EP_6

EditorMollah M Amzad Hossain

Advisory EditorAnwarul Islam TarekSaiful Amin

International EditorDr. Nafis Ahmed

Contributing EditorsSaleque SufiDr. A RahmanIslam SharifKhondker Rezaur Rahman

Managing EditorAfroza Akther Pervin

ReportersJannatul FerdushyNahid Anjum Siddiqui

Design & GraphicsMd. Monirul Islam

PhotographyBulbul AhmedFarzana Karim Chowdhury

Magazine AdministratorAKM Shamsul Hoque

ProductionMufazzal Hossain Joy

Computer GraphicsMd. Uzzal Hossain

Technical SupportLaser Scan/Colour Touch

Circulation AssistantKhokan Chandra Das

Editorial, News and CommercialRoom 509, Eastern Trade Center56 Inner Circular Road (VIP Road)Naya Paltan. GPO Box : 677Dhaka-1000, BangladeshTel & Fax : 88-02-8354532Email: [email protected]

[email protected]: www.ep-bd.com

PriceBangladesh: Tk 25, SAARC: US$ 3,Asia: US$ 5, Europe: US$ 6, NorthAmerica, Africa & Australia: US$ 7.5

Khalilur Rahman, Chairman ofKDS Group of Industries &

President of Chittagong MetropolitanChamber of Commerce & Industry real-ized that the present energy crisis in theport city of Chittagong can’t be resolvedonly through local sources. Heexpressed his valuable views about Ctgenergy crisis in an interview with EP.

45

9According to an analysis, it ispossible to quickly solve the gascrisis in Chittagong through

bringing gas from the middle part ofthe country. Bakhrabad-Chittagonggas pipeline can at best transmit 250MMCFD of gas, which can be sup-plied entirely to Chittagong if thedemand of Comilla and Noakhali canbe met with local supplies. But there isa concern whether Chittagong wouldagain have to face gas deficit if gas hasto be supplied through the newpipeline from Bakhrabad toSiddhirganj. GTCL managing directorAminur Rahman said the gas produc-tion is increasing with the growingdemand while pipeline capacitywould be increased after installation oftwo compressor stations by 2013.

Chittagong, which is considered as the lifeline of Bangladesh economy, hasbeen facing acute energy crisis for a long time. Operations of the country’s topseaport and numerous heavy industries are being hampered. Gas supply isalmost half of the city’s demand. Electricity supply falls short of demand as well.Both power and gas demand are increasing in the busy commercial city wherenew gas connections remained suspended for the last three years. There ishardly any sign that the situation would improve in the foreseeable period oftime, at least during the remaining period of the present government with only alittle more than one year left. However, government officials are still confidentthat it would be possible to mitigate the energy crisis of Chittagong throughimporting LNG, an initiative taken to implement by this year. They now hope toimport LNG from January 2014. Experts stressed the need for a coordinatedlong-term initiative to solve the crisis ensuring that the bureaucracy would notcause any delay in implementation of the projects. They think it may bepossible in the long run to solve the power crisis through importing coal, butthere is no alternative to increased gas supply for maintaining industrialproduction.

C

COVER

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

For Space Bookings Contact :

The Energy & Powerhad introduced GreenPage marking its step-ping into the 7th year tocampaign for efficientuse of energy, energyconservation and usingenvironment-fr iendlyenergy. Encouraged bythe readers andpatrons, the EP decidedto continue with thepages as it is steppinginto the 8th year. TheEP would make its besteffort to keep up thecampaign

Page: 39, 41, 42

Green Page

5 WORLD WATCH

Latest Development in World

6-7 SNAPSHOT

Latest Development

9 COVER

Chittagong Energy Crisis not to Be Solved Soon

12 COVER PLUS

Kutubdia Gas Field: EMRD Rejects Santos Request

COVER ARTICLE

15 How Long Ctg to Suffer From Energy Crisis

SPECIAL ARTICLE

19 Maintaining Electricity Price within Bearable Limits

ARTICLE

21 Why Cyber Security is Critical for Smart Grid?

REGION

23 Coalgate Rocks Delhi

SPECIAL REPORT

27 Rampal Power Project Uncertain

REPORT

29 Obama Spars With Romney on Energy

31 TAPI Train Moving Smoothly

32 Greater Probability From Risk Potential

33 800,000 Tonnes Furnace Oil For Rental Plants

35 India's Grid Chief Shifts Blame for Blackouts

COLUMN

37 Coal Deals Strike Blows to Manmohan Singh

GREEN PAGE

39 Focus More on Renewable Energy: Analysts

41 $155m Additional Fund From WB Likely

41 Generation of Renewable Energy in Khulna Stressed

42 Chicken's Litter a Cheap Source of Power: IFC

INTERVIEW

45 Khalilur Rahman,

Chairman of KDS Group of Industries & President of

Chittagong Metropolitan Chamber of Commerce &

Industry (CMCCI).

5

WORLDWATCH

Geneva energy trad-er Gunvor bought a30 percent interest inone of Russia's lead-ing coal producers

which plans to boost production five-fold.

The deal, described by Gunvor as its "first foray intoRussian coal mining", gives it a stake in Kolmar, a coalmining and processing company with reserves of morethan 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 withLuxembourg-based investment company Volga Resourcesfor a 60 percent stake in Kolmar, it added.

"Kolmar is focused on the development of a long-termstrategy aimed at bringing the annual production volumefrom current two million tonnes to 10 million tonnes perannum," said Kolmar chief executive Andrey Churin.

Geneva TraderTakes Stake inRussian Coal Giant

British energygroup BP saithat it had

agreed to sell its Carson refinery in California to US peerTesoro 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 theclean-up bill and compensation costs from the devastating2010 US Gulf of Mexico oil spill.

The troubled energy major has agreed to sell $26.5 billionof assets since the start of 2010, including the latest deal.

"BP announced today it has reachedagreement to sell its Carson, Californiarefinery and related logistics and market-ing assets in the region to TesoroCorporation for $2.5 billion in cash," thegroup said in a statement.

BP said that the Carson sale would allowit to focus its investment and operations on the Britishgroup's three refineries in the northern United States.

BP Sells US RefineryFor $2.5b to Tesoro

Construction of the Southern Lineof the Central Asia-China GasPipeline, an energy co-operation

project between China and Kazakhstan, has started inQyzylorda, Kazakhstan.

The project includes the engineering, procurement andconstruction (EPC) of a 571.6 km pipeline with a diameterof 1,067 mm. The EPC contract was awarded to CNPC affil-iated China Petroleum Pipeline Bureau (CPC).

Along the coast of the Aral Sea, the pipeline traverses theGobi Desert, sand dunes and saline and alkaline lands.CPC has completed preparation works within one year’stime, including campsite construction, CRC crew andequipment relocation, and testing of full automatic weldingequipment, etc.

The pipeline is listed in Kazakhstan’s ten priority projects.Once operational, it will deliver natural gas to dozens of

cities and hun-dreds of villagesto help optimizethe country’senergy structure,and improve theliving standard forpeople in SouthKazakhstan.

CA-ChinaGas Pipeline

Natural gasneeds from Indiaare driving the

momentum behind a multilateral natural gas pipeline fromTurkmenistan, a U.S. diplomat said.

The government of Turkmenistan signed agreements in Mayto sell natural gas to its Asian partners through the 1,043-mile Turkmenistan-Afghanistan-Pakistan-India pipeline.

U.S. Assistant Secretary of State for South and Central AsiaRobert Blake, on a tour of Central Asia, said the project wasan important regional energy bridge.

"There is now a real market in India and they can afford topay for the gas," he was quoted by the Press Trust of Indiaas saying. "Turkmenistan has sufficient gas to fuel thispipeline."

Turkmen President Gurbanguly Berdimuhamedov said theplanned natural gas pipeline would ensure the safe deliveryof more than 1 trillion cubic feet of Turkmen natural gas todownstream consumers.

The pipeline has financial backing from the AsianDevelopment Bank. Prospects are complicated, however,by security concerns in war-torn Afghanistan.

Blake acknowledged were there "a lot of risks to participat-ing in such a pipeline." TAPI is seen as an alternative to asimilar network planned by Iran.

U.S. Lauds Prospectsfor TAPI Gas Pipeline

The Russianenergy giantGazprom andfour Turkish

companies have signed an agreement to supply Russiangas to Turkey via the Western Route, the Zaman newspa-per reported quoting a source in the Turkish Energy MarketRegulatory Authority (EPDK).

The document was signed by Akfel Gaz, BosphorusGaz,Kibar Holding and İndex Holding. The previous gassupply agreement between Gazprom and Turkish Botasexpires in September 2012.

Gazprom, Four TurkishCompanies Ink GasImports Deal

The pipeline, connecting central Asia & China

Power Division is set toink the final deal withEnergy Holdings

International INC and its subsidiary EHII MENA DMCC,Dubai, UAE next month.

According to the power division, the power developmentboard (PDB) in June inked a memorandum of understand-ing (MoU) with the UAE Company to build two 225megawatts (mw) each capacity combined cycle powerplants at Bibiyana and Fenchuganj.

“If they could successfully complete the task of installing225 MW Bibiyana power plants in next six months thenthey will get the opportunity o install Fenchuganj 225 MWpower plant,” A senior official of the division said.

According to the MoU the Energy Holding will install thecombined cycle power plant at a cost of 3.85 cent per unit.

The plant would be installing at BOO basis.

Deal on BibiyanaIV Soon

6

SNAPSHOT

S t a t eMinister forPower and

Energy Mohammad Enamul Haque asked the diplomaengineers to work hard to provide better electricity supplyto the people.

Addressing a pre-iftar discussion at the Institute ofDiploma Engineers Bangladesh auditorium, he said thegovernment is committed to ensure the best electricitysupply to people.

DPDC Diploma Engineers Association hosted the pro-gram.

“Diploma engineers can play an important role in reach-ing electricity to the con-sumers,” he added.

Diploma Engrs Askedto Ensure Power Supply

StandardCharteredBank and

Midland Power Company Ltd have signed a financingagreement to facilitate implementation of 51 MW gas firedpower plant at Ashuganj.

Standard Chartered will provide a Structured TradeFinance facility for US$ 32 million for setting up this 51MW natural gas based Independent Power Plant (IPP).Standard Chartered Bank is the Sole Arranger and Lenderof this landmark facility and is proud to be associated withMidland Power for this prestigious transaction that willassist in adding new power generation capacity in thecountry.

The Bank will provide a USD 21 million term facility forfinancing the capital expenditure of the project. MidlandPower is a joint venture company of two large local cor-porate of Bangladesh - Viyellatex Group and Youth Group.

These two entities came together to implement the projectunder the IPP (Independent Power Producer) policy of theGovernment of Bangladesh, where Bangladesh Power

DevelopmentB o a r d(BPDB) is thepower pur-chaser underthe relevantP o w e rP u r c h a s eA g r e e m e n t(PPA).

Stan Chart to Finance$32M to Midland Power

T h eg o v -e r n -

ment is planning to hire 250 locomotives and tank wagonsof different size from India to ensure fuel supply to powerplants.

“Power Division has forwarded a proposal to the Ministryof Finance for approval to procure the bulk amount of rail-way equipments,” the official said.

The Power Division has already formed a high-poweredcommittee comprising officials from power and railwaydivisions.

Besides, the Power Division on March, 2012 approved aproposal to hire some railway equipments from India.

The division submitted a requirement for around 190,000tonnes of diesel and furnace oil to run it’s nearly threedozens of fuel-oil based power plants.

