 350 MMCFD gas supply, merely gets about 230 MMCFD. No credible plan to improve the situation is visible until now or for near future. Many thinks,

Chittagong is destined to suffer for indefinite period. The region gets gas supply from National Gas Transmission Grid through Bakhrabad Chittagong Gas Transmission Pipeline. After meeting the requirements of BGSL-operated greater Camilla and greater Noakhali franchise areas, about 200 -215 MMCFD gas can be allocated for Chittagong, about 25 MMCFD gas now comes from Santos operated Shangu Offshore Gas Field. BAPEX operated Semutang also supplies about 10 MMCFD. At present there are no other sources of gas supply to Chittagong. Gas production from Feni Gas Field situated at strategic location remains unaccessed as Petrobangla failed to resolve its long standing dispute with NIKO. Government is accounting for huge penalty to multinational company KAFCO for not obliging to its gas supply commitment over a long time. CUFL also remains shut for a while. Fertilizer plants develop various

mechanical complexities and operational problems -- these are kept out of operation for a long time. Substantial available capacity of gas-based power generation in Chittagong also remains idle prolonging power crisis. Many local industrial entrepreneurs setting up small to large gas-based industries were waiting for a long time for gas connection to start production. Various exportoriented industries are also suffering from huge business loss. Huge potential of Korean EPZ remains unrealized. Chittagong Chamber of Commerce and Industry have brought this situation several times to the attention of policymakers. Media publishes regular columns about the situation. But apart from sweet promises, nothing positive has happened so far. Woos of Chittagongians for gas and power continues.

What are The Reasons for Crisis? We are aware that Bakhrabad Gas Systems Ltd (BGSL) was created in early 1980s as a vertically integrated gas company with a vision for serving the gas demand of entire South Eastern region of Bangladesh, particularly Chittagong region. Bakhrabad and Feni Gas Fields were developed to serve the purpose initially. A 178 KM long 24 inches diameter ANSI 400 BakhrabadChittagong Gas Transmission Pipeline was constructed to feed greater Comilla excluding Brahmanbaria (already under titas gas franchise at that time), greater Noakhali and Chittagong region. A view of the government owned Chittagong Urea Fertilizer Company Ltd
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This pipeline at design condition (maximum allowable operating pressure of 960 Psig) had a capacity to transport 350 MMCFD. Chittagong distribution system has a well designed Ring Main around it and well crafted network fed from Chittagong City Gate Station at Faujderhat, 5 High Pressure District Regulating Station (HP DRS) and 17 IP DRS As the proposed off take of gas at Chittagong was delayed a bit and Dhaka Gas System continue to grow expeditiously a 75 KM Bakhrabad Demra ANSI 600 Pipeline was built with a design capacity of 220 MMCFD in 1984 to divert gas to greater Dhaka Titas Gas Franchise area. Eventually all large gas users of Chittagong came on stream and Chittagong gas market started growing exponentially. Keeping up with market growth Petrobangla and BGSL should have had perspective plan with vision. But very unprofessional operation of Bakhrabad Gas Field at more than prescribed maximum rate created serious production problem from early 1990s. Gas reservoir experts suggested capping production to 180 MMCFD and annually adjusting it lower by 10 MMCFD. But over ambitious attempts to produce at 200 plus caused extensive damage to reservoir pay sands. Sand, water and liquid hydrocarbon flowing with gas harmed subsurface and surface infrastructures of the gas field. Bakhrabad Chittagong and Bakhrabad Demra pipeline also got saturated with liquid. Condensate even entered Dhaka City Distribution network bypassing Demra City Gate Station. The situation could have been somehow remedied through carrying out on stream pigging operation of the pipelines. But by mid 1900s, the situation reached such an alarming state that the production from Bakhrabad Gas Field was required to be cut down from 160 MCFD to 80 MMCFD causing shutting down of fertilizer and power plants in Chittagong areas in 1996. However, the situation could also be overcome through expeditious construction of Ashuganj Bakhrabad 58 KM 30 inches diameter gas transmis-

sion pipeline. This pipeline completed a national gas grid in the eastern side of Jamuna river facilitating gas diversion from surplus North Eastern part to South Eastern region. Discovery of Shangu Offshore Gas field and its expeditious development in 1998 came as a short term blessing for Chittagong as it took over major gas supply load of Chittagong area from 1998. But Petrobangla learned very little from the production fiasco of Bakhrabad Gas Field lesson. Again Shell Cairn was encouraged to produce much beyond its experts recommended capacity of 140 MMCFD and met with similar catastrophic fast depletion. By 2004 production came down to 100 MMCFD and by 2008 to 40 MMCFD and now merely to 25 MMCFD. In the meantime gas demand in Chittagong region grew exponentially to beyond 300 MMCFD. Petrobangla in anticipation of these should have planned and implemented a Gas transmission loop line from Bakhrabad Chittagong as suggested by transmission professionals. It should have persuaded IOC operator to develop Magnama and Hatiya on fast track. It could be extremely benefitted if it could more positively interact with Myanmar and India from 2005 for implementation of Myanmar Bangladesh - India tri nation gas pipeline. The open access pipeline was planned to be routed through Coxsbazar and Chittagong. But none of these happened. Bakhrabad Chittagong pipeline in its present condition can transport only 250-260 MMCFD gas of which about 50 MMCFD gas is required for KGDCL leaving about 210 MMCFD for Chittagong. Small Semutang can supply about 10 MMCFD and for the last few months after some frantic works of Santos, Shangu is supplying about 25 MMCFD. After all these, Chittagong system has a gas deficit of about 200 MMCFD. What Are Government Plans? The present government that claimed to have undertaken extensive homework of energy and power situation should have had Chittagong gas supply scenario in view. It announced plan for

importing about 500 MMCFD equivalent LNG import for Chittagong by end 2012. Experts raised genuine concerns about LNG import both from technical and commercial challenges. LNG import situation in August 2013 has not only become uncertain but there is every doubt now that whether it will be materialized at all in the near future. The government also has plans to set up some imported coal-based power plants in Chittagong to meet its growing demand for power in the region. Experts also have concerns about imported coal-based power generation. Santos should have been encouraged to expedite development of Magnama and Hatiya prospects and also develop Kutubdia (with block 16). But beauracracy of EMRD has created all sorts of barriers to this option. Petrobangla under instruction of EMRD has informed Santos that Kutubdia is taken out of block 16 scope of works of PSC with Santos and will be tendered separately. The seismic activities of Magnama from September 2012 and exploration from 2013 will now become uncertain as it is highly unlikely that Santos will be willing to mobilize expensive drilling rig to drill one or two wells at offshore. The decision for taking out Kutubdia field out of Block 16 has taken without actively considering its consequences. Experts always believed that ConocoPhillips would struggle with exploration and development of possible gas resources in its allotted offshore blocks as its bid for those blocks were never based on sound economic analysis. It is not sure as to when ConocoPhillips can explore, discover and develop some gas resources for Chittagong. The government is said to have updated draft PSC 2012 document for fresh offshore PSC round. In draft PSC 2008, there were not many incentives for major IOC to bid for it. We believe that no genuine efforts were made to assess as to why major IOCs stayed away from bidding. Deep water drilling requires companies taking huge risks. If there are no substantial incentives, genuine IOCs will not be interested in making
16

risk investments. Any repeat of PSC Bidding Round 2008 or more stringent conditions will discourage major IOCs and bring in small to medium little known IOCs which after few years of trial and error will relinquish the blocks. That situation will not bring any blessing for Bangladesh. Suggestions & Recommendations In the greater national interest of the country, it has become extremely necessary to take some priority actions to remedy the situation. The government should realize that import of LNG for technical constraints is not feasible over near terms. Similarly, imported coal-based power generation in the near terms is unlikely to materialize. Hence, while pursuing for both the following other actions may be taken to address very critical situation of Chittagong. After drilling additional wells at Bibiyana, Titas and other Gas Fields and commissioning of gas pipeline compressor station at Ashuganj about 1000 MMCFD gas can be transported to Bakhrabad Gas Field transmission hub. For diverting surplus gas to Chittagong, the government should adopt a high priority national project to construct a 180 KM long 30 inches diameter gas transmission loop line project from Bakhrabad Chittagong. It will facilitate diversion of about 500 MMCFD gas from national grid for Chittagong by 2014. Existing Bakhrabad Chittagong pipeline in the present sate cannot transport more gas from national grid. ANSI 400 pipeline for thinning of pipe wall thickness from severe internal corrosion cannot also be operated at maximum allowable operating pressure. Resolve issues with NIKO without any delay and exploit the gas resource of Feni Gas Field. Australian IOC Santos must be encouraged and supported to initiate development of Magnama & Haitya prospects and Kutubdia Gas Field. The unprofessional decision of taking out Kutubdia Gas Field from block 16 and let it out for tender separately must be