Govt. to Hire Locomotives,Tank Wagons from India

The multi-national plantKarnaphuli FertilizerCompany (KAFCO) went

into production with the resumption of gas supply by theKarnaphuli Gas Distribution Company limited (KGDCL).

The KAFCO went into annual overhauling on March 16.With the annual overhauling of KAFCO, more than 50MMCFD saved gas had been supplied to PowerDevelopment Board for power generation.

KAFCO, a multinational plant was set up in 1992 with theproduction capacity of 5.61 lakh tonnes and is currently

producing morethan 5 lakh tonnesof fertilizer annual-ly.

Bangladesh govern-ment is supposed topurchase KAFCOfertilizer at interna-tional rates.

KAFCO ResumesProduction

Standard Chartered Bank & Midland Power

Company Ltd have signed a financing agreement

Karnaphuli Gas Distribution Company Ltd

7

SNAPSHOT

The output of naturalgas by the country'slone oil and gas explo-

ration company -- Bapex -- has more than doubled in thepast one year, which is considered one major achievementin ensuring future energy security of Bangladesh.

The Bangladesh Petroleum Exploration and ProductionCompany Ltd (Bapex) is now supplying around 82 millioncubic feet per day (MMCFD) of gas to the national grid. Thesupply was only 38 MMCFD a year ago.

"The stepped-up exploration activities and funding assis-tance by the government are contributing to enhance ourcapacity," said Bapex Managing Director Mortuza AhmadFaruque.

Apart from drilling new wells and working over the oldwells, the Bapex brought two new gas-fields on-line lastyear, resulting in augmentation of its overall production.

He said the company is also developing a group of new andenergetic professionals to carry out the country's future gasexploration activities.

The Bapex is producingaround 82 mmcfd of gasfrom 10 producing wellsin five gas-fields.Semutang and Sundalpur,two new gas-fields of theBapex, are now supply-ing around 11 mmcfd and10 mmcfd of gas respec-tively, Faruque said.

Bapex's OutputDoubled in A Year

The High Court(HC) asked thegovernment to

explain in two weeks why filling up of Moidara river inRampal upazila of Bagerhat near the Sundarbans for set-ting up a coal-fired power plant should not be declaredillegal.

The court came up with the rule following a writ petitionfiled by Save the Sundarbans, an environmentalist organi-zation, saying that the government authorities concernedhave been filing earth in the Moidara river to set up thepower plant violating the environment laws.

Earlier on March 22, the HC in response to another writpetition issued a ruleupon the governmentto explain why itshould not be directednot to set up the pro-posed 1,320Megawatt coal-firedpower plant atSapmari -Katakhal iMouja of Rampal.

HC QuestionsRampal Power Plant

Sundalpur gas field

High Court

Russia is willingto provide a cred-it up to 85 per-cent of the esti-mated cost of Tk

12,000-15,000 crore needed for setting up of the first-ever nuclear power plant in Bangladesh.

It will initially provide around Tk 4,000 crore (US$500million) for conducting necessary studies and preparingthe design for the 1,000 MW plant.

The agreement was reached during a two-day meetingbetween Dhaka and Moscow recently in the Russian cap-ital, officials at the Science and Technology Ministry said.A formal agreement is expected to be signed by the endof this year.

Bangladesh offered an interest of three percent on theloan.

State Minister for Science and Technology MinistryYeafesh Osman, who was in the delegation, said Russiawould submit a proposal on the loan agreement within amonth.

Russian officials assured Bangladesh that Moscow wouldconsider Dhaka's proposal for a reduced interest rate, headded. He said the Russian delegation asked for com-pleting in two years all the 60 studies required for settingup the plant, but Bangladesh would try to do so beforethat.

Bangladesh has already conducted 12 studies, Russia willconduct 22 studies and then Bangladesh will do theremaining 26.

A conference on nuclear power plant will be held inDhaka at the end of this year. Experts from home andabroad, including those from the International EnergyAgency, and different stakeholders would participate.

Russia May Provide85pc Fund for NukePower Plant

The state-o w n e dBangladeshPe t ro leumCorporation

(BPC) incurs a loss of more than Tk 100 crore in the nameof ‘system losses in handling imported fuel oils.

As the country’s lone importer and distributor of petrole-um products, BPC incurs the loss due to rampant pilfer-age and corruption at terminals and depots.

A nexus of BPC employees anddishonest traders is allegedlyinvolved in a practice of manip-ulation to pilfer huge quantitiesof costly imported fuels at thetime of handling and distribu-tion.

BPC Incurs Loss of Tk100 Crore in the Nameof ‘System Loss’

9

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...

Chittagong city is home to themajor seaport of Bangladesh. Italso hosts some, heavy indus-

tries, power plants and other commer-cial establishments. However, it is suf-fering from an acute energy crisis thatis forcing the economic activities torun at less than their true potential.

The city is getting little more than halfof its gas demand of 400 MMCFD (newgas connections have remained sus-pended for the last three years, sup-pressing actual demand) and 75-80MW short of its electricity demand for675-700 MW.

The Korean EPZ located in Chittagongwants 30 MMCFD of gas while newdemands for industrial and commer-cial connections are piling up whenonly half the existing demand can bemet at present, according to JamilAhmed Alim, Managing Director ofKarnafuli Gas Distribution CompanyLimited (KGDCL).

The extent of the short supply of ener-gy has been visible during the holymonth of Ramadan when the city hadto suffer a lot although other parts ofthe country experienced hardly anyload shedding or shortage of gas sup-ply. Thanks to the contingency meas-ures the government had taken to jackup gas production to its peak at 2240MMCFD and maximum power genera-tion of 6,350 MW. However,Chittagong was deprived of the bene-fits.

The energy crisis is not unique toChittagong as it is applicable to thecountry as a whole. But what is differ-ent for Chittagong is that the problemthere has not improved whencompared against someimprovements in other parts ofthe country. There is hardly anysign that the situation wouldimprove in the foreseeablefuture, at least during theremaining period of the presentgovernment, with only a littlemore than one year.

It’s not that the government doesnot have the plans to overcome

the energy problems — be it gas supplyor power supply -- of the city. Theimprovements in the other parts of thecountry during about last four yearsindicate that the port city has been leftout of the development as the plansremaining only on paper. And theprospect for improvement at least innext one year period remains mostlyunclear, if not impossible.

“I think, the situation is due to lack ofappropriate initiatives by the govern-ment,” said Murshed Murad Ibrahim,president of Chittagong Chamber ofCommerce and Industry (CCCI).“There has not been any mentionableprogress in this regard during last 44months of the government. I don’tthink the government can do some-thing mentionable in next 16 monthsonly.”

He said no investment took place inChittagong during the last three yearsdue to the energy crisis as the existingfactories could not maintain produc-tion at desired level due to supplyshortage of gas. He expressed concernthat many entrepreneurs are nowabout to become bankrupts as they didnot get gas connections even after set-ting up of all machinery at their facto-ries.

Official figures show that the energycrisis in the port city is mainly becauseof shortage in gas supply that restrictspower generation to that short of thedemand. Problems in furnace-oil-based plants with 355 MW capacityand lack of adequate water flow forhydro-power plants of 230 MW capac-ity made it difficult for the power plants

to generate half of the total installedcapacity of 1212 MW, including gas-based plants of 627 MW. Chittagonghas to depend on national grid to getrequired power supply.

KGDCL Managing Director, JamilAhmed Alim sees very poor prospectfor getting more gas than whatChittagong gets now from theBakhrabad-Chittagong pipeline. Thereis no information yet on any new gassupply to the Chittagong gas network.He does not have any solution to theproblem for now other than waiting forLNG import or discovery and extrac-tion of gas from the sea bed.

Senior officials of the government werestill confident that it would be possibleto mitigate the energy crisis ofChittagong through imported LNG, aninitiative the government had taken toimplement by this year. The initiativehas not progressed much. A senior offi-cial of Energy Ministry claimed thatthey would be able to import LNG byJanuary 2014.

The work-in-progress, however, doesnot support the claim. A joint-ventureof Astra Oil Co. Ltd. Singapore andHiranadini, India has won the tenderfor construction of LNG terminal andRe-gasification system. They would beawarded the contract subject to suc-cessful negotiation scheduled thismonth. They need 15 months to imple-ment the project. Meanwhile, landacquisition for the installation of 91-KM pipeline from Moheshkhali toChittagong could not be completedyet. GTCL managing director AminurRahman, however, said they have the

skill to complete the projectwithin the stipulated timeframe.

The government has signed amemorandum of understandingwith Qatar to get LNG, but therehas been no progress in thisregard yet. A Petrobangla offi-cial said that they would fix theLNG price considering Japancrude cocktail. It would costUS$ 16 per MMBTU (about athousand cubic feet) plus LNGterminal charge.

11

He said the average price would not bemore than US$ 7 per thousand cubicfeet if we blend the price of LNG withPetrobangla gas price (US$ 1.5 perthousand cubic feet). “I think the localmarket could afford the price.”

Special assistant to the past caretakergovernment and PetroleumEngineering Professor of BUET Dr M.Tamim, however, apprehended that theprice of LNG would be far more thanwhat the Petrobangla officials estimate.He does not think that it would beavailable below US$ 18-20 consider-ing the experience of India and Japan.

“The local market is not prepared yetto consume LNG. It would not bringany result in the short term,” said BUETProfessor Dr Ijaz Hossain, an energyand environment expert.

“Supply of energy is the main concern,not the price,” said CCCI presidentMurshed. “The consumers ofChittagong would not protest to buyenergy at higher price if the govern-ment can supply it.”

The experts, however, stressed on opti-mum utilization of local sources ofenergy to come out of the crisis,instead of depending on LNG import.They suggested reducing gas supply toBakhrabad Gas Systems Limited areasfrom the Bakhrabad-Chittagongpipeline, and increasing supply fromOnshore Chittagong and offshore.There has been an initiative to increasegas supply to the pipeline while Bapexis working on drilling a developmentwell in Semutang to add 20 MMCFDgas for Chittagong. Meantime, 130MMCFD of gas could be added to thesurrounding areas of Bakhrabad distri-bution areas from Sreekail, Salda river,Sundalpur and Begumganj, said Bapexmanaging director Mortuza AhmadFaruque.

The prospect, if any, for oil and gasexploration in the Bay of Bengal is notan immediate solution to the crisis inChittagong as it would take a long time,perhaps 5-6 years to develop. US com-pany ConocoPhillips has just been con-tracted to explore the deep-offshoreblocks 10 & 11. Sangu recently started

supplying gas from Sangu 11 thoughthe amount is not much. However, theyhave a plan to explore Magnama andHatia afresh. Considering explorationin the sea is expensive and it is notcommercially feasible to drill a singlewell, Santos proposed to developKutubdia gas field in the block no 16.But the Energy Ministry turned downthe proposal, apparently closing one of

the possible options to mitigate theChittagong crisis.

On the other hand, Chinese Sinopec-Shengli was holding discussion withauthorities to work jointly with Bapex towork on four exploratory wells in Patia,Joldi, Sita pahar and Kachhalong ofChittagong. Bapex board of directorshas not yet approved the proposal. An 0

12

official of the Energy Ministry informedthat the government has taken a goslow strategy in this regard consideringthe bitter experience of Bapex-Nikojoint venture. If undertaken it wouldhave been possible to complete theworks here in only two years and sup-ply the gas to the gas-starved city easily.