reversed. This action will be counterproductive as no major IOC will be interested investing in a small area. In extreme situation this may lead to exit of Santos from Bangladesh. The possibilities of getting gas from Magnama, Hatiya coming on stream by 2016 will become uncertain. US Energy giant ConocoPhillips must be strongly persuaded to expedite its exploration works in allotted blocks. The government should invite all stake holders reputed IOCs, international and local experts for a road show at Dhaka on draft Model PSC 2012 and discuss it. It must have required value additional for encouraging investors in risking investment in the deep water drilling. Some financial experts must carry out authentic and logical financial model. Offshore drilling is like a gamble. No genuine IOC will be interested to risk investment unless there are adequate incentives. In international market, gas price swings from US$ 2.25 15.00/ MBTU. In such situation a ceiling of US$ 4- 4.5/ MBTU for 25 years will not work. Imposing more tax burden on IOCs will make drilling more costly. Rather, Bangladesh should plan for higher sharing of profit and ensure more vigorous monitoring of work program and budget of IOCs to reduce the cost. The government should encourage BAPEX and others to expedite exploration efforts at onshore frontiers around Chittagong. Chittagong urgently requires effective short, medium and long term action plan and coordinated implementation strategy for combating present and emerging power and energy crisis. It also requires a team of committed professionals to transform plans into reality. Mere talks and lofty planning will bear no fruit. Chittagong itself can make major contribution to doubledigit GDP growth if only power and energy crisis can be professionally mitigated and managed within 3-5 years.
EP

Engr. Khondkar A Saleque ; Advisor, Ministry of Mines, Afghanistan

17

SPECIAL ARTICLE

Maintaining Electricity Price within Bearable Limits

Shamsul Islam

t a recent deliberation in public hearing on electricity tariff it was stated on behalf of BPDB that not raising the power tariff forthwith would cause a deficit of Taka 12,500 crore in the current fiscal year and even with the implementation of hefty increase in tariff proposed by the utility, the deficit would stand at Taka 3,700 crore. At this age of availability of computers and of other associated technology, we are almost certain that it was possible for the high officials of the utility and those of the ministry to know that : a. Such a staggering some of deficit was not created overnight and this crisis leading to almost an untenable financial situation was the cumulative effects of many and several actions taken over the last several years by the concerned management. For ordinary electricity consumers crores of Taka of deficit is not easy to swallow & comprehend as easy as it may sound to the formulator of tariff for consumers to pay or resort to theft and pilferage to avoid payments. b. Provided the assumption holds valid that the management could foresee such astronomical sum of deficit, it is difficult to understand why the consumers and the prospective investors in job creating and value addition sectors were not warned that the utility is leading them to pay a very high charge for their consumption of electricity in successive years. One tends to believe that this was not quite fair under a monopoly system. c. The concerned utility regularly publishes expensive advertisement regarding generation addition and increasing number of consumers in the system. In a small paragraph it could be indicated that the kind of price the consumers

would have to pay for the expansion of the system. d. It is not simply the supposedly global increase in liquid fuel price leading to increase in variable cost of power production that is causing such huge deficits. The increase in international oil prices during last couple of years and the percentage share of generation mix do not justify such staggering deficits. Rather it is the cumulative results of defective consumer meters, defective billing and system of collection of revenue, higher technical and non-technical losses, improper and some time unnecessary investments etc. are also contributing to such deficits. And now the hapless consumers are being asked to pay for bridging / reducing this gap between projected income and expenditure. Electricity industry is certainly not a lone example in this country only. Over the last many years it gradually developed all over the world in developed and developing country. Experience gained in the process and worthwhile contribution by economists, engineers and others in the field, a set of norms and guidelines gradually evolved to help the industry to achieve the desired goals of removing poverty, increasing food production and of other items and the most important need of providing employment opportunity to ever increasing number of young population in developing countries. Unemployed and under employed educated and semi educated young population is a great force to reckon with in the society. Unless their zeal and energy can be properly channeled through providing suitable employment opportunity, it may inadvertently lead to major problems and create conditions not conducive to overall development of the

country. A reliable supply of electricity at reasonable price for production oriented activities can certainly accelerate the pace of activities for overall betterment of the society, thereby poverty can be gradually diminished. Keeping the price of sale (tariff) within reasonable limits is a primary function and responsibility of a successful utility. Following Good Methods Practiced by other Successful Utilities Many of our administrators, engineers and others had opportunities to be in countries and in some cases receive training where sound and well planned electricity system does exist. It is certainly possible to emulate such examples and thereby derive good results. Manuals and relevant literatures on every possible branch of electricity are easily available. At this age of well developed IT it is rather easy to find out and learn what norms and practices are being followed in a good electricity system with commendable results. When the British left country in 1947, the total public sector generating capacity was less than 50 MW. Of course the total population of this fertile land was also only a small percentage of the present number. Since then it has been possible to develop an integrated power system with desired results. The efforts need be accelerated keeping the cost of supply within tolerable limits. Paying capability of consumers and maintenance of satisfied customers are important for maintaining good relationship so necessary for additional revenue collection. No Room for Random Application of Individual Discretion & Impulsive Decision Making Electricity industry is very much a part of the entire nation and its economy. It can not function in isolation. Planning,
19

project formulation, their financing, implementation, successful completion must be within the framework of established basic laws of economics, standard accounting, investment decision making and other relevant associated factors. Ignoring some or all of them may lead to a difficult and untenable situation. Sustenance is rather very important for a basic infrastructure like electricity. Sky rocketing of electricity price within a comparatively shorter time period is bound to affect financial viability of a utility and encourage theft and pilferage of this precious product affecting revenue income seriously. Primarily due to somewhat unplanned system additions and impulsive actions, the sector has landed in a very critical and almost untenable financial situation. The actions taken in the past can not perhaps be reversed totally. But from now on we must be very careful of what is done in this sector so that no steep regular increase in electricity price becomes a compulsion. Examples For Illustration We pick up some of the major power station project to facilitate discussion. A base load steam power plant has a life expectancy of no less than 50 years while it is very capital intensive. Provided properly selected equipment with proven operational quality are installed, they can supply electricity at a comparatively lower cost over many years of its useful life. Selecting appropriate location for installation of such major power plants already conducted through a proper feasibility study is the first major significant step to that end. Unfortunately some of the steam plants have been planned to be located at odd locations. A huge problem is thus created and left for the posterity of power sector professionals to solve and live with for many years to come. Cost per unit of electricity to be produced in those plants are bound to be very high making difficulty for consumers to pay. Take the example of three new major power plants proposed to be located at

Mawa in Munshiganj, Rampal in Bagerhat and Anwara in Chittagong. They are planned to use imported coal as fuel. Nobody knows for sure from which and how and at what price those fuel would be imported and what will be the cost of per unit of electricity to be produced in this country. Reliability in supply of electricity will be replaced by an every present anxiety and probably higher cost of production. Proposed Rampal Power Plant It is noted in newspapers that in case of one of those three power plants with output capacity of 1320 MW the following are being considered. a. Very costly buyers credit of financing is the contemplated. Under the buyers credit financing system, the selected contractors would arrange required external finance for the project. This mode was apparently accepted hastily by some of powerful officials who sensed lack of interest of international donors to finance this project. b. The Rampal power plant was proposed to be in operation by 20132014. The present revised date of completion is 2016. So there is adequate time to pause, think and take logical decisions eventually bringing good results. The present somewhat impasse state of relationship with multinational donors will surely be solved with passage of time. We are very much a member country of WB and ADB. With substantial backward shifting of the date of completion by about three years, now more time is available to look for softer term of financing for the project. Again the job of looking for external finance is that of ERD and Ministry of Finance. It is they who ought to explore the best source of financing with the overall framework and interest of the country.
EP

To be continued
Shamsul Islam; Former Chairman, BPBD
20

ARTICLE

Why Cyber Security is Critical for Smart Grid?

Shoaib Yousuf

ower system operations pose many security challenges that are different from most other industries. For instance, most security measures were developed to counter hackers on the Internet. The Internet environment is vastly different from the power system operations environment. Therefore, in the security industry there is typically a lack of understanding of the security requirements and the potential impact of security measures on the communication requirements of power system operations. In particular, the security services and technologies have been developed primarily for industries that do not have many of the strict performance and reliability requirements that are needed by power system operations.

environment Testing of security measures cannot be allowed to impact power system operations Balance is needed between security measures and power system operational requirements. Absolute security may be achievable, but is undesirable because of the loss of functionality that would be necessary to achieve this near perfect state Balance is also needed between risk and the cost of implementing the security measures. In the Smart Grid, there are two key purposes for cyber security: Power System Reliability Keep electricity flowing to customers, businesses, and industry. For decades, the power system industry has been developing extensive and sophisticated systems and equipment to avoid or shorten power system outages. In fact, power system operations have been termed the largest and most complex machine in the world. Although there are definitely new areas of cyber security concerns for power system reliability as technology opens new opportunities and challenges, nonetheless, the existing energy management systems and equipment, possibly enhanced and expanded, should remain as key cyber security solutions. Confidentiality & Privacy of Customers As the Smart Grid reaches into homes and businesses, and as customers increasingly participate in managing their energy, confidentiality and privacy of their information has increasingly become a concern. How Can Security Requirements for Smart Grid Interfaces be Determined? There is no single set of cyber security requirements and solutions that fits each of the Smart Grid interfaces. Cyber

security solutions must ultimately be implementation-specific, driven by the configurations, the actual applications, and the varying requirements for security of all of the functions in the system. That said, typical security requirements can be developed for different types of interfaces which can then be used as checklists or guidelines for actual implementations. Typically, security requirements address the integrity, confidentiality, and availability of data. However, in the Smart Grid, the complexity of stakeholders, systems, devices, networks, and environments precludes simple or one-size-fits-all security solutions. Therefore, additional criteria must be used in determining the cyber security requirements before selecting the cyber security measures. These additional criteria must take into account the characteristics of the interface, including the constraints and issues posed by device and network technologies, the existence of legacy systems, varying organizational structures, regulatory and legal policies, and cost criteria. Once these interface characteristics are applied, then cyber security requirements can be applied that are both specific enough to be applicable to the interfaces, while general enough to permit the implementation of different cyber security solutions that meet the cyber security requirements or embrace new security technologies as they are developed. This cyber security information can then be used in subsequent steps to select cyber security controls for the Smart Grid. EP

Security Services For Instance Operation of the power system must continue 247 with high availability (e.g. 99.99% for SCADA and higher for protective relaying) regardless of any compromise in security or the implementation of security measures which hinder normal or emergency power system operations Power system operations must be able to continue during any security attack or compromise (as much as possible). Power system operations must recover quickly after a security attack or compromised information system The complex and many-fold interfaces and interactions across this largest machine of the world the power system makes security particularly difficult since it is not easy to separate the automation and control systems into distinct security domains. And yet end-to-end security is critical There is not a one-size-fits-all set of security practices for any particular system or for any particular power system

Shoaib Yousuf CISSP, CISM, CISA

21

REGION

Coalgate Rocks Delhi

EP Desk

down by opposition politicians in parliament. Parliament remained virtually paralyzed since the national auditor released a report two weeks ago saying the sale of coal blocks without competitive bidding was expected to net private companies windfall profits of up to $34bn. Singh's office posted his defence on his official handle on Twitter, the microblogging site. "I wish to say that any allegations of impropriety are without basis and unsupported by the facts," Singh's office tweeted, adding that the auditor's observations were "clearly disputable". Speaking outside parliament, Singh told reporters: "Let the country judge where the truth lies." A string of tweets went on to accuse the auditors of using faulty logic and disputable math to produce their report. Singh also said that as the minister in charge at the time in question he would take full responsibility for the decision not to switch the government's method of allocating coal fields to an auction system sooner. At one point he tweeted, in Hindi, an Indian saying: "My silence is better than

ndia's parliament stalled for several days over the controversial sale of coalfields by the government.

defensive about," she was quoted as telling a party meeting by the Press Trust of India news agency. Senior BJP leaders say that, if needed, they will stretch their protest to cover the entire monsoon session, due to end on 8 September. The government says the coalfields were "allocated by the same procedure by previous governments". The sale of coalfields has been dubbed "Coalgate" by the opposition. India is one of the largest producers of coal in the world. The auditors' report on the sale of coal is the latest in a series of financial scandals to hit the Congress-led government, and the revelations have caused public anger. Manmohan Singh dismissed accusations that his country lost vast amounts of money in a coal scandal, calling the charges baseless in a Twitter message. Singh, who was in charge of the coal ministry from 2004 to 2009, defended himself after earlier being shouted

The opposition BJP has been insisting that Prime Minister Manmohan Singh should quit over a recent report that the country lost $34bn by selling coalfields cheaply. Manmohan Singh has rejected the allegation. A report by government auditors said the coalfields were allotted without auction from 2005 to 2009. Although the report exonerated Manmohan Singh, BJP leaders say he must resign as he was heading the coal ministry at the time of the sale. Manmohan Singh said that the findings were "flawed", and that "any allegation of impropriety is without any basis and unsupported by facts". The chief of the ruling Congress Party Sonia Gandhi has backed Manmohan Singh and has criticized the opposition for holding the parliament "to ransom". "We have nothing to hide or to be

BJP leader L K Advani

Congress Chief Sonia Gandhi

Indian Prime Minster Monmohan Singh

23

a thousand answers." But, India's auditor suggested the government lost billions of dollars by failing to auction valuable coal mining rights in a damning report that implicated Prime Minister Manmohan Singh. "Whatever has happened, the PM is directly responsible. He cannot escape," the parliamentary leader of the opposition Bharatiya Janata Party (BJP), Sushma Swaraj, told reporters.

Coal Minister The hotly awaited Sripraksh Jaiswal hit findings, which led back at the CAG's the opposition to findings, saying the step up demands for government did not Singh to resign, critiagree with the figIndian parliament is deadlocked over the main opposition partys demand that the Prime cized how coal Minister Manmohan Singh quit over coal scam ures or methodology. blocks were given to "The mechanism adopted for coal allocompanies in a murky allocation and objectivity," the CAG concluded. process instead of being sold by open Singh, who has been prime minister cation was transparent," he countered. bidding. The Comptroller and Auditor General (CAG) estimated that since mid-2004 private operators who won coal blocks without competition may have enjoyed "financial gains to the tune of 1.86 trillion rupees ($33.4 billion)". "A part of this financial gain could have accrued to the national exchequer," it added, without giving an estimate for the total loss to the state or alleging that there had been corrupt or criminal practices. It said the problems of granting coal rights for free instead of inviting bidders had been raised as far back as June 2004 when coal officials had discussed the potential for private groups to make windfall profits. Since then, a new policy had been repeatedly delayed and 142 coal blocks had been allocated to various large firms, including Essar Power, Tata Steel and Jindal Steel and Power. "This allocation lacked transparency
The Union Minister for Coal, Shri Sriprakash Jaiswal briefing the media, in New Delhi

since 2004, also served as coal minister from 2004-2009, and the CAG documented a number of official meetings, memos and directives about the need for new legislation. Singh's coalition government, dominated by the left-leaning Congress party, has been beset by a string of corruption cases since re-election in 2009 and the latest allegations of mismanagement led to renewed pressure on him. The softly-spoken leader, promoted to the top job owing to his reputation as "Mr Clean" and a successful stint as a reformist finance minister in the 1990s, has seen his public image battered in recent years.

The CAG released its audit entitled "Allocation of Coal Blocks and Augmentations of Coal Production" against a backdrop of a huge problems in the state-dominated sector, which is vital for India's economic development. State-owned Coal India, the world's biggest coal producer, has been struggling to raise output to meet the demands of power producers, leading to electricity shortages that constrain companies and inconvenience consumers. The idea of allocating coal resources to private companies, which then supply to key industries such as electricity, cement or metals, was intended to boost production by bringing in new capital and technology. More than half of the India's electricity comes from coalfired power stations, some of which are lying idle because of supply shortages or are being forced to resort to importing expensive foreign coal.
EP