According to an analysis, it is possible

to quickly solve the gas crisis inChittagong through bringing gas fromthe middle part of the country.Bakhrabad-Chittagong gas pipelinecan at best transmit 250 MMCFD ofgas, which can be supplied entirely toChittagong if the demand of Comillaand Noakhali can be met with localsupplies. But there is a concernwhether Chittagong would again have

to face gas deficit if gas has to be sup-plied through the new pipeline fromBakhrabad to Siddhirganj. GTCL man-aging director Aminur Rahman said thegas production is increasing with thegrowing demand while pipelinecapacity would be increased afterinstallation of two compressor stationsby 2013. “So, it is pointless to thinkabout the concern of fresh gas crisis inChittagong”, he said.

Meanwhile, GTCL has had a primaryroute survey few years back to installan alternative pipeline in theBakhrabad-Chittagong line. But the ini-tiative has been stalled due to givingimportance on LNG import. “GTCLdoes not have that plan for now,” headded.

Whether there is any alternative optionto supply most part of the power sup-ply from elsewhere, PGCB director(technical) Tapan Kumar Roy said tech-nically it is not possible as it would cre-ate a new problem of low voltage,forcing a shutdown of the powerplants.

The BPDB has signed a MoU with aChinese organization to set up 1320MW coal-based power plant inChittagong, but the process for imple-mentation has not been started yet. Itmight take 7-8 years to get supplies fromthe station. BPDB also signed a contractwith Orion Group to install a 382 MWcoal-based plant in the city, which isexpected to be commissioned in next40-44 months.

The sector experts think that it may bepossible in the long run to solve thepower crisis through imported coal, butthere is no alternative to gas supply tomaintain fertilizer production, otherindustrial production and setting up ofnew industrial units.

“It seems to me that the elected repre-sentatives from Chittagong have failed toplay appropriate role in solving the cri-sis,” said CCCI president Murshed.

The sector experts stressed the need for acoordinated long term initiative to solvethe crisis by ensuring that the bureaucra-cy is not the cause for any delay inimplementation of the initiative.

13

EPEP

Chittagong is the gateway toBangladesh. It is the secondlargest city after Dhaka and the

largest industrial city of Bangladesh. Ithandles majority of the export-importactivities. The green hills and the blueocean make it picturesque and eyepleasing to the visitors. But for the lastseveral years, it is suffering from chron-ic energy crunch, specially natural gas.Two large fertilizer manufacturingplants -- government owned CUFL andmultinational KAFCO -- were shutdown for several months for lack of gassupply. As soon as they brought intooperation recently, load shedding start-ed crippling businesses, commerce andcivic life. Two major power generationunits at Raujan were to be shut downimmediately. Other power plants can-not also be run to their full capacity.CNG fuelling stations, industries,domestic and commercial users werealso suffering from poor quality gassupply. New gas connections to indus-tries have been suspended for the pastseveral years. A very potential KoreanEPZ situated at Southern bank ofKarnafuli Riverremains almost barrenfor years. For the lastfew years, all otherconnections have alsobeen put on halt.KGDCL, aPetrobangla companyresponsible for gassupply to Chittagongrequiring about 350MMCFD gas supply,merely gets about 230MMCFD. No credibleplan to improve thesituation is visibleuntil now or for nearfuture. Many thinks,

Chittagong is destined to suffer forindefinite period.

The region gets gas supply fromNational Gas Transmission Gridthrough Bakhrabad —Chittagong GasTransmission Pipeline. After meetingthe requirements of BGSL-operatedgreater Camilla and greater Noakhalifranchise areas, about 200 -215MMCFD gas can be allocated forChittagong, about 25 MMCFD gas nowcomes from Santos operated ShanguOffshore Gas Field. BAPEX operatedSemutang also supplies about 10MMCFD. At present there are no othersources of gas supply to Chittagong.Gas production from Feni Gas Field sit-uated at strategic location remainsunaccessed as Petrobangla failed toresolve its long standing dispute withNIKO.

Government is accounting for hugepenalty to multinational companyKAFCO for not obliging to its gas sup-ply commitment over a long time.CUFL also remains shut for a while.Fertilizer plants develop various

mechanical complexities and opera-tional problems -- these are kept out ofoperation for a long time. Substantialavailable capacity of gas-based powergeneration in Chittagong also remainsidle prolonging power crisis. Manylocal industrial entrepreneurs setting upsmall to large gas-based industries werewaiting for a long time for gas connec-tion to start production. Various export-oriented industries are also sufferingfrom huge business loss. Huge poten-tial of Korean EPZ remains unrealized.Chittagong Chamber of Commerce andIndustry have brought this situationseveral times to the attention of policy-makers. Media publishes regularcolumns about the situation. But apartfrom sweet promises, nothing positivehas happened so far. Woos of‘Chittagongians’ for gas and powercontinues.

What are The Reasons for Crisis?We are aware that Bakhrabad GasSystems Ltd (BGSL) was created in early1980s as a vertically integrated gascompany with a vision for serving thegas demand of entire South Eastern

region of Bangladesh,particularly Chittagongregion. Bakhrabad andFeni Gas Fields weredeveloped to serve thepurpose initially. A 178KM long 24 inchesdiameter ANSI 400Bakhrabad—ChittagongGas TransmissionPipeline was con-structed to feed greaterComilla excludingBrahmanbaria (alreadyunder titas gas fran-chise at that time),greater Noakhali andChittagong region.

15

COVER ARTICLE

How Long Ctg to SufferFrom Energy Crisis

Engr. Khondkar Abdus Saleque

A view of the government owned Chittagong Urea Fertilizer Company Ltd

This pipeline at design condition (max-imum allowable operating pressure of960 Psig) had a capacity to transport350 MMCFD.

Chittagong distribution system has awell designed Ring Main around it andwell crafted network fed fromChittagong City Gate Station atFaujderhat, 5 High Pressure DistrictRegulating Station (HP DRS) and 17 IPDRS As the proposed off take of gas atChittagong was delayed a bit andDhaka Gas System continue to growexpeditiously a 75 KM Bakhrabad —Demra ANSI 600 Pipeline was builtwith a design capacity of 220 MMCFDin 1984 to divert gas to greater DhakaTitas Gas Franchise area. Eventually alllarge gas users of Chittagong came onstream and Chittagong gas market start-ed growing exponentially. Keeping upwith market growth Petrobangla andBGSL should have had perspectiveplan with vision. But very unprofes-sional operation of Bakhrabad GasField at more than prescribed maxi-mum rate created serious productionproblem from early 1990s. Gas reser-voir experts suggested capping produc-tion to 180 MMCFD and annuallyadjusting it lower by 10 MMCFD. Butover ambitious attempts to produce at200 plus caused extensive damage toreservoir pay sands. Sand, water andliquid hydrocarbon flowing with gasharmed subsurface and surface infra-structures of the gas field. Bakhrabad —Chittagong and Bakhrabad — Demrapipeline also got saturated with liquid.Condensate even entered Dhaka CityDistribution network bypassing DemraCity Gate Station.

The situation could have been some-how remedied through carrying out onstream pigging operation of thepipelines. But by mid 1900s, the situa-tion reached such an alarming statethat the production from BakhrabadGas Field was required to be cut downfrom 160 MCFD to 80 MMCFD causingshutting down of fertilizer and powerplants in Chittagong areas in 1996.However, the situation could also beovercome through expeditious con-struction of Ashuganj — Bakhrabad 58KM 30 inches diameter gas transmis-

sion pipeline. This pipeline completeda national gas grid in the eastern side ofJamuna river facilitating gas diversionfrom surplus North — Eastern part toSouth — Eastern region. Discovery ofShangu Offshore Gas field and its expe-ditious development in 1998 came as ashort term blessing for Chittagong as ittook over major gas supply load ofChittagong area from 1998. ButPetrobangla learned very little from theproduction fiasco of Bakhrabad GasField lesson. Again Shell — Cairn wasencouraged to produce much beyondits experts recommended capacity of140 MMCFD and met with similar cat-astrophic fast depletion. By 2004 pro-duction came down to 100 MMCFDand by 2008 to 40 MMCFD and nowmerely to 25 MMCFD. In the meantimegas demand in Chittagong region grewexponentially to beyond 300 MMCFD.Petrobangla in anticipation of theseshould have planned and implementeda Gas transmission loop line fromBakhrabad — Chittagong as suggestedby transmission professionals. It shouldhave persuaded IOC operator to devel-op Magnama and Hatiya on fast track.It could be extremely benefitted if itcould more positively interact withMyanmar and India from 2005 forimplementation of Myanmar —Bangladesh - India tri nation gaspipeline. The open access pipeline wasplanned to be routed throughCoxsbazar and Chittagong. But none ofthese happened.

Bakhrabad — Chittagong pipeline in itspresent condition can transport only250-260 MMCFD gas of which about50 MMCFD gas is required for KGDCLleaving about 210 MMCFD forChittagong. Small Semutang can sup-ply about 10 MMCFD and for the lastfew months after some frantic works ofSantos, Shangu is supplying about 25MMCFD. After all these, Chittagongsystem has a gas deficit of about 200MMCFD.

What Are Government Plans?The present government that claimedto have undertaken extensive home-work of energy and power situationshould have had Chittagong gas supplyscenario in view. It announced plan for

importing about 500 MMCFD equiva-lent LNG import for Chittagong by end2012. Experts raised genuine concernsabout LNG import both from technicaland commercial challenges. LNGimport situation in August 2013 has notonly become uncertain but there isevery doubt now that whether it will bematerialized at all in the near future.The government also has plans to setup some imported coal-based powerplants in Chittagong to meet its growingdemand for power in the region.Experts also have concerns aboutimported coal-based power generation.Santos should have been encouragedto expedite development of Magnamaand Hatiya prospects and also developKutubdia (with block 16). But beau-racracy of EMRD has created all sorts ofbarriers to this option. Petrobanglaunder instruction of EMRD hasinformed Santos that Kutubdia is takenout of block 16 scope of works of PSCwith Santos and will be tendered sepa-rately. The seismic activities ofMagnama from September 2012 andexploration from 2013 will nowbecome uncertain as it is highly unlike-ly that Santos will be willing to mobi-lize expensive drilling rig to drill one ortwo wells at offshore. The decision fortaking out Kutubdia field out of Block16 has taken without actively consider-ing its consequences.

Experts always believed thatConocoPhillips would struggle withexploration and development of possi-ble gas resources in its allotted offshoreblocks as its bid for those blocks werenever based on sound economic analy-sis. It is not sure as to whenConocoPhillips can explore, discoverand develop some gas resources forChittagong.

The government is said to have updat-ed draft PSC 2012 document for freshoffshore PSC round. In draft PSC 2008,there were not many incentives formajor IOC to bid for it. We believe thatno genuine efforts were made to assessas to why major IOCs stayed away frombidding. Deep water drilling requirescompanies taking huge risks. If thereare no substantial incentives, genuineIOCs will not be interested in making

16

risk investments. Any repeat of PSCBidding Round 2008 or more stringentconditions will discourage major IOCsand bring in small to medium littleknown IOCs which after few years oftrial and error will relinquish theblocks. That situation will not bring anyblessing for Bangladesh.

Suggestions & RecommendationsIn the greater national interest of thecountry, it has become extremely nec-essary to take some priority actions toremedy the situation.

The government should realize thatimport of LNG for technical constraintsis not feasible over near terms.Similarly, imported coal-based powergeneration in the near terms is unlikelyto materialize. Hence, while pursuingfor both the following other actionsmay be taken to address very criticalsituation of Chittagong.