26

SPECIAL REPORT

Rampal Power Project Uncertain

Sabuj Younus Nazmul Imam

he proposed coal-based power plant at Rampal of Bagerhat in Bangladesh has become uncertain due to differences between Bangladesh Power Development Board (BPDB) and National Thermal Power Corporation (NTPC) of India. They signed a memorandum of understanding (MoU) in 2010 to set up Bangladeshs biggest coal-based power plant having a capacity of 1320 MW under a joint venture initiative. Authorities concerned apprehended that starting of implementation works of the project, planned to be completed by 2015, would be difficult even if the two parties could revove the differences immediately. They even thought that the differences of opinion have hardly any possibility to be solved soon as they could not be removed so far even after exchanging letters, holding several meetings and visits of officials from both sides. There has not been any progress in real term since signing of the MoU while authorities concerned were apprehending whether it would be implemented even in next five years. They thought that it would be difficult to organize preparatory works in next one and half years. They include forming a joint venture company, registering the company with the Registrar of the Joint Stock Companies, signing of power purchase agreement, signing long term coal

import agreement with the supplying countries concerned, performing necessary dredging in the routes to facilitate coal-laden vessels and mobilizing huge amount of credit to meet the project cost estimated to be of Tk 132 billion. The project cost would be increasing with the time passing fast. Prime Ministers Power, Energy and Mineral Resources Adviser Dr TawfiqE-Elahi Chowdhury expressed the hope that the planned project would be implemented timely. Weve not taken any project like this. So it is taking some time. This is normal. The Differences Four main points of differences have so far surfaced during the negotiation between the two parties. NTPC wants to distribute depreciation fund among the shareholders against BPDBs preference to keep the money as a reserve for maintenance, development and modernization of the

plant; As per the plan PGCB will install a grid for transmission of the power to be generated from the plant. BPDB wants PGCB to be a part of the project and sign the agreement. But NTPC does not want PGCB to sign the agreement as a partner and they want BPDB to become the part of it; BPDB wants NTPCs investment will be given back if the power purchase agreement (PPA) is cancelled for any reason and the government of Bangladesh will pay back their money. But NTPC wants distribution of the asset value, to be assessed by an independent consultant, among the shareholders; and BPDB wants to fix the price of electricity they would purchase from the plant as per a formula that would facilitate pricing for a period of 25 years. NTPC wants it to be fixed every year. BPDB member (company affairs) Abul Kashem told that it is completely a new initiative. The project would take some more time to remove all the differences and reach a consensus as we have to do everything considering the interest of the country. BPDB to Compromise BPDB has already compromised with NTPC in some areas of differences due to their strict position on the differences during the last bilateral meetings. Latest in June this year, a Bangladesh
27

Map of the Rampal Upazila

delegation visited India where they had to compromise on some issues to reach consensus. BPDB wanted to make a provision for compensation if the project is delayed. Eventually the two parties agreed to realize the compensation from the contractor as demanded by NTPC. BPDB also compromised on proposed performance security and operations security provisions. The joint venture company will provide corporate guarantee, instead. Besides, BPDB earlier compromised on some issues, including the place of arbitration. Coal Problems Both the sides were closely thinking of the problems relating to the fuel for the power plant. They are sourcing coal for a long period of time, need for capital dredging from Akram point of the confluence of the sea to project area as well as regular dredging of the river, and continuous increase in the price of coal in the international market. A senior Energy Division official said the problems have been reported in the recent study Centre for Environmental and Geographic Information Services (CEGIS), which is assigned for locating coal sources and transportation. The report recommended three countries South Africa, Indonesia and Australia. It said there would be a requirement for a long term contract to import coal from these countries. Otherwise it would be difficult to get coal timely. It also recommended using high quality coal as the plant would be set up near the Sundarbans. The quality coal would be costlier than what the authorities of the two countries had estimated. An Energy Division Official said this type of coal would cost US$ 145 per tonnes plus an expenditure of US$ 27 for transportation. The coal from South Africa and Australia would cost US$ 160 per tonnes and transportation cost US$ 39. It has also been recommended importing coal with vessels having 80,000 tonnes capacity to keep the

transportation cost feasible up to the Akram point. Moreover, it would require carrying out some dredging up to 44 nautical mile south of Mongla port to maintain navigability for the light vessels. It needs expensive capital dredging. It would cost US$ 105 million as per the report. The river route will have to be dredged regularly to facilitate movement of the lighter vessels, which will cost US$ 30 million annually. The power generation cost would be much higher, as a
REPORT

result. Experts said that it would not be easy to implement the expensive project while BPDB would have to incur losses as it will have to purchase power at higher prices.
EP

Sabuj Younus; Associate Editor Daily Samakal. Nazmul Imam; Special Correspondent, Daily Samakal

BAPEX Starts Drilling at Sunetra

EP Report

he state-owned Bangladesh Petroleum Exploration and Production Company (BAPEX) starts exploration at Sunetra structure on August 10. Petrobangla Chairman Dr Hossain Monsur inaugurated the drilling of the exploratory well. Local lawmaker Muazzam Hossen Ratan, Bapex Managing Director Mortoza Ahmed Faruque and Sunetra Gas Field Project Manager Nurul Islam, among others, were present on the occasion. BAPEX mobilized an exploratory rig to Sunetra in May last. Before the start of rig mobilization, a 35-kilometre road was constructed and renovated for transportation. Petrobangla Chairman said Bapex was hopeful to get an outcome from exploration within four months after it began drilling. Bapex had placed a Tk 910 million development project proposal (DPP) to run the project between January, 2012 and June, 2013. BAPEX will receive funds from Gas

Development Fund (GDF). GDF has a fund of over Tk 13.56 billion. Last year, Bapex placed a Tk 2.79 billion DPP before the government for drilling four exploratory wells at Sunetra gas structure located in Sunamganj and Netrokona districts. BAPEX indentify the Sunetra structure in 2010 through conducting a two dimensional (2-D) seismic survey on 260 line-kilometre in the districts. BAPEX told they estimated a gas reserve of over 2.5 trillion cubic feet (TCF). BAPEX earlier had planned to drill the exploratory well at the structure in late last year. But it was delayed as the construction firm allegedly failed to complete the driveway on time, a Petrobangla official said. BAPEX had already prepared a 20year roadmap to explore oil and gas in 74 exploratory and development wells in 23 onshore block structures in the country. According to the roadmap, it would drill 13 exploratory wells between 2011 and 2015.
EP

28

REPORT

Obama Spars With Romney on Energy

EP Desk

S President Barack Obama and Republican Mitt Romney put their differences on energy in stark relief with competing speeches from a center of wind power development and from coal country. At a rally recently in Oskaloosa, Iowa, Obama criticized Romney for calling the benefits of alternative energy "imaginary" and his running mate, Representative Paul Ryan, for labeling wind power a "fad." Romney appeared at a coal mine in Beallsville, Ohio, where he promised to achieve energy independence for North America by the end of a second term and criticized Obama for regulations that he said were stifling coal production.

If Romney knew what youve been doing, hed know that 20% of Iowas electricity now comes from wind, powering our homes and factories and our businesses, Obama said. Romney spokesman Ryan Williams said the Republican candidate supports wind power. Instead of Obamas approach Romney would promote policies that remove regulatory barriers, support free enterprise and marketbased competition, and reward technological innovation, Williams said in an e-mail. Iowa, which Obama won in 2008 and where polls show this years race is up for grabs, has the second highest wind power capacity in the U.S. and the industry directly and indirectly supports 4,000 to 5,000 jobs there, according to the American Wind Energy Association. The potential lapse of the tax credit at years end is already affecting the industry. Vestas Wind Systems A/S, the worlds largest supplier of turbines and blades, plans to cut 1,600 jobs at its

factories in Colorado this year because the tax credit will expire Dec. 31 unless Congress acts to extend it. Romney is traveling through Ohios coal country on the final day of his four-day bus tour of electoral battleground states. The former Massachusetts governor maintains that the Obama administration has burdened the mining industry and that has directly led to job cuts in Ohio. Standing before dozens of hard hatwearing coal miners and next to a backhoe piled with coal in Beallsville, Ohio, Romney said Obamas policies have caused increases in energy prices and made it more difficult for the coal industry to be profitable. Romney, in making his pledge of energy independence for the U.S. if hes able to complete two White House terms, said that would free the country from reliance on Venezuela and the Middle East. Canada, Saudi Arabia, Mexico and Venezuela were the top four sources of U.S. crude oil imports in 2010, according to the EIA. Through increased oil and natural gas extraction and conservation, the U.S. has increased the proportion of demand met from domestic sources over the past six years to an estimated 81 percent through the first 10 months of 2011, according to data compiled by Bloomberg from the U.S. Department of Energy.
EP

The two candidates were making their cases in swing states in an election campaign playing out against the backdrop of sluggish U.S. economic growth and an unemployment rate of 8.3 percent. The jobless rate has been stuck above 8 percent since Obamas first full month in office. Their running mates also were appealing for votes in battleground states, with Ryan speaking in Colorado and raising money in Nevada while Vice President Joe Biden campaigned in Virginia. Obama in his speech cited the 75,000 U.S. jobs tied to the wind energy industry and contrasted his support for extending a wind energy manufacturing tax credit with Romneys opposition.

US president Barack Obama

Republican Mitt Romney

Source: Bloomberg
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REPORT

TAPI Train Moving Smoothly

EP Report

he planning and preparatory works of the multibillion dollar Tu r k m e n i s t a n - A f g h a n i s t a n PakistanIndia (TAPI) four-nation gas transmission pipeline is smoothly moving on the right track. Based on the framework agreement signed among the nations countries have advanced significantly on agreeing on the gas transit agreements and transit fees. India and Pakistan have already signed Gas Sales and Purchase Agreement (GPSA) with Turkmenistan. There has been considerable progress in the GPSA between Afghanistan and Turkmenistan. Now the countries are advancing on finding the right company or consortium to invest, construct, own and operate the $ 7.6 billion worth of TAPI pipeline. TAPI Working Group (TWG) in a meeting held in Turkmenistan capital Ashgabat on August 2-3 August 2012 talked and finalized date, venue of road shows for probable investors for TAPI Pipeline and ancillary facilities. The representatives of Turkmenistan, Afghanistan, Pakistan, India and project sponsor Asian Development Bank (ADB) attended the meeting. The meeting of TWG which was 18th of its kind dealt with the following matters: Finalize the details related to road shows (schedule, participant list, invitee list and materials for information packet), Update on the status of Afghan/Turkmen GSPA, Update on the status of the transit fee negotia-

tions, Continue negotiations related to Operations Agreement, One of the most significant development of the project is that project sponsor ADB informed the meeting of approval of the ADB management of the Technical Assistance (Phase 3). ADB TA would cover ADBs continued role as the Secretariat until the conclusion of Phase 3 (Pipeline Company Establishment). The countries prepared tentative schedule of road shows to commence in Singapore on 10 September 2012 and end on 20 September 2012 in London. The second Road Show is scheduled in New York. These road shows are intended to present to probable investors, developers and operators the details of the pipeline, the issues, challenges and opportunities. About 47 companies comprising of major energy giants, pipeline operators, banks and financial institutions are among the invitees. Major companies like Chevron, Shell, Exxon Mobil, GAZPROM, CNPC, PETRONAS, SINOPEC, Petro China, Williams, Conoco Philips, TOTAL, British Gas, Stat Oil, Gaz de France, BP, ENI, Saudi

Aramco, Sonatrach, EGAS, ADNOC, KOC are among the invitees. TWG also included some major banks and financial institutions in the list. Notable among them are ANZ (Finance Australia), Royal Bank of Scotland (Financier United Kingdom), Coface (Financier France), Deutsche Bank (Financier Germany), Goldman Sachs (US Financier), Merrill Lynch (Financier), Citi Group (US Financier), JP Morgan (US Financier), Bank of Tokyo Mitsubishi (Financier), Mizuho Corporate Bank (Financier), Mizuho Corporate Bank (Financier), Sumitomo Mitsui Banking Corporation (Financier), State Bank of India (Financier), US-Exim (Export and Import Bank of USA), National Bank of Pakistan (Financier). ADB team in the TWG meeting gave a short presentation on the materials that will be presented in relation to the TAPI project contractual structure and the contractual and commercial arrangements of the pipeline system. ADB would finalize the presentation addressing the comments of the participants. The draft operation agreement was also presented by ADB team and discussed in TWG meeting. Important issues like gas allocation, future gas sales, nomination period, changes of standards, common disputes etc were discussed. TWG agreed to update the draft reflecting the common agreement reached among countries. Issues like security of the Pakistan
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Tow proposed pipelines in South Asia

are extremely sensitive for the Pipeline especially in Afghanistan and Pakistan segment. Afghanistan and Pakistan team were requested to present their situation in greater details. Three countries -- Pakistan, Afghanistan and India -- also discussed issues related to transit fees, Transit fees indexation, methods of payment and reviewed the draft transit fee agreement. The TWG meeting agreed on the following tentative schedule of Road Shows and next meeting. Road Show in Singapore on September 10-12, 2012, Road Show in New York on September 13-15, 2012 & Road Show in London on September 17-20, 2012 This pipeline will create long term energy security for Afghanistan and Pakistan and will meet the partial requirement of huge energy demand of India. It still can be a major source of long term energy security for Bangladesh if it positively approaches this pipeline rather than making half hearted efforts. The energy sector of Afghanistan has just started to move on right direction. It will require substantial power generation to meet the demand of extensive mining growth and industrial development. Afghanistan is also trying to explore and exploit its significant untapped hydrocarbon resources. In case of significant major discovery it may also use capacity of the pipeline to transport its own gas from one part of the country to other or even join Turkmenistan in export to Pakistan and India. Pakistan is suffering from massive energy crisis. It desperately need gas flowing through TAPI as soon as possible. India will find TAPI gas a better competitive option that other imports like LNG from volatile LNG market to fuel its expanding economy. The importance of TAPI was never so seriously felt before. We believe that for the greater interest of the countries of the region Pakistan, Afghanistan and India will combine efforts to ensure security of the pipeline.
EP

Greater Probability From Risk Potential

EP Desk

PEC may have to reduce its forecast for growth in world oil demand in 2013 by 20 percent, the exporter group said, citing a vague and turbulent outlook for the global economy. The Organization of the Petroleum Exporting Countries (OPEC) left its forecast unchanged on August 9 from its estimate last month, however. Demand will expand by 810,000 barrels per day (bpd) next year, although the odds suggest oil use could undershoot that figure, it said. "The downward risk potential has greater probability in the forecast than the upward risk one," OPEC said in its monthly report. "Therefore, the gloomy picture could reduce the world oil demand growth forecast by 20 percent next year." OPEC, source of more than a third of the world's oil, expects world economic growth to slow to 3.2 percent next year from 3.3 percent in 2012, hindered by a slightly slower expansion in the United States and China, the world's two largest oil consumers, and weakness in the euro zone. OPEC's demand outlook is, as usual, more cautious than that of the US government, which raised its forecast for 2013 growth in oil consumption. The last of this month's trio of major oil reports is due on August 10, 2012 from the International Energy Agency. For this year, OPEC left its forecast for the growth in world oil use virtually unchanged at 900,000 bpd and said the outlook had flattened out. "Demand has overcome earlier expectations of a declining momentum and moved to a more stabilized trend, supported by the summer driving season, the summer heat and the continued shutdown of most of Japan's nuclear capacity."

Lower Saudi, Iranian Output OPEC trimmed the forecast of demand for its own oil this year and in 2013 by 80,000 bpd and 100,000 bpd, respectively, due to higher supply from producers outside the 12-member group.
The United States, Canada and South Sudan are among the non-OPEC producers expected to provide more oil than previously expected this year. South Sudan said this week it hoped to resume production in September after ending a dispute with Sudan. OPEC now expects demand for its crude to average 29.9 million bpd in 2012 significantly less than it is pumping at present even after a drop in output last month due to sanctions on Iran and a cutback by Saudi Arabia. Citing secondary sources, OPEC said its production fell by 160,000 bpd to 31.19 million bpd in July, led by Iran, whose oil became subject to a European Union embargo from July 1 over its disputed nuclear program. Output also declined in OPEC's top producer, Saudi Arabia, which told OPEC it had trimmed supply by 300,000 bpd to 9.8 million bpd in July. Industry sources told Reuters last month Riyadh reduced supply because of lower demand from some customers. Analysts at Barclays Capital pointed out that the drop in Saudi output, as reported by Saudi Arabia itself, was larger than estimated by other assessors. "The Saudi output that was brought on to help compensate for the constriction of Iranian exports is being scaled back," Barclays Capital oil analyst Miswin Mahesh said in a report. US and European sanctions have pushed Iran from its traditional position as OPEC's second-largest producer to rank third behind Iraq, which has pushed output above 3 million bpd in July, ahead of Iran at 2.82 million bpd. EP
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REPORT

800,000 Tonnes Furnace Oil For Rental Plants

EP Report

he state-owned Bangladesh Petroleum Corporation (BPC) will import 800,000 tonnes of furnace oil to fuel the rental and quick rental power plants in six months beginning from July this year, officials said. The BPC recently finalized the import estimation of the heavy fuel oil (HFO) after it had received requirements from the state-owned Power Development Board (PDB). The PDB has deals to purchase electricity from the rental and quick rental power plants. The fuel oil based picking, rental and quick rental power plants now generate about 2,300 MW of electricity. The government has to supply fuel to these plants at a subsidized rate and also purchase electricity from them at a relatively higher rate through giving subsidy. BPC Chairman Abu Bakar Siddique informed that he has received the demand notes about the furnace oil requirements recently and finalized a plan to import about 800,000 tonnes of fuel for the coming months. He said the cabinet body recently approved six proposals for import of 1.650 tonnes petroleum fuels which were mainly diesel, kerosene, octane and jet fuel.