�After drilling additional wells atBibiyana, Titas and other Gas Fieldsand commissioning of gas pipelinecompressor station at Ashuganj about1000 MMCFD gas can be transportedto Bakhrabad Gas Field transmissionhub. For diverting surplus gas toChittagong, the government shouldadopt a high priority national project toconstruct a 180 KM long 30 inchesdiameter gas transmission loop lineproject from Bakhrabad — Chittagong. Itwill facilitate diversion of about 500MMCFD gas from national grid forChittagong by 2014. ExistingBakhrabad — Chittagong pipeline in thepresent sate cannot transport more gasfrom national grid. ANSI 400 pipelinefor thinning of pipe wall thickness fromsevere internal corrosion cannot alsobe operated at maximum allowableoperating pressure.

�Resolve issues with NIKO withoutany delay and exploit the gas resourceof Feni Gas Field.

�Australian IOC Santos must beencouraged and supported to initiatedevelopment of Magnama & Haityaprospects and Kutubdia Gas Field. Theunprofessional decision of taking outKutubdia Gas Field from block 16 andlet it out for tender separately must be

reversed. This action will be counter-productive as no major IOC will beinterested investing in a small area. Inextreme situation this may lead to exitof Santos from Bangladesh. The possi-bilities of getting gas from Magnama,Hatiya coming on stream by 2016 willbecome uncertain.�US Energy giant ConocoPhillips mustbe strongly persuaded to expedite itsexploration works in allotted blocks.

�The government should invite allstake holders — reputed IOCs, interna-tional and local experts for a road showat Dhaka on draft Model PSC 2012 anddiscuss it. It must have required valueadditional for encouraging investors inrisking investment in the deep waterdrilling. Some financial experts mustcarry out authentic and logical finan-cial model. Offshore drilling is like agamble. No genuine IOC will be inter-ested to risk investment unless there areadequate incentives. In internationalmarket, gas price swings from US$ 2.25— 15.00/ MBTU. In such situation aceiling of US$ 4- 4.5/ MBTU for 25years will not work. Imposing more taxburden on IOCs will make drillingmore costly. Rather, Bangladesh shouldplan for higher sharing of profit andensure more vigorous monitoring ofwork program and budget of IOCs toreduce the cost.�The government should encourageBAPEX and others to expedite explo-ration efforts at onshore frontiersaround Chittagong.

Chittagong urgently requires effectiveshort, medium and long term actionplan and coordinated implementationstrategy for combating present andemerging power and energy crisis. Italso requires a team of committed pro-fessionals to transform plans into reali-ty. Mere talks and lofty planning willbear no fruit. Chittagong itself canmake major contribution to double-digit GDP growth if only power andenergy crisis can be professionally mit-igated and managed within 3-5 years.

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

17

EP

At a recent deliberation in publichearing on electricity tariff itwas stated on behalf of BPDB

that not raising the power tariff forth-with would cause a deficit of Taka12,500 crore in the current fiscal yearand even with the implementation ofhefty increase in tariff proposed by theutility, the deficit would stand at Taka3,700 crore.

At this age of availability of computersand of other associated technology, weare almost certain that it was possiblefor the high officials of the utility andthose of the ministry to know that :

a. Such a staggering some of deficitwas not created overnight and this cri-sis leading to almost an untenablefinancial situation was the cumulativeeffects of many and several actionstaken over the last several years by theconcerned management. For ordinaryelectricity consumers crores of Taka ofdeficit is not easy to swallow & com-prehend as easy as it may sound to theformulator of tariff for consumers to payor resort to theft and pilferage to avoidpayments.

b. Provided the assumption holds validthat the management could foreseesuch astronomical sum of deficit, it isdifficult to understand why the con-sumers and the prospective investors injob creating and value addition sectorswere not warned that the utility is lead-ing them to pay a very high charge fortheir consumption of electricity in suc-cessive years. One tends to believethat this was not quite fair under amonopoly system.

c. The concerned utility regularly pub-lishes expensive advertisement regard-ing generation addition and increasingnumber of consumers in the system. Ina small paragraph it could be indicatedthat the kind of price the consumers

would have to pay for the expansion ofthe system.

d. It is not simply the supposedly glob-al increase in liquid fuel price leadingto increase in variable cost of powerproduction that is causing such hugedeficits. The increase in internationaloil prices during last couple of yearsand the percentage share of generationmix do not justify such staggeringdeficits. Rather it is the cumulativeresults of defective consumer meters,defective billing and system of collec-tion of revenue, higher technical andnon-technical losses, improper andsome time unnecessary investmentsetc. are also contributing to suchdeficits. And now the hapless con-sumers are being asked to pay forbridging / reducing this gap betweenprojected income and expenditure.

Electricity industry is certainly not alone example in this country only. Overthe last many years it gradually devel-oped all over the world in developedand developing country. Experiencegained in the process and worthwhilecontribution by economists, engineersand others in the field, a set of normsand guidelines gradually evolved tohelp the industry to achieve the desiredgoals of removing poverty, increasingfood production and of other items andthe most important need of providingemployment opportunity to everincreasing number of young populationin developing countries. Unemployedand under employed educated andsemi educated young population is agreat force to reckon with in the socie-ty. Unless their zeal and energy can beproperly channeled through providingsuitable employment opportunity, itmay inadvertently lead to major prob-lems and create conditions not con-ducive to overall development of the

country. A reliable supply of electricityat reasonable price for production ori-ented activities can certainly acceleratethe pace of activities for overall better-ment of the society, thereby povertycan be gradually diminished. Keepingthe price of sale (tariff) within reason-able limits is a primary function andresponsibility of a successful utility.

Following Good Methods Practiced byother Successful Utilities

Many of our administrators, engineersand others had opportunities to be incountries and in some cases receivetraining where sound and well plannedelectricity system does exist. It is cer-tainly possible to emulate such exam-ples and thereby derive good results.Manuals and relevant literatures onevery possible branch of electricity areeasily available. At this age of welldeveloped IT it is rather easy to find outand learn what norms and practices arebeing followed in a good electricitysystem with commendable results.

When the British left country in 1947,the total public sector generatingcapacity was less than 50 MW. Ofcourse the total population of this fer-tile land was also only a small percent-age of the present number. Since then ithas been possible to develop an inte-grated power system with desiredresults. The efforts need be acceleratedkeeping the cost of supply within toler-able limits. Paying capability of con-sumers and maintenance of satisfiedcustomers are important for maintain-ing good relationship so necessary foradditional revenue collection.

No Room for Random Application ofIndividual Discretion & Impulsive

Decision MakingElectricity industry is very much a partof the entire nation and its economy. Itcan not function in isolation. Planning,

19

SPECIAL ARTICLE

Maintaining Electricity Pricewithin Bearable Limits

Shamsul Islam

project formulation, their financing,implementation, successful comple-tion must be within the framework ofestablished basic laws of economics,standard accounting, investment deci-sion making and other relevant associ-ated factors. Ignoring some or all ofthem may lead to a difficult and unten-able situation.

Sustenance is rather very important fora basic infrastructure like electricity.Sky rocketing of electricity price with-in a comparatively shorter time periodis bound to affect financial viability ofa utility and encourage theft and pilfer-age of this precious product affectingrevenue income seriously.

Primarily due to somewhat unplannedsystem additions and impulsiveactions, the sector has landed in a verycritical and almost untenable financialsituation. The actions taken in the pastcan not perhaps be reversed totally.But from now on we must be verycareful of what is done in this sector sothat no steep regular increase in elec-tricity price becomes a compulsion.

Examples For IllustrationWe pick up some of the major powerstation project to facilitate discussion.A base load steam power plant has alife expectancy of no less than 50 yearswhile it is very capital intensive.Provided properly selected equipmentwith proven operational quality areinstalled, they can supply electricity ata comparatively lower cost over manyyears of its useful life.

Selecting appropriate location forinstallation of such major power plantsalready conducted through a properfeasibility study is the first major signif-icant step to that end. Unfortunatelysome of the steam plants have beenplanned to be located at odd locations.A huge problem is thus created and leftfor the posterity of power sector pro-fessionals to solve and live with formany years to come. Cost per unit ofelectricity to be produced in thoseplants are bound to be very high mak-ing difficulty for consumers to pay.

Take the example of three new majorpower plants proposed to be located at

Mawa in Munshiganj, Rampal inBagerhat and Anwara in Chittagong.They are planned to use imported coalas fuel. Nobody knows for sure fromwhich and how and at what pricethose fuel would be imported andwhat will be the cost of per unit ofelectricity to be produced in this coun-try. Reliability in supply of electricitywill be replaced by an every presentanxiety and probably higher cost ofproduction.

Proposed Rampal Power PlantIt is noted in newspapers that in case ofone of those three power plants withoutput capacity of 1320 MW the fol-lowing are being considered.

a. Very costly buyer’s credit of financ-ing is the contemplated. Under thebuyer’s credit financing system, theselected contractors would arrangerequired external finance for the proj-ect. This mode was apparently accept-ed hastily by some of p o w e r f u lofficials who sensed lack of interest ofinternational donors to finance thisproject.

b. The Rampal power plant was pro-posed to be in operation by 2013-2014. The present revised date of com-pletion is 2016. So there is adequatetime to pause, think and take logicaldecisions eventually bringing goodresults. The present somewhat impassestate of relationship with multinationaldonors will surely be solved with pas-sage of time. We are very much amember country of WB and ADB.With substantial backward shifting ofthe date of completion by about threeyears, now more time is available tolook for softer term of financing for theproject. Again the job of looking forexternal finance is that of ERD andMinistry of Finance. It is they whoought to explore the best source offinancing with the overall frameworkand interest of the country.

To be continued

Shamsul Islam;Former Chairman, BPBD

20

EP

Power system operations posemany security challenges that aredifferent from most other indus-

tries. For instance, most security meas-ures were developed to counter hackerson the Internet.

The Internet environment is vastly dif-ferent from the power system opera-tions environment. Therefore, in thesecurity industry there is typically a lackof understanding of the security require-ments and the potential impact of secu-rity measures on the communicationrequirements of power system opera-tions.

In particular, the security services andtechnologies have been developed pri-marily for industries that do not havemany of the strict performance and reli-ability requirements that are needed bypower system operations.

Security Services For Instance�Operation of the power system mustcontinue 24×7 with high availability(e.g. 99.99% for SCADA and higher forprotective relaying) regardless of anycompromise in security or the imple-mentation of security measures whichhinder normal or emergency power sys-tem operations�Power system operations must beable to continue during any securityattack or compromise (as much as pos-sible). Power system operations mustrecover quickly after a security attack orcompromised information system�The complex and many-fold inter-faces and interactions across this largestmachine of the world — the power sys-tem — makes security particularly diffi-cult since it is not easy to separate theautomation and control systems intodistinct “security domains”. And yetend-to-end security is critical�There is not a one-size-fits-all set ofsecurity practices for any particular sys-tem or for any particular power system

environment�Testing of security measures cannotbe allowed to impact power systemoperations�Balance is needed between securitymeasures and power system opera-tional requirements. Absolute securitymay be achievable, but is undesirablebecause of the loss of functionality thatwould be necessary to achieve this nearperfect state�Balance is also needed between riskand the cost of implementing the secu-rity measures.In the Smart Grid, there are two keypurposes for cyber security:

Power System ReliabilityKeep electricity flowing to customers,businesses, and industry. For decades,the power system industry has beendeveloping extensive and sophisticatedsystems and equipment to avoid orshorten power system outages. In fact,power system operations have beentermed the largest and most complexmachine in the world.

Although there are definitely new areasof cyber security concerns for powersystem reliability as technology opensnew opportunities and challenges,nonetheless, the existing energy man-agement systems and equipment, possi-bly enhanced and expanded, shouldremain as key cyber security solutions.

Confidentiality & Privacyof Customers

As the Smart Grid reaches into homesand businesses, and as customersincreasingly participate in managingtheir energy, confidentiality and privacyof their information has increasinglybecome a concern.

How Can Security Requirements forSmart Grid Interfaces be Determined?

There is no single set of cyber securityrequirements and solutions that fitseach of the Smart Grid interfaces. Cyber

security solutions must ultimately beimplementation-specific, driven by theconfigurations, the actual applications,and the varying requirements for securi-ty of all of the functions in the system.

That said, “typical” security require-ments can be developed for differenttypes of interfaces which can then beused as checklists or guidelines foractual implementations. Typically,security requirements address theintegrity, confidentiality, and availabili-ty of data.

However, in the Smart Grid, the com-plexity of stakeholders, systems,devices, networks, and environmentsprecludes simple or one-size-fits-allsecurity solutions. Therefore, additionalcriteria must be used in determining thecyber security requirements beforeselecting the cyber security measures.

These additional criteria must take intoaccount the characteristics of the inter-face, including the constraints andissues posed by device and networktechnologies, the existence of legacysystems, varying organizational struc-tures, regulatory and legal policies, andcost criteria.

Once these interface characteristics areapplied, then cyber security require-ments can be applied that are both spe-cific enough to be applicable to theinterfaces, while general enough to per-mit the implementation of differentcyber security solutions that meet thecyber security requirements or embracenew security technologies as they aredeveloped.

This cyber security information canthen be used in subsequent steps toselect cyber security controls for theSmart Grid.

Shoaib Yousuf CISSP, CISM, CISA

21

ARTICLE

Why Cyber Security is Criticalfor Smart Grid?

Shoaib Yousuf

EP

India's parliament stalled for severaldays over the controversial sale ofcoalfields by the government.

The opposition BJP has been insistingthat Prime Minister Manmohan Singhshould quit over a recent report that thecountry lost $34bn by selling coalfieldscheaply.

Manmohan Singh has rejected the alle-gation.

A report by government auditors saidthe coalfields were allotted withoutauction from 2005 to 2009.

Although the report exoneratedManmohan Singh, BJP leaders say hemust resign as he was heading the coalministry at the time of the sale.

Manmohan Singh said that the findingswere "flawed", and that "any allegationof impropriety is without any basis andunsupported by facts".

The chief of the ruling Congress PartySonia Gandhi has backed ManmohanSingh and has criticized the oppositionfor holding the parliament "to ransom".

"We have nothing to hide or to be

defensive about," she was quoted astelling a party meeting by the PressTrust of India news agency.

Senior BJP leaders say that, if needed,they will stretch their protest to coverthe entire monsoon session, due to endon 8 September.

The government says the coalfieldswere "allocated by the same procedureby previous governments".

The sale of coalfields has been dubbed"Coalgate" by the opposition.

India is one of the largest producers ofcoal in the world.

The auditors' report on the sale of coalis the latest in a series of financial scan-dals to hit the Congress-led govern-ment, and the revelations have causedpublic anger.Manmohan Singh dismissed accusa-tions that his country lost vast amountsof money in a coal scandal, calling thecharges baseless in a Twitter message.

Singh, who was in charge of the coalministry from 2004 to 2009, defendedhimself after earlier being shouted

down by opposition politicians in par-liament.

Parliament remained virtually para-lyzed since the national auditorreleased a report two weeks ago sayingthe sale of coal blocks without compet-itive bidding was expected to net pri-vate companies windfall profits of up to$34bn.

Singh's office posted his defence on hisofficial handle on Twitter, themicroblogging site.

"I wish to say that any allegations ofimpropriety are without basis andunsupported by the facts," Singh'soffice tweeted, adding that the auditor'sobservations were "clearly disputable".

Speaking outside parliament, Singhtold reporters: "Let the country judgewhere the truth lies."

A string of tweets went on to accuse theauditors of using faulty logic and dis-putable math to produce their report.

Singh also said that as the minister incharge at the time in question he wouldtake full responsibility for the decisionnot to switch the government's methodof allocating coal fields to an auctionsystem sooner.

At one point he tweeted, in Hindi, anIndian saying: "My silence is better than

23

REGION

Coalgate Rocks DelhiEP Desk

BJP leader L K Advani Congress Chief Sonia Gandhi Indian Prime Minster Monmohan Singh

a thousand answers."

But, India's auditorsuggested the gov-ernment lost billionsof dollars by failingto auction valuablecoal mining rights ina damning reportthat implicatedPrime MinisterManmohan Singh.

The hotly awaitedfindings, which ledthe opposition tostep up demands forSingh to resign, criti-cized how coalblocks were given tocompanies in a murky allocationprocess instead of being sold by openbidding.

The Comptroller and Auditor General(CAG) estimated that since mid-2004private operators who won coal blockswithout competition may have enjoyed"financial gains to the tune of 1.86 tril-lion rupees ($33.4 billion)".

"A part of this financial gain could haveaccrued to the national exchequer," itadded, without giving an estimate forthe total loss to the state or alleging thatthere had been corrupt or criminalpractices.

It said the problems of granting coalrights for free instead of inviting biddershad been raised as far back as June2004 when coal offi-cials had discussedthe potential for pri-vate groups to makewindfall profits.

Since then, a newpolicy had beenrepeatedly delayedand 142 coal blockshad been allocatedto various largefirms, including EssarPower, Tata Steel andJindal Steel andPower.

"This allocationlacked transparency

and objectivity," the CAG concluded.

Singh, who has been prime ministersince 2004, also served as coal ministerfrom 2004-2009, and the CAG docu-mented a number of official meetings,memos and directives about the needfor new legislation.

Singh's coalition government, dominat-ed by the left-leaning Congress party,has been beset by a string of corruptioncases since re-election in 2009 and thelatest allegations of mismanagementled to renewed pressure on him.

The softly-spoken leader, promoted tothe top job owing to his reputation as"Mr Clean" and a successful stint as areformist finance minister in the 1990s,has seen his public image battered inrecent years.

"Whatever has hap-pened, the PM isdirectly responsible.He cannot escape,"the parliamentaryleader of the opposi-tion Bharatiya JanataParty (BJP), SushmaSwaraj, toldreporters.

Coal MinisterSripraksh Jaiswal hitback at the CAG'sfindings, saying thegovernment did notagree with the fig-ures or methodology.

"The mechanism adopted for coal allo-cation was transparent," he countered.

The CAG released its audit entitled"Allocation of Coal Blocks andAugmentations of Coal Production"against a backdrop of a huge problemsin the state-dominated sector, which isvital for India's economic develop-ment.

State-owned Coal India, the world'sbiggest coal producer, has been strug-gling to raise output to meet thedemands of power producers, leadingto electricity shortages that constraincompanies and inconvenience con-sumers.

The idea of allocating coal resources toprivate companies, which then supplyto key industries such as electricity,

cement or metals,was intended toboost production bybringing in new cap-ital and technology.

More than half of theIndia's electricitycomes from coal-fired power stations,some of which arelying idle because ofsupply shortages orare being forced toresort to importingexpensive foreigncoal.

26

Indian parliament is deadlocked over the main opposition party’s demand that the Prime

Minister Manmohan Singh quit over coal scam

The Union Minister for Coal, Shri Sriprakash Jaiswal briefing the media, in New Delhi EP

The proposed coal-based powerplant at Rampal of Bagerhat inBangladesh has become uncer-

tain due to differences betweenBangladesh Power Development Board(BPDB) and National Thermal PowerCorporation (NTPC) of India. Theysigned a memorandum of understand-ing (MoU) in 2010 to set upBangladesh’s biggest coal-based powerplant having a capacity of 1320 MWunder a joint venture initiative.

Authorities concerned apprehendedthat starting of implementation worksof the project, planned to be completedby 2015, would be difficult even if thetwo parties could revove the differ-ences immediately. They even thoughtthat the differences of opinion havehardly any possibility to be solved soonas they could not be removed so fareven after exchanging letters, holdingseveral meetings and visits of officialsfrom both sides.

There has not been anyprogress in real termsince signing of the MoUwhile authorities con-cerned were apprehend-ing whether it would beimplemented even innext five years. Theythought that it would bedifficult to organizepreparatory works innext one and half years.They include forming ajoint venture company,registering the companywith the Registrar of theJoint Stock Companies,signing of power pur-chase agreement, sign-ing long term coal

import agreement with the supplyingcountries concerned, performing nec-essary dredging in the routes to facili-tate coal-laden vessels and mobilizinghuge amount of credit to meet the proj-ect cost estimated to be of Tk 132 bil-lion. The project cost would be increas-ing with the time passing fast.

Prime Minister’s Power, Energy andMineral Resources Adviser Dr Tawfiq-E-Elahi Chowdhury expressed the hopethat the planned project would beimplemented timely. “We’ve not takenany project like this. So it is takingsome time. This is normal.”

The DifferencesFour main points of differences have sofar surfaced during the negotiationbetween the two parties.

NTPC wants to distribute deprecia-tion fund among the shareholdersagainst BPDB’s preference to keep themoney as a reserve for maintenance,development and modernization of the

plant;

As per the plan PGCB will install agrid for transmission of the power to begenerated from the plant. BPDB wantsPGCB to be a part of the project andsign the agreement. But NTPC does notwant PGCB to sign the agreement as apartner and they want BPDB tobecome the part of it;

BPDB wants NTPC’s investment willbe given back if the power purchaseagreement (PPA) is cancelled for anyreason and the government ofBangladesh will pay back their money.But NTPC wants distribution of theasset value, to be assessed by an inde-pendent consultant, among the share-holders; and

BPDB wants to fix the price of elec-tricity they would purchase from theplant as per a formula that would facil-itate pricing for a period of 25 years.NTPC wants it to be fixed every year.

BPDB member (company affairs) AbulKashem told that it iscompletely a new initia-tive. The project wouldtake some more time toremove all the differ-ences and reach a con-sensus as we have to doeverything consideringthe interest of the coun-try.

BPDB to CompromiseBPDB has already com-promised with NTPC insome areas of differencesdue to their strict posi-tion on the differencesduring the last bilateralmeetings. Latest in Junethis year, a Bangladesh

27

SPECIAL REPORT

Rampal Power ProjectUncertain

Sabuj YounusNazmul Imam

Map of the Rampal Upazila

delegation visited India where theyhad to compromise on some issues toreach consensus. BPDB wanted tomake a provision for compensation ifthe project is delayed. Eventually thetwo parties agreed to realize the com-pensation from the contractor asdemanded by NTPC. BPDB also com-promised on proposed performancesecurity and operations security provi-sions. The joint venture company willprovide corporate guarantee, instead.Besides, BPDB earlier compromisedon some issues, including the place ofarbitration.

Coal ProblemsBoth the sides were closely thinking ofthe problems relating to the fuel forthe power plant. They are sourcingcoal for a long period of time, need forcapital dredging from Akram point ofthe confluence of the sea to projectarea as well as regular dredging of theriver, and continuous increase in theprice of coal in the international mar-ket. A senior Energy Division officialsaid the problems have been reportedin the recent study Centre forEnvironmental and GeographicInformation Services (CEGIS), which isassigned for locating coal sources andtransportation.

The report recommended three coun-tries — South Africa, Indonesia andAustralia. It said there would be arequirement for a long term contractto import coal from these countries.Otherwise it would be difficult to getcoal timely. It also recommendedusing high quality coal as the plantwould be set up near the Sundarbans.The quality coal would be costlierthan what the authorities of the twocountries had estimated. An EnergyDivision Official said this type of coalwould cost US$ 145 per tonnes plusan expenditure of US$ 27 for trans-portation. The coal from South Africaand Australia would cost US$ 160 pertonnes and transportation cost US$39.