Petroleum Corporation, Malaysian Petronas Trading Corporation, Singaporebased Petrochina International, the Philippines PNOC Exploration Corporation, Egypts Middle East Oil Refinery Limited (MIDOR), and the Emirates National Oil Company (ENOC).
Kumargaon 50MW rental power plant

EP

CNOOC in Talks to Buy Tullows Assets in Bangladesh

EP Report

he China National Offshore Oil Corporation (CNOOC) is in talks to buy UK-based Tullow Oils assets in Bangladesh, an official said. If negotiations are successful, it will be CNOOCs first investment in Bangladeshs oil and gas sector, he said. CNOOC bid for shallow water gas block SS-08-01 in Bangladeshs 2008 bidding round but was not successful. It is mulling taking part in Bangladeshs next offshore bidding round, which is slated for later this year, he added. Tullow Oil is planning to divest all its Asian assets, which are located in Bangladesh and Pakistan, and has held preliminary talks with several oil companies. Australian exploration and production company Santos has also held prelim-

inary talks to buy Tullow assets in Bangladesh, Santos President in Bangladesh John Chambers media recently. The shift away from Asia will allow Tullow Oil to focus on its core operations, its huge Jubilee discovery offshore Ghana, and its exploration acreage in South America and elsewhere in Africa. Tullows sales revenue from Asia totaled $20.8 million in 2011, while its global sales revenue totaled $2.3 billion. Tullow Oil has a 30 percent stake in Bangladeshs Bangora gas field. CNOOC in February partnered Frances Total in a $2.9 billion deal to buy a third of Tullow Oils stakes in three oil exploration areas in Uganda.
EP

There was no proposal for furnace oil import. But, now well move proposal for furnace oil import after completion of import negotiation with different suppliers, said the BPC Chairman. The fuel supplying companies of six countries from which the BPC will import petroleum include Kuwait

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REPORT

India's Grid Chief Shifts Blame for Blackouts

EP Desk

abindra Nath Nayak, Chairman of state-owned Power Grid Corp. of India Ltd., said factors like unexpected surges in demand from farmers and provincial governments, added to India's failure to build enough new power plants and were more important reasons for the recent blackout. Nayak's comments, in his first interview since the failures, come ahead of a government panel report on the blackouts. He is one of seven members on the panel. "There are many things that happened together," Nayak said of the blackout, which left more than 600 million people without power over two days, causing millions of dollars in economic losses. A major reason for the outage was a surge in demand from farmers, Nayak argued. More farmers were relying on electric pumps to get to ground water because of the failure of this summer's monsoon rains, he said. The demand spike was exacerbated by some provinces drawing more than their quota from the national grid, he said. India's provinces get power for their local grids via the more than 100,000 kilometers of national lines operated by Power Grid. The local governments are supposed to draw only as much electricity as stipulated in power-purchase agreements with

producers, but some don't stick to these limits, Nayak said. He admitted, though, that Power Grid's infrastructure did factor in the blackout. One of two major transmission lines in northern India was shut for work at the time, forcing power onto a single line, Nayak said. "I mean, the entire load fell on one line and that led to the cascading effect," he said. The company, he added, has since delayed the repair work by two months to prevent a repeat. Nayak also acknowledged that the grid needs investment as demand for electricity grows at 20% per year due to India's economic expansion. The company is planning to invest $18 billion over the next five years to upgrade the grid, he said. He denied that India's electricity grid was below international standards. "We have the best infrastructure in the world. It is not due to our infrastructure,"

Mr. Nayak said. "Nobody is having a better electricity transmission infrastructure than us." Some may not agree with Nayak. India's inadequate power generation capacity and its creaky transmission infrastructure "severely lag the country's mushrooming demand for power," said Standard & Poor's credit analyst Rajiv Vishwanathan. Both were a major reason for the blackout, he added. In the long term, Nayak said India's government needs to increase power generation to meet rising demand. Efforts by India to build new power plants have stumbled. A major issue is a shortage of coal and gas to run them. India's poor investment climate has also stymied efforts. "The country, and the power sector, is going through a transition phase, and for us, the challenge is to catch up with the electricity demand," Nayak said. Although Nayak denied his company's national infrastructure was below par, he did say local government grids had suffered from lack of investment. Many provincial electricity utilities are lossmaking as they are unable to raise tariffs due to pressure from local politicians. Nayak said provinces in India needed to be more disciplined and there should be sufficient penalties so that they don't
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Traffic Jam in New Delhi India During the Blackout

draw too much power. A Power Grid executive said the panel report is likely to recommend the company be given the authority to shut off power supply to provinces that don't adhere to the terms of power-purchase agreements. Nayak said Power Grid is working on a plan to isolate essential services such as hospitals, railways and some regions, such as New Delhi, the capital, from future blackouts by setting up dedicated power generation and distribution networks. $35 Billion Debt Revamp After Blackout Meanwhile, India plans to restructure about $35 billion of loans held by its utilities to boost their ability to supply electricity and avert outages like the one that cut off power to half the nations 1.2 billion people. Half of the short-term borrowings of the state-owned utilities, which generate or buy and distribute electricity, will be transferred to the books of the regional governments, according to a power ministry draft proposal obtained by Bloomberg News. The rest will be rescheduled by the banks and allowed a three-year moratorium on principal repayments. Cash losses at utilities widened 15 times over three years to 288 billion rupees ($5.2 billion) in the year ended March 2010, prompting them to seek shortterm loans even as dues to power producers and coal miners rose. The difference between the average cost of supplying electricity and the average tariff has almost doubled in the 11 years to March 2010, according to the draft, leading banks to refuse loans. For some state utilities today, selling more power means incurring more losses, said Salil Garg, a New Delhi-based director at Fitch Ratings India. Restructuring their debt seems to be the only solution. Utilities will look to turn around, while banks will seek to minimize sacrifices. The proposal is expected to be circulated among cabinet members in a week, Power Secretary P. Uma Shankar said on

Aug. 13. There will be a separate arrangement for financing part of the operational losses and interest payments for the first three years, according to the plan. Biggest Blackout The utilities are servicing the interest on existing loans by fresh borrowings, which leads to a virtual debt trap in the long run, according to the draft report. Almost 27 percent of Indias electricity is lost in transmission because of dissipation through wires and theft, causing a peak shortfall of 9 percent. Distribution utilities, unable to retrieve their costs through tariffs, accumulate debt and losses and cut purchases of electricity, leading to blackouts. Grid collapses on two consecutive days in India last month caused the worlds biggest blackout. NTPC Ltd. (NTPC), the countrys biggest power producer, was forced to cut generation by 13 billion kilowatt hours, or 6 percent of total production in the year ended March 31, as state government utilities reduced purchases, Chairman Arup Roy Choudhury said on Aug. 7. The company may have to cut output by almost as much this fiscal year. Free Power Most state utilities often adhere to political demands of the local governments by providing free or cheap power to people. Punjab and Haryana, two of Indias biggest producers of food crops, provide subsidized power to farmers. Some utilities dont receive subsidies announced by governments in lieu of free power they give to farmers, Garg of Fitch Ratings said. States, including Tamil Nadu, Andhra Pradesh, Punjab and Karnataka, have increased tariffs since April to reduce the gap between cost and sales. Tamil Nadu increased tariffs after almost a decade. We are hoping to break even this year, thanks to the increase in tariffs, S.C. Arora, finance director at Punjab State Power Corp. said by telephone. Deficient rains have forced us to buy more power for irrigation and we are

appealing to people to use electricity judiciously. Punjab State Power has 200 billion rupees of liabilities, half of which is short-term and being considered for restructuring, Arora said. The utility lost 0.07 rupees on every kilowatt hour of electricity it sold last year, he said. Higher Tariffs States have accepted the inevitability of increasing tariffs, but theres a limit to the increase, Garg of Fitch Ratings said. Ultimately, the solution lies in improving efficiencies. The burden of any increase in tariffs will be borne by industrial users more than households. Industries pay more than double the price households pay for their electricity, which affects profitability. India has to have a tariff system that reflects the change in costs, said Debasish Misra, senior director at consulting firm Deloitte Touche Tohmatsu in Mumbai. Increasing losses at state utilities are also endangering investment in generation projects in states, as concerns mount that generation companies may find it difficult to recover their dues from utilities. Nervous Lenders The risks of offtake and fuel availability are two biggest concerns in the minds of lenders today, said Ashish Sethia, head of India research for Bloomberg New Energy Finance. Banks will obviously be nervous in lending to a generation project in a state that has a financially stressed distribution company. Damodar Valley Corp., a power producer in the eastern part of the country, posted a loss of 1.2 billion rupees in the year ended March 2011 after interest payments on short-term loans increased. The biggest challenge in the power sector today is getting the money for what you sell, NTPCs Roy Choudhury said on Aug. 7. If we are able to address that issue, this is the most viable sector.
EP
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COLUMN