It has also been recommendedimporting coal with vessels having80,000 tonnes capacity to keep the

transportation cost feasible up to theAkram point. Moreover, it wouldrequire carrying out some dredging upto 44 nautical mile south of Monglaport to maintain navigability for thelight vessels. It needs expensive capi-tal dredging. It would cost US$ 105million as per the report. The riverroute will have to be dredged regular-ly to facilitate movement of the lightervessels, which will cost US$ 30 mil-lion annually. The power generationcost would be much higher, as a

result.

Experts said that it would not be easyto implement the expensive projectwhile BPDB would have to incur loss-es as it will have to purchase power athigher prices.

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

28

The state-owned BangladeshPetroleum Exploration and

Production Company (BAPEX) startsexploration at ‘Sunetra’ structure onAugust 10.

Petrobangla Chairman Dr HossainMonsur inaugurated the drilling of theexploratory well.

Local lawmaker Muazzam HossenRatan, Bapex Managing DirectorMortoza Ahmed Faruque and SunetraGas Field Project Manager NurulIslam, among others, were present onthe occasion.

BAPEX mobilized an exploratory rigto Sunetra in May last. Before the startof rig mobilization, a 35-kilometreroad was constructed and renovatedfor transportation.

Petrobangla Chairman said Bapexwas hopeful to get an outcome fromexploration within four months after itbegan drilling.

Bapex had placed a Tk 910 milliondevelopment project proposal (DPP)to run the project between January,2012 and June, 2013.

BAPEX will receive funds from Gas

Development Fund (GDF). GDF has afund of over Tk 13.56 billion.

Last year, Bapex placed a Tk 2.79 bil-lion DPP before the government fordrilling four exploratory wells atSunetra gas structure located inSunamganj and Netrokona districts.

BAPEX indentify the Sunetra structurein 2010 through conducting a twodimensional (2-D) seismic survey on260 line-kilometre in the districts.BAPEX told they estimated a gasreserve of over 2.5 trillion cubic feet(TCF).

BAPEX earlier had planned to drill theexploratory well at the structure inlate last year. But it was delayed as theconstruction firm allegedly failed tocomplete the driveway on time, aPetrobangla official said.

BAPEX had already prepared a 20-year roadmap to explore oil and gasin 74 exploratory and developmentwells in 23 onshore block structuresin the country.

According to the roadmap, it woulddrill 13 exploratory wells between2011 and 2015.

BAPEX Starts Drillingat Sunetra

EP Report

REPORT

EP

EP

US President Barack Obama andRepublican Mitt Romney puttheir differences on energy in

stark relief with competing speechesfrom a center of wind power develop-ment and from coal country. At a rallyrecently in Oskaloosa, Iowa, Obamacriticized Romney for calling the bene-fits of alternative energy "imaginary"and his running mate, RepresentativePaul Ryan, for labeling wind power a"fad."

Romney appeared at a coal mine inBeallsville, Ohio, where he promisedto achieve energy independence forNorth America by the end of a secondterm and criticized Obama for regula-tions that he said were stifling coal pro-duction.

The two candidates were making theircases in swing states in an electioncampaign playing out against the back-drop of sluggish U.S. economic growthand an unemployment rate of 8.3 per-cent. The jobless rate has been stuckabove 8 percent since Obama’s first fullmonth in office.

Their running matesalso were appealingfor votes in battle-ground states, withRyan speaking inColorado and raisingmoney in Nevadawhile Vice PresidentJoe Biden cam-paigned in Virginia.

Obama in his speechcited the 75,000 U.S.jobs tied to the windenergy industry andcontrasted his supportfor extending a windenergy manufacturingtax credit withRomney’s opposition.

If Romney “knew what you’ve beendoing, he’d know that 20% of Iowa’selectricity now comes from wind, pow-ering our homes and factories and ourbusinesses,” Obama said.

Romney spokesman Ryan Williamssaid the Republican candidate supportswind power. Instead of Obama’sapproach Romney would promote“policies that remove regulatory barri-ers, support free enterprise and market-based competition, and reward techno-logical innovation,” Williams said in ane-mail.

Iowa, which Obama won in 2008 andwhere polls show this year’s race is upfor grabs, has the second highest windpower capacity in the U.S. and theindustry directly and indirectly sup-ports 4,000 to 5,000 jobs there, accord-ing to the American Wind EnergyAssociation.

The potential lapse of the tax credit atyear’s end is already affecting theindustry. Vestas Wind Systems A/S, theworld’s largest supplier of turbines andblades, plans to cut 1,600 jobs at its

factories in Colorado this year becausethe tax credit will expire Dec. 31 unlessCongress acts to extend it.

Romney is traveling through Ohio’scoal country on the final day of hisfour-day bus tour of electoral battle-ground states. The formerMassachusetts governor maintains thatthe Obama administration has bur-dened the mining industry and that hasdirectly led to job cuts in Ohio.

Standing before dozens of hard hat-wearing coal miners and next to abackhoe piled with coal in Beallsville,Ohio, Romney said Obama’s policieshave caused increases in energy pricesand made it more difficult for the coalindustry to be profitable.

Romney, in making his pledge of ener-gy independence for the U.S. if he’sable to complete two White Houseterms, said that would free the countryfrom reliance on Venezuela and theMiddle East. Canada, Saudi Arabia,Mexico and Venezuela were the topfour sources of U.S. crude oil imports in2010, according to the EIA.

Through increased oiland natural gasextraction and con-servation, the U.S.has increased theproportion of demandmet from domesticsources over the pastsix years to an esti-mated 81 percentthrough the first 10months of 2011,according to datacompiled byBloomberg from theU.S. Department ofEnergy.

Source: Bloomberg

29

REPORT

Obama Spars With Romneyon Energy

EP Desk

EP

US president Barack Obama Republican Mitt Romney

The planning and preparatoryworks of the multibillion dollarTurkmenis tan-Afghanis tan-

Pakistan—India (TAPI) four-nation gastransmission pipeline is smoothlymoving on the right track. Based onthe framework agreement signedamong the nations countries haveadvanced significantly on agreeing onthe gas transit agreements and transitfees. India and Pakistan have alreadysigned Gas Sales and PurchaseAgreement (GPSA) with Turkmenistan.There has been considerable progressin the GPSA between Afghanistan andTurkmenistan. Now the countries areadvancing on finding the right compa-ny or consortium to invest, construct,own and operate the $ 7.6 billionworth of TAPI pipeline.

TAPI Working Group (TWG) in ameeting held in Turkmenistan capitalAshgabat on August 2-3 August 2012talked and finalized date, venue ofroad shows for probable investors forTAPI Pipeline and ancillary facilities.The representatives of Turkmenistan,Afghanistan, Pakistan, India and proj-ect sponsor Asian Development Bank(ADB) attended the meeting. Themeeting of TWG which was 18th of itskind dealt with the following matters:

�Finalize thedetails related toroad shows(schedule, partic-ipant list, inviteelist and materialsfor informationpacket),

�Update on thestatus ofAfghan/TurkmenGSPA,

�Update on thestatus of the tran-sit fee negotia-

tions,

�Continue negotiations related toOperations Agreement,

One of the most significant develop-ment of the project is that projectsponsor ADB informed the meeting ofapproval of the ADB management ofthe Technical Assistance (Phase 3).ADB TA would cover ADB’s contin-ued role as the Secretariat until theconclusion of Phase 3 (PipelineCompany Establishment).

The countries prepared tentativeschedule of road shows to commencein Singapore on 10 September 2012and end on 20 September 2012 inLondon. The second Road Show isscheduled in New York. These roadshows are intended to present to prob-able investors, developers and opera-tors the details of the pipeline, theissues, challenges and opportunities.

About 47 companies comprising ofmajor energy giants, pipeline opera-tors, banks and financial institutionsare among the invitees. Major compa-nies 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. TWGalso included some major banks andfinancial institutions in the list.Notable among them are ANZ(Finance Australia), Royal Bank ofScotland (Financier United Kingdom),Coface (Financier France), DeutscheBank (Financier Germany), GoldmanSachs (US Financier), Merrill Lynch(Financier), Citi Group (US Financier),JP Morgan (US Financier), Bank ofTokyo Mitsubishi (Financier), MizuhoCorporate Bank (Financier), MizuhoCorporate Bank (Financier), SumitomoMitsui Banking Corporation(Financier), State Bank of India(Financier), US-Exim (Export andImport Bank of USA), National Bankof Pakistan (Financier).

ADB team in the TWG meeting gave ashort presentation on the materialsthat will be presented in relation to theTAPI project contractual structure andthe contractual and commercialarrangements of the pipeline system.ADB would finalize the presentationaddressing the comments of the par-ticipants.

The draft operation agreement wasalso presented by ADB team and dis-cussed in TWG meeting. Important

issues like gasallocation, futuregas sales, nomi-nation period,changes of stan-dards, commondisputes etc werediscussed. TWGagreed to updatethe draft reflect-ing the commona g r e e m e n treached amongcountries.

Issues like securi-ty of the Pakistan

31

REPORT

TAPI Train Moving SmoothlyEP Report

Tow proposed pipelines in South Asia

are extremely sensitive for the Pipelineespecially in Afghanistan and Pakistansegment. Afghanistan and Pakistanteam were requested to present theirsituation in greater details. Threecountries -- Pakistan, Afghanistan andIndia -- also discussed issues related totransit fees, Transit fees indexation,methods of payment and reviewed thedraft transit fee agreement.

The TWG meeting agreed on the fol-lowing tentative schedule of RoadShows and next meeting. Road Showin Singapore on September 10-12,2012, Road Show in New York onSeptember 13-15, 2012 & Road Showin London on September 17-20,2012

This pipeline will create long termenergy security for Afghanistan andPakistan and will meet the partialrequirement of huge energy demandof India. It still can be a major sourceof long term energy security forBangladesh if it positively approachesthis pipeline rather than making halfhearted efforts. The energy sector ofAfghanistan has just started to moveon right direction. It will require sub-stantial power generation to meet thedemand of extensive mining growthand industrial development.Afghanistan is also trying to exploreand exploit its significant untappedhydrocarbon resources. In case of sig-nificant major discovery it may alsouse capacity of the pipeline to trans-port its own gas from one part of thecountry to other or even joinTurkmenistan in export to Pakistanand India. Pakistan is suffering frommassive energy crisis. It desperatelyneed gas flowing through TAPI as soonas possible. India will find TAPI gas abetter competitive option that otherimports like LNG from volatile LNGmarket to fuel its expanding economy.The importance of TAPI was never soseriously felt before. We believe thatfor the greater interest of the countriesof the region Pakistan, Afghanistanand India will combine efforts toensure security of the pipeline.

32

OPEC may have to reduce its fore-cast for growth in world oil

demand in 2013 by 20 percent, theexporter group said, citing a vague andturbulent outlook for the global econo-my.

The Organization of the PetroleumExporting Countries (OPEC) left its fore-cast unchanged on August 9 from itsestimate last month, however. Demandwill expand by 810,000 barrels per day(bpd) next year, although the odds sug-gest oil use could undershoot that fig-ure, it said.

"The downward risk potential hasgreater probability in the forecast thanthe upward risk one," OPEC said in itsmonthly report. "Therefore, the gloomypicture could reduce the world oildemand growth forecast by 20 percentnext year."

OPEC, source of more than a third ofthe world's oil, expects world econom-ic growth to slow to 3.2 percent nextyear from 3.3 percent in 2012, hin-dered by a slightly slower expansion inthe United States and China, theworld's two largest oil consumers, andweakness in the euro zone.

OPEC's demand outlook is, as usual,more cautious than that of the US gov-ernment, which raised its forecast for2013 growth in oil consumption. Thelast of this month's trio of major oilreports is due on August 10, 2012 fromthe International Energy Agency.

For this year, OPEC left its forecast forthe growth in world oil use virtuallyunchanged at 900,000 bpd and saidthe outlook had flattened out.

"Demand has overcome earlier expec-tations of a declining momentum andmoved to a more stabilized trend, sup-ported by the summer driving season,the summer heat and the continuedshutdown of most of Japan's nuclearcapacity."

Lower Saudi, Iranian OutputOPEC trimmed the forecast of demandfor its own oil this year and in 2013 by80,000 bpd and 100,000 bpd, respec-tively, due to higher supply from pro-ducers outside the 12-member group.

The United States, Canada and SouthSudan are among the non-OPEC pro-ducers expected to provide more oilthan previously expected this year.South Sudan said this week it hoped toresume production in September afterending a dispute with Sudan.

OPEC now expects demand for its crudeto average 29.9 million bpd in 2012 -significantly less than it is pumping atpresent even after a drop in output lastmonth due to sanctions on Iran and acutback by Saudi Arabia.

Citing secondary sources, OPEC said itsproduction fell by 160,000 bpd to 31.19million bpd in July, led by Iran, whoseoil became subject to a European Unionembargo from July 1 over its disputednuclear program.

Output also declined in OPEC's top pro-ducer, Saudi Arabia, which told OPEC ithad trimmed supply by 300,000 bpd to9.8 million bpd in July. Industry sourcestold Reuters last month Riyadh reducedsupply because of lower demand fromsome customers.

Analysts at Barclays Capital pointed outthat the drop in Saudi output, as report-ed by Saudi Arabia itself, was largerthan estimated by other assessors.

"The Saudi output that was brought onto help compensate for the constrictionof Iranian exports is being scaled back,"Barclays Capital oil analyst MiswinMahesh said in a report.

US and European sanctions havepushed Iran from its traditional positionas OPEC's second-largest producer torank third behind Iraq, which haspushed output above 3 million bpd inJuly, ahead of Iran at 2.82 million bpd.

Greater Probability FromRisk Potential

EP Desk

EPEP

The state-ownedBangladesh PetroleumCorporation (BPC) will

import 800,000 tonnes of fur-nace oil to fuel the rental andquick rental power plants in sixmonths beginning from July thisyear, officials said.

The BPC recently finalized theimport estimation of the heavyfuel oil (HFO) after it hadreceived requirements from thestate-owned PowerDevelopment Board (PDB). The PDBhas deals to purchase electricity fromthe rental and quick rental powerplants.

The fuel oil based picking, rental andquick rental power plants now generateabout 2,300 MW of electricity. Thegovernment has to supply fuel to theseplants at a subsidized rate and also pur-chase electricity from them at a rela-tively higher rate through giving sub-sidy.

BPC Chairman Abu Bakar Siddiqueinformed that he has received thedemand notes about the furnace oilrequirements recently and finalized aplan to import about 800,000 tonnes offuel for the coming months.

He said the cabinet body recentlyapproved six proposals for import of1.650 tonnes petroleum fuels whichwere mainly diesel, kerosene, octaneand jet fuel.

“There was no proposal for furnace oilimport. But, now we’ll move proposalfor furnace oil import after completionof import negotiation with differentsuppliers,” said the BPC Chairman.

The fuel supplying companies of sixcountries from which the BPC willimport petroleum include Kuwait

Petroleum Corporation,Malaysian Petronas TradingCorporation, Singapore-based PetrochinaInternational, thePhilippines’ PNOCExploration Corporation,Egypt’s Middle East OilRefinery Limited (MIDOR),and the Emirates NationalOil Company (ENOC).

33

REPORT

800,000 Tonnes Furnace OilFor Rental Plants

EP Report

The China National Offshore OilCorporation (CNOOC) is in talks

to buy UK-based Tullow Oil’s assets inBangladesh, an official said.

If negotiations are successful, it willbe CNOOC’s first investment inBangladesh’s oil and gas sector, hesaid.

CNOOC bid for shallow water gasblock SS-08-01 in Bangladesh’s 2008bidding round but was not successful.It is mulling taking part inBangladesh’s next offshore biddinground, which is slated for later thisyear, he added.

Tullow Oil is planning to divest all itsAsian assets, which are located inBangladesh and Pakistan, and hasheld preliminary talks with several oilcompanies.

Australian exploration and productioncompany Santos has also held prelim-

inary talks to buy Tullow assets inBangladesh, Santos’ President inBangladesh John Chambers mediarecently.

The shift away from Asia will allowTullow Oil to focus on its core opera-tions, its huge Jubilee discovery off-shore Ghana, and its explorationacreage in South America and else-where in Africa.

Tullow’s sales revenue from Asiatotaled $20.8 million in 2011, whileits global sales revenue totaled $2.3billion.

Tullow Oil has a 30 percent stake inBangladesh’s Bangora gas field.

CNOOC in February partneredFrance’s Total in a $2.9 billion deal tobuy a third of Tullow Oil’s stakes inthree oil exploration areas in Uganda.

CNOOC in Talks toBuy Tullow’s Assets in

BangladeshEP Report

Kumargaon 50MW rental power plant

EP

EP

Rabindra Nath Nayak, Chairman ofstate-owned Power Grid Corp. ofIndia Ltd., said factors like unex-

pected surges in demand from farmersand provincial governments, added toIndia's failure to build enough newpower plants and were more importantreasons for the recent blackout.

Nayak's comments, in his first interviewsince the failures, come ahead of a gov-ernment panel report on the blackouts.He is one of seven members on thepanel.

"There are many things that happenedtogether," Nayak said of the blackout,which left more than 600 million peoplewithout power over two days, causingmillions of dollars in economic losses.

A major reason for the outage was asurge in demand from farmers, Nayakargued. More farmers were relying onelectric pumps to get to ground waterbecause of the failure of this summer'smonsoon rains, he said.

The demand spikewas exacerbatedby some provincesdrawing more thantheir quota fromthe national grid,he said. India'sprovinces getpower for theirlocal grids via themore than 100,000kilometers ofnational lines oper-ated by PowerGrid. The localgovernments aresupposed to drawonly as much elec-tricity as stipulatedin power-purchaseagreements with

producers, but some don't stick to theselimits, Nayak said.

He admitted, though, that Power Grid'sinfrastructure did factor in the blackout.One of two major transmission lines innorthern India was shut for work at thetime, forcing power onto a single line,Nayak said.

"I mean, the entire load fell on one lineand that led to the cascading effect," hesaid. The company, he added, has sincedelayed the repair work by two monthsto prevent a repeat.

Nayak also acknowledged that the gridneeds investment as demand for elec-tricity grows at 20% per year due toIndia's economic expansion. The com-pany is planning to invest $18 billionover the next five years to upgrade thegrid, he said.

He denied that India's electricity gridwas below international standards.

"We have the best infrastructure in theworld. It is not due to our infrastructure,"

Mr. Nayak said. "Nobody is having abetter electricity transmission infrastruc-ture than us."

Some may not agree with Nayak. India'sinadequate power generation capacityand its creaky transmission infrastruc-ture "severely lag the country's mush-rooming demand for power," saidStandard & Poor's credit analyst RajivVishwanathan. Both were a major rea-son for the blackout, he added.

In the long term, Nayak said India's gov-ernment needs to increase power gener-ation to meet rising demand. Efforts byIndia to build new power plants havestumbled. A major issue is a shortage ofcoal and gas to run them. India's poorinvestment climate has also stymiedefforts.

"The country, and the power sector, isgoing through a transition phase, and forus, the challenge is to catch up with theelectricity demand," Nayak said.

Although Nayak denied his company'snational infrastruc-ture was belowpar, he did saylocal governmentgrids had sufferedfrom lack of invest-ment. Manyprovincial electric-ity utilities are loss-making as they areunable to raise tar-iffs due to pressurefrom local politi-cians.

Nayak saidprovinces in Indianeeded to be moredisciplined andthere should besufficient penaltiesso that they don't

35

REPORT

India's Grid Chief ShiftsBlame for Blackouts

EP Desk

Traffic Jam in New Delhi India During the Blackout

draw too much power. A Power Gridexecutive said the panel report is likelyto recommend the company be giventhe authority to shut off power supply toprovinces that don't adhere to the termsof power-purchase agreements.

Nayak said Power Grid is working on aplan to isolate essential services such ashospitals, railways and some regions,such as New Delhi, the capital, fromfuture blackouts by setting up dedicatedpower generation and distribution net-works.

$35 Billion Debt RevampAfter Blackout

Meanwhile, India plans to restructureabout $35 billion of loans held by itsutilities to boost their ability to supplyelectricity and avert outages like the onethat cut off power to half the nation’s 1.2billion people.

Half of the short-term borrowings of thestate-owned utilities, which generate orbuy and distribute electricity, will betransferred to the books of the regionalgovernments, according to a powerministry draft proposal obtained byBloomberg News. The rest will berescheduled by the banks and allowed athree-year moratorium on principalrepayments.

Cash losses at utilities widened 15 timesover three years to 288 billion rupees($5.2 billion) in the year ended March2010, prompting them to seek short-term loans even as dues to power pro-ducers and coal miners rose. The differ-ence between the average cost of sup-plying electricity and the average tariffhas almost doubled in the 11 years toMarch 2010, according to the draft,leading banks to refuse loans.

“For some state utilities today, sellingmore power means incurring more loss-es,” said Salil Garg, a New Delhi-baseddirector at Fitch Ratings India.“Restructuring their debt seems to be theonly solution. Utilities will look to turnaround, while banks will seek to mini-mize sacrifices.”

The proposal is expected to be circulat-ed among cabinet members in a week,Power Secretary P. Uma Shankar said on

Aug. 13. There will be a separatearrangement for financing part of theoperational losses and interest paymentsfor the first three years, according to theplan.

Biggest BlackoutThe utilities are “servicing the intereston existing loans by fresh borrowings,which leads to a virtual debt trap in thelong run,” according to the draft report.

Almost 27 percent of India’s electricityis lost in transmission because of dissi-pation through wires and theft, causinga peak shortfall of 9 percent.Distribution utilities, unable to retrievetheir costs through tariffs, accumulatedebt and losses and cut purchases ofelectricity, leading to blackouts. Gridcollapses on two consecutive days inIndia last month caused the world’sbiggest blackout.

NTPC Ltd. (NTPC), the country’s biggestpower producer, was forced to cut gen-eration by 13 billion kilowatt hours, or 6percent of total production in the yearended March 31, as state governmentutilities reduced purchases, ChairmanArup Roy Choudhury said on Aug. 7.The company may have to cut output byalmost as much this fiscal year.

Free PowerMost state utilities often adhere to polit-ical demands of the local governmentsby providing free or cheap power topeople. Punjab and Haryana, two ofIndia’s biggest producers of food crops,provide subsidized power to farmers.Some utilities don’t receive subsidiesannounced by governments in lieu offree power they give to farmers, Garg ofFitch Ratings said.

States, including Tamil Nadu, AndhraPradesh, Punjab and Karnataka, haveincreased tariffs since April to reducethe gap between cost and sales. TamilNadu increased tariffs after almost adecade.

“We are hoping to break even this year,thanks to the increase in tariffs,” S.C.Arora, finance director at Punjab StatePower Corp. said by telephone.“Deficient rains have forced us to buymore power for irrigation and we are

appealing to people to use electricityjudiciously.”