Coal Deals Strike Blows to Manmohan Singh

ndia is the worlds third largest producer of coal, the current production estimated at more than 550 million tons. The emerging South Asian giant is also the home to the worlds fourth largest reserve of coal, a major source of energy in the energy-hungry country. Despite the enviable position with regard to production and reserves Indias growing demand for coal has forced the nation to go for imports to meet the shortfall. According to recent estimate Indias demand for coal is more than 700 million tons. Nearly 70 per cent of the coal is used for generating electricity; the remaining 30 per cent is used by steel, cement, fertilizer and chemical industries. In recent weeks Indias coal has hit the headlines. Not for any major mining accident. Not for any strike or protest by coal miners. This time the headlines have been made by allegations of corruption in awarding coal fields to private companies when Prime Minister Manmohan Singh was in charge of the coal ministry during 20042009. The allegations, persistently denied by the Indian PM, now on his second term in office, originated from a report of Indias auditor general. The audit report by Comptroller and Auditor Generals office has found something grossly wrong in the coal field dealings. The government has virtually incurred a loss of more than $33 billion in awarding the fields to the private companies allegedly not in transparent ways

In defending his decision the 79-yearold Indian PM has claimed that nothing was wrong. Nor was any lack of transparency in the deals. He says the CAG report has flaws and it contains misleading information. However, the opposition has not lost any time to seize the opportunity in raising a hue and cry about the CAG report. It has asked the Indian PM to resign taking responsibility in the deals. The opposition has forced several disruptions in the proceedings of both houses of Indian parliament. The opposition members have caused so much of noises in the parliament that Singh could not even finish his speech in the parliament one day last week. Manmohan Singh has tried to explain that competitive bidding in the allocation of coal fields could not have been introduced in 2006 because of the opposition. He says the states where the coal fields are located were all being run by the opposition at that time when

the deals were done. The state governments at that time failed to reach a consensus on the competitive bidding. Let the country decide where the truth lies, one newspaper report quoted Singh as saying in his written speech. The Indian people will sure judge the Singhs decision and arrive at their own conclusion. With next national elections not far off the Indian politics is getting extra doses of political heat generated by corruption allegations against Singhs UPA government. The UPA government has recently been hit by a series of corruption scandals _ the other major one being the deals on 2 G mobile phones. Singh was not directly involved in the mobile phone deals, but he is at the center of the coal corruption allegations. It is possible that the UPA government will survive the latest scandal. The opposition has vowed to force a vote of confidence in the parliament. It is unlikely that the government will collapse at this stage. But the unrelenting scandals_ hitting the troubled UPA government one after another _ is leaving Singh and his government wounded. While the government licks the wounds and struggles to recover from the shocks the coal policy of India comes under spot light. Economic and industrial deals are made for the welfare of a nation. But bad deals harm not only the people, but also those who make them. Thats the lessons Manmohan Singh is learning. EP
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Indian Prime Minister Manmohan Singh

Focus More on Renewable Energy: Analysts

EP Report

new buildings have mushroomed with low-quality products." The professor said policymakers should think in terms of kilowatts rather than megawatts when conceiving energy for rural areas. A solar panel with a capacity of about three kilowatt is sufficient to light two bulbs and charge a mobile phone, facilitating electricity provision to the masses. Huque also urged the government to lower import duties on solar energy products. "Unfortunately, the import duties are higher for energy-efficient products." Khursheed-Ul-Islam, senior adviser on Sustainable Energy for Development for GIZ, said the solar energy is an untapped mine for Bangladesh. "But it has to be made affordable for people," he said, adding that Bangladesh has already made a good impression with its installations of over 1.5 million solar home systems in off-grid areas. "Although we have not had much success yet in generating wind energy, increasing the tower height can improve our chances," Islam said. He also suggested exports of the biogas emitted from Bangladesh's over 1 lakh poultry farms. BAPA President M Shahjahan chaired the seminar, and Md Habibur Rahman, associate professor of Department of Applied Physics, Electronics and Communication Engineering, at the University of Dhaka, also spoke on the occasion. EP
39

angladesh should leverage its vast renewable energy potential, including solar power, to deal with its energy crisis, experts. The observations came at a seminar, "The Untapped Mine: How can we fight climate change, revitalise the economy and gain energy independence for Bangladesh" organized by Bangladesh Poribesh Andolon, an environmental body, in the capital. Around 53 percent of Bangladesh's population have access to grid electricity, with the rest depending on the costly kerosene and solar power. The total solar energy absorbed by earth's atmosphere, oceans and land masses in one hour is more than the world's demand for energy a year, said Sajed Kamal, adjunct lecturer of Sustainable International Development Program at USA's Brandeis University, while presenting the keynote paper. "But it is untapped. We are mostly using the solar energy in a natural way," said Kamal, also the author of The Renewable Revolution, adding that Bangladesh's exposure to high solar radiation presents great opportunities. Prof Dr Saiful Huque, coordinator of Dhaka University's Renewable Energy Research Centre, said Bangladesh's attitude towards solar energy

is that of an afterthought. People who control the fossil fuel are also in charge of solar energy, and they do not take the matter of renewable energy seriously. The government should form a dedicated body for it," he said. Huque, also the secretary of Bangladesh Solar Energy Society, said the country's energy demand is actually growing annually at 14 percent, and not as per government's estimation of 7 percent. "The renewable energy can bridge this gap," he said, adding that Bangladesh would have to develop local infrastructure and not rely on costly imports to effectively harness the solar energy. Huque also criticized the government for not ensuring proper installations of solar panels on rooftops. "People responsible for monitoring are not doing their jobs properly. As a result,

Sajed Kamal, lecturer Brandeis University of USA, presenting his keynote paper at the seminar, organized by BAPA Photo: BAPA

$155m Additional Fund From WB Likely

he World Bank (WB) will further provide $ 155 million credit for rural electrification and renewable energy projects in Bangladesh, Economic Relations Division (ERD) sources said. The credit will be invested for the second "Rural Electrification and Renewable Energy Development Project (RERED) to increase access to clean energy in rural areas, promote more efficient energy consumption, and improve the response capacity of the borrower in case of an emergency. The WB is most likely to approve the project on September 20, 2012, it is learnt. Meanwhile, the ERD took prior approval from the Prime Minister's Office to negotiate the credit for the RERED. On July 16, 2002 an agreement for $ 190 million credit was inked between the Government and the WB held to ensure off grid power supply to the remote areas Bangladesh by 2020. Later, another agreement was also

signed on September 2, 2009, for $ 130 million credit to supply Compact Fluorescent Lamp (CFL) bulbs and renovation of distribution lines. Besides, an agreement between the ERD and WB was signed for $172 million credit to support installation of an additional 630,000 solar home systems and other renewable energy mini-grid schemes in Bangladesh on November 14, 2011. The credit was an additional financing to the ongoing RERED, following the project's success in installing solar home

systems in rural areas where grid electricity is not economically feasible or hard to avail. The solar home system component of the RERED project is implemented by the Infrastructure Development Company Limited (IDCOL), a government- owned financial institution. The partner organizations, mostly non government organizations (NGOs), install the solar home systems. Only about one-third of rural households have access to electricity with about 16 million households yet to be electrified. Apart from 630,000 new solar home systems by 2012, the additional financing would also be utilized for other options such as mini-grids. The proposed credit of $ 155 million will be received from the International Development Association (IDA), the WB's concessionary arm, has 40 years to maturity with a 10year grace period and carries a service charge of 0.75 percent. EP

Bangladesh is seeing a surge in the adaptation home solar energy systems

Generation of Renewable Energy in Khulna Stressed

ayor of Khulna City Corporation (KCC) Talukder Abdul Khaleque said, Renewable energy could be an important alternative source of energy, especially in rural areas, and play a significant role against the adverse impacts of climate change. He said people could use different renewable energy including solar, wind, biogas and biomass that is appropriate for the country. Industrialization and urbanization have become rampant now-

a-days due to rapid growth of population. So, there is an urgent need to use the best alternative in order to save the

environment. Thus, the solar power system is durable and environment friendly and it also prevents pollution through absorbing carbon-dioxide, Khaleque said. Mayor also said, We have to depend on natural resource for generating power. Mayor Khaleque was addressing as chief guest a daylong workshop titled Qualifying Teachers on Solar Energy held at Khulna Solar Energy Production and Training Centre at Sonadanga in the city. Khulna City Corporation (KCC), Khulna University (KU), Bremen University of Germany and Bangladesh Vocational Education Teachers Association jointly organized the workshop. EP
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Training of 33 Junior Assistant Manager (SAE) of WZPDCL, Khulna

Chicken's Litter a Cheap Source of Power: IFC

here is ample scope to produce electricity from chicken's litter, finds an International Finance Corporation pilot project. The waste of 565,300 hens in 52 poultry farms can generate about one megawatt of power, said Muhammad Taif Ul Islam, Operations Analyst with IFC. These plants could also help reduce as much as 10,649 tonnes of greenhouse gases annually, according to him. The poultry industry has 110,000 to 125,000 farms. Out of those, 40 per cent supply eggs and keep generating litter continuously. "Our estimate is that 5,000 farms can produce 500 megawatt of electricity at a very low variable cost," he said. The country is now generating about 60,000 megawatts of electricity by burning fossil fuel. According to the government plan, 10 percent of the total power generation will come from renewable energy by 2021. The renewable technology was not a rocket science and was readily available, Taif said adding, "It has various benefits low cost, low carbon emission and carbon trading."