Punjab State Power has 200 billionrupees of liabilities, half of which isshort-term and being considered forrestructuring, Arora said. The utility lost0.07 rupees on every kilowatt hour ofelectricity it sold last year, he said.Higher Tariffs

“States have accepted the inevitabilityof increasing tariffs, but there’s a limit tothe increase,” Garg of Fitch Ratings said.“Ultimately, the solution lies in improv-ing efficiencies.”

The burden of any increase in tariffs willbe borne by industrial users more thanhouseholds. Industries pay more thandouble the price households pay fortheir electricity, which affects profitabil-ity.

“India has to have a tariff system thatreflects the change in costs,” saidDebasish Misra, senior director at con-sulting firm Deloitte Touche Tohmatsuin Mumbai.

Increasing losses at state utilities are alsoendangering investment in generationprojects in states, as concerns mountthat generation companies may find itdifficult to recover their dues from utili-ties.

Nervous Lenders“The risks of offtake and fuel availabilityare two biggest concerns in the minds oflenders today,” said Ashish Sethia, headof India research for Bloomberg NewEnergy Finance. “Banks will obviouslybe nervous in lending to a generationproject in a state that has a financiallystressed distribution company.”Damodar Valley Corp., a power produc-er in the eastern part of the country,posted a loss of 1.2 billion rupees in theyear ended March 2011 after interestpayments on short-term loansincreased.

“The biggest challenge in the powersector today is getting the money forwhat you sell,” NTPC’s Roy Choudhurysaid on Aug. 7. “If we are able toaddress that issue, this is the most viablesector.”

36

EP

India is the world’s third largest pro-ducer of coal, the current productionestimated at more than 550 million

tons. The emerging South Asian giant isalso the home to the world’s fourthlargest reserve of coal, a major source ofenergy in the energy-hungry country.Despite the enviable position withregard to production and reservesIndia’s growing demand for coal hasforced the nation to go for imports tomeet the shortfall. According to recentestimate India’s demand for coal is morethan 700 million tons. Nearly 70 percent of the coal is used for generatingelectricity; the remaining 30 per cent isused by steel, cement, fertilizer andchemical industries.

In recent weeks India’s coal has hit theheadlines. Not for any major miningaccident. Not for any strike or protest bycoal miners. This time the headlineshave been made by allegations of cor-ruption in awarding coal fields to pri-vate companies when Prime MinisterManmohan Singh wasin charge of the coalministry during 2004-2009. The allegations,persistently denied bythe Indian PM, now onhis second term inoffice, originated froma report of India’s audi-tor general. The auditreport by Comptrollerand Auditor General’soffice has found some-thing grossly wrong inthe coal field dealings.The government hasvirtually incurred a lossof more than $33 bil-lion in awarding thefields to the privatecompanies allegedlynot in transparent ways

In defending his decision the 79-year-old Indian PM has claimed that nothingwas wrong. Nor was any lack of trans-parency in the deals. He says the CAGreport has flaws and it contains mis-leading information. However, theopposition has not lost any time to seizethe opportunity in raising a hue and cryabout the CAG report. It has asked theIndian PM to resign taking responsibili-ty in the deals. The opposition hasforced several disruptions in the pro-ceedings of both houses of Indian par-liament. The opposition members havecaused so much of noises in the parlia-ment that Singh could not even finishhis speech in the parliament one daylast week.

Manmohan Singh has tried to explainthat competitive bidding in the alloca-tion of coal fields could not have beenintroduced in 2006 because of theopposition. He says the states where thecoal fields are located were all beingrun by the opposition at that time when

the deals were done. The state govern-ments at that time failed to reach a con-sensus on the competitive bidding. “Letthe country decide where the truth lies,”one newspaper report quoted Singh assaying in his written speech.

The Indian people will sure judge theSingh’s decision and arrive at their ownconclusion. With next national elec-tions not far off the Indian politics is get-ting extra doses of political heat gener-ated by corruption allegations againstSingh’s UPA government. The UPA gov-ernment has recently been hit by aseries of corruption scandals _ the othermajor one being the deals on 2 Gmobile phones. Singh was not directlyinvolved in the mobile phone deals, buthe is at the center of the coal corruptionallegations.

It is possible that the UPA governmentwill survive the latest scandal. Theopposition has vowed to force a vote ofconfidence in the parliament. It isunlikely that the government will col-

lapse at this stage. Butthe unrelenting scan-dals_ hitting the trou-bled UPA governmentone after another _ isleaving Singh and hisgovernment wounded.While the governmentlicks the wounds andstruggles to recoverfrom the shocks thecoal policy of Indiacomes under spot light.Economic and industri-al deals are made forthe welfare of a nation.But bad deals harm notonly the people, butalso those who makethem. That’s the les-sons Manmohan Singhis learning.

37

COLUMN

Coal Deals StrikeBlows to Manmohan

Singh

EPIndian Prime Minister Manmohan Singh

39

Bangladesh should leverage its vastrenewable energy potential,including solar power, to deal with

its energy crisis, experts.

The observations came at a seminar,"The Untapped Mine: How can we fightclimate change, revitalise the economyand gain energy independence forBangladesh" organized by BangladeshPoribesh Andolon, an environmentalbody, in the capital.

Around 53 percent of Bangladesh's pop-ulation have access to grid electricity,with the rest depending on the costlykerosene and solar power.

The total solar energy absorbed byearth's atmosphere, oceans and landmasses in one hour is more than theworld's demand for energy a year, saidSajed Kamal, adjunct lecturer ofSustainable International DevelopmentProgram at USA's Brandeis University,while presenting thekeynote paper.

"But it is untapped. Weare mostly using the solarenergy in a natural way,"said Kamal, also theauthor of The RenewableRevolution, adding thatBangladesh's exposure tohigh solar radiation pres-ents great opportunities.

Prof Dr Saiful Huque,coordinator of DhakaUniversity's RenewableEnergy Research Centre,said Bangladesh's atti-tude towards solar energy

is that of an afterthought.

“People who control the fossil fuel arealso in charge of solar energy, and theydo not take the matter of renewableenergy seriously. The governmentshould form a dedicated body for it," hesaid.

Huque, also the secretary of BangladeshSolar Energy Society, said the country'senergy demand is actually growingannually at 14 percent, and not as pergovernment's estimation of 7 percent.

"The renewable energy can bridge thisgap," he said, adding that Bangladeshwould have to develop local infrastruc-ture and not rely on costly imports toeffectively harness the solar energy.

Huque also criticized the governmentfor not ensuring proper installations ofsolar panels on rooftops.

"People responsible for monitoring arenot doing their jobs properly. As a result,

new buildings have mushroomed withlow-quality products."

The professor said policymakers shouldthink in terms of kilowatts rather thanmegawatts when conceiving energy forrural areas.

“A solar panel with a capacity of aboutthree kilowatt is sufficient to light twobulbs and charge a mobile phone, facil-itating electricity provision to the mass-es.”

Huque also urged the government tolower import duties on solar energyproducts.

"Unfortunately, the import duties arehigher for energy-efficient products."

Khursheed-Ul-Islam, senior adviser onSustainable Energy for Development forGIZ, said the solar energy is an untappedmine for Bangladesh.

"But it has to be made affordable for peo-ple," he said, adding that Bangladesh hasalready made a good impression with itsinstallations of over 1.5 million solarhome systems in off-grid areas.

"Although we have not had much suc-cess yet in generating wind energy,increasing the tower height can improveour chances," Islam said.

He also suggestedexports of the biogasemitted fromBangladesh's over 1 lakhpoultry farms.

BAPA President MShahjahan chaired theseminar, and MdHabibur Rahman, associ-ate professor ofDepartment of AppliedPhysics, Electronics andC o m m u n i c a t i o nEngineering, at theUniversity of Dhaka, alsospoke on the occasion.

Focus More on RenewableEnergy: Analysts

EP Report

Sajed Kamal, lecturer Brandeis University of USA, presenting his keynote paper at the

seminar, organized by BAPA Photo: BAPAEP

41

The World Bank (WB) will further pro-vide $ 155 million credit for rural

electrification and renewable energyprojects in Bangladesh, EconomicRelations Division (ERD) sources said.

The credit will be invested for the sec-ond "Rural Electrification andRenewable Energy DevelopmentProject’’ (RERED) to increase access toclean energy in rural areas, promotemore efficient energy consumption, andimprove the response capacity of theborrower in case of an emergency.

The WB is most likely toapprove the project onSeptember 20, 2012, it islearnt. Meanwhile, the ERDtook prior approval from thePrime Minister's Office tonegotiate the credit for theRERED.

On July 16, 2002 an agree-ment for $ 190 million creditwas inked between theGovernment and the WBheld to ensure off grid powersupply to the remote areasBangladesh by 2020. Later,another agreement was also

signed on September 2, 2009, for $ 130million credit to supply CompactFluorescent Lamp (CFL) bulbs and reno-vation of distribution lines.

Besides, an agreement between the ERDand WB was signed for $172 millioncredit to support installation of an addi-tional 630,000 solar home systems andother renewable energy mini-gridschemes in Bangladesh on November14, 2011.

The credit was an additional financing tothe ongoing RERED, following the pro-ject's success in installing solar home

systems in rural areas where grid elec-tricity is not economically feasible orhard to avail. The solar home systemcomponent of the RERED project isimplemented by the InfrastructureDevelopment Company Limited(IDCOL), a government- owned finan-cial institution.

The partner organizations, mostly nongovernment organizations (NGOs),install the solar home systems.Only about one-third of rural house-holds have access to electricity withabout 16 million households yet to be

electrified.

Apart from 630,000 new solarhome systems by 2012, theadditional financing wouldalso be utilized for otheroptions such as mini-grids.The proposed credit of $ 155million will be received fromthe International DevelopmentAssociation (IDA), the WB'sconcessionary arm, has 40years to maturity with a 10-year grace period and carries aservice charge of 0.75 percent.

Mayor of Khulna City Corporation(KCC) Talukder Abdul Khaleque

said, “Renewable energy could be animportant alternative source ofenergy, especially in rural areas,and play a significant roleagainst the adverse impacts ofclimate change.”

He said people could use differ-ent renewable energy includingsolar, wind, biogas and biomassthat is appropriate for the coun-try.

“Industrialization and urbaniza-tion have become rampant now-

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

environment. Thus, the solar powersystem is durable and environmentfriendly and it also prevents pollutionthrough absorbing carbon-dioxide”,Khaleque said.

Mayor also said, “We have to dependon natural resource for generating

power.” Mayor Khaleque wasaddressing as chief guest a day-long workshop titled ‘QualifyingTeachers on Solar Energy’ held at‘Khulna Solar Energy Productionand Training Centre’ at Sonadangain the city.

Khulna City Corporation (KCC),Khulna University (KU), BremenUniversity of Germany andBangladesh Vocational EducationTeachers’ Association jointlyorganized the workshop.

Generation of RenewableEnergy in Khulna Stressed

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

$155m Additional FundFrom WB Likely

EP

Training of 33 Junior Assistant Manager (SAE) of WZPDCL, Khulna EP

42

There is ample scope to produceelectricity from chicken's litter,

finds an International FinanceCorporation pilot project.

The waste of 565,300 hens in 52 poul-try farms can generate about onemegawatt of power, said MuhammadTaif Ul Islam, Operations Analyst withIFC.

These plants could also help reduce asmuch as 10,649 tonnes of greenhousegases annually, according to him.

The poultry industry has 110,000 to125,000 farms. Out of those, 40 percent supply eggs and keep