These farms would contribute to 460 to 485 tonnes of carbon dioxide emission reduction, which could lead to another source of income for the country through trading in carbon, he added. "We want to promote clean energy opportunities in Bangladesh and unleash the potential of electricity generation from poultry wastes," he said. The German technical agency GIZ, local infrastructure funding institution IDCOL, and Eastern Bank and Brac Bank were working together with IFC to promote clean energy, he added. The IFC official said the government could also encourage private sector to invest in the sector. The investors would collect all poultry, dairy and kitchen wastes from farms or households within the community and use those for power generation, he said. "Fifty per cent population is still out of electricity network and through this facilitation, assurance of access to clean energy for the people living in off-grid areas can come very quickly." About five million people are engaged in poultry sector, the second largest source of rural employment in the country. The sector, with an investment of about $2 billion, ensures food security as it provides cheapest source of protein for people of the country.
EP

Smart Grid: Solution to Energy Crisis

olution to energy crisis in Pakistan lies in smart grid (Intelligent Energy Management) and use of solar energy along with the electricity of Wapda. This was stated by Prof Dr Yaqoob Raziq of University of Tennessee, Chattanooga, US, at the concluding ceremony of a four-day workshop on load management through smart grid held at Federal Urdu University. He said that in Pakistan line losses are much more as compared to other countries. Through smart grid not only loss of energy can be controlled but load can also be managed. By using smart grid, we can restrict any house, company or factory from using unlimited load. We can even restrict the residents from using air conditioners, he said. We can also fix the limit of use of electricity for every house through smart grid for a certain time period due to which we can make sure that at least electricity for bulbs and other small appliances will be provided round the clock, he said. Chief guest of the workshop, Mian Muhammad Javed, founder member of Pakistan Telecommunication Authority said that transmission and distribution of energy can be made intelligent by integrating the existing power system with telecommunication system, including engaging Sensors Networks and Information Technology. More than 50 participants including foreign faculty members, teachers, researchers, professionals and engineering students attended the workshop.
EP
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I N T E RV I E W

LNG is the Answer

Khalilur Rahman

he present energy crisis in the port city of Chittagong cant be resolved only through local sources. That is the realization of Khalilur Rahman, Chairman of KDS Group of Industries and President of Chittagong Metropolitan Chamber of Commerce and Industry (CMCCI). To overcome the gas crisis, his suggestion is to import LNG and supply to the city. His view backs the policymakers, but runs counter to the experts who think import of LNG is not a feasible option in terms of its cost as well as the Bangladesh market is not ready to consume the expensive energy at present. Rahman, however, thinks that the high price of LNG is unlikely to be a problem, echoing with what many other businessmen from the countrys major industrial hub argue. The businesses want gas supply at whatever the price may be. In an interview with Energy & Power, Khalilur Rahman even demanded action against those officials who would cause delays in implementation of the project.

this situation? What do you think? KR: Not only the households in Chittagong are experiencing load shedding for this energy crisis, the industrial units are also experiencing the load shedding. The situation is similar across the country, not only in Chittagong. It decreased the industrial production, hampered export businesses. The GDP growth couldnt achieve target due to the crisis. On the other hand, load shedding in the residential areas has been hampering regular public life. Students are also being affected. The country, especially Chittagong, is not getting new industry that is not also desired at all. EP: We would like to know about the impact of load shedding specially in Chittagong. KR: As you know, many industrial units were set up after getting assurance of gas supply to the city. But, these industries didnt get gas connections. So, machinery of thousands of crores of taka remained idle. Many entrepreneurs are not being able to repay the bank loans as they couldnt go for production at all. Many units didnt get gas connections even after depositing money following the demand note issued by Karnaphuli Gas Company. These units are also closed.

The gas crisis in Chittagong has not been created overnight. There should have been alternative thought when we witnessed less production in Bakhrabad. Also, steps should have been taken when production started to be decreased in Sangu.

EP: Have you any study from your metropolitan chamber? KR: The specific observation of the Chittagong Metropolitan Chamber of Commerce and Industry (CMCCI) is that no long-term industrial planning can be implemented by the present proven gas reserves of the country. We dont see any prospect of big gas field in near future. The couple of small fields discovered in recent times will
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EP Editor Mollah Amzad Hossain took the interview. Following are the excerpts: EP: Chittagong has been experiencing energy crisis for last five years. Why is

not be able to contribute significant role. In this perspective, weve to decide to import LNG. Otherwise no new industry will be set up. Well not get foreign investment. Many foreign investors, who were interested to invest in Bangladesh, changed their mind and went to other countries. EP: Many think that the energy crisis in Chittagong is due to continuous ignorance of the successive governments. What do you think? KR: Once Chittagong was declared commercial capital of Bangladesh. If you judge the situation before and after the announcement, youll find that the observation is right. The largest industrial area of the country is in Chittagong. But, there is no special effort to supply gas and electricity for the industries although export processing zones get special facilities. However, the present governments attitude towards Chittagong is positive. Honorable Prime Minister in 2009 had announced to import LNG and we had expected that the LNG would be supplied by 2012. EP: Data show that the generation capacity of plants in Chittagong area is 1,200 MW. But, Chittagong experiences load shedding although the demand is 700 MW. What do you think? KR: You see electricity in other areas is used mainly for household consumption and official purposes. But, the lion part in Chittagong is used for industries. Half the electricity demand is being supplied to Chittagong. Not only Chittagong dwellers are losers of the short supply, but the entire country from the economic point of view. The people are being deprived of the benefits that would have been possible if the gas and electricity supply remained equivalent to their respective demand. Export earnings also being affected, as a result. The existing industries are forced to consume expensive energy for lack of grid supplies, making products expensive and forcing the people to buy products at higher prices. The export goods are also losing competition in the international market.

EP: How do you evaluate the contingency measure like closing down of factories to face the situation that emerge out of gas supply shortage? KR: Although it is said that the demand for Chittagong is 400 MMCFD, the actual demand is higher. The industries having demand note are not included in this list. I think, if a decision is taken to supply 600 MMCFD gas to

Considering the gas crisis, a step was taken in 2009 to import LNG. Several visits were also made to Qatar. But, we are not watching any step after we passed half of 2012. If any quarter is involved in the bid to foil the Prime Ministers plan of importing LNG, they should be identified and punished. EP: Do you think the plan to import LNG is really pragmatic? KR: The annual gas demand in Chittagong at present would be 1.0 TCF. Petrobangla is already in a suffocating situation. If the situation continues, not only Chittagong, but also the entire country will watch a disastrous consequence. You see all the steps taken to minimize the gas crisis are adhoc or interim. Not only for Chittagong, but to meet the demand for entire country and to run the wheels of the economy the country will have to go for importing LNG. The talks about the high cost of LNG are worthless. You see people accepted the tariff of the electricity although it was increased in phases one after another. I think the situation will be same in case of LNG. If the government ensures LNG, the consideration will be getting gas supply, not its price. Moreover, the price comprising both local gas and imported will be at tolerable level. EP: Another aspect, how do you look into the governments bid to go for coal-based power plants with imported coal, leaving domestic coal unutilized? KR: You must see the power situation has improved. Now-a-days, there is almost no load shedding. The present generation is almost 6,000 MW. But, the government is discouraging new connections. The actual demand is much higher than the generation comprising all options like rental, quick rental and IPPs. So, I think the government took right decision in going for imported coal-based power plants, instead of sitting idle for local coal. If we can produce our own coal, the coal import will decrease automatically.
EP
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Not only the households in Chittagong are experiencing load shedding for this energy crisis, the industrial units are also experiencing the load shedding. The situation is similar across the country, not only in Chittagong. It decreased the industrial production, hampered export businesses. The GDP growth couldnt achieve target due to the crisis.

Chittagong, there will be demand for more within a month. The gas crisis in Chittagong has not been created overnight. There should have been alternative thought when we witnessed less production in Bakhrabad. Also, steps should have been taken when production started to be decreased in Sangu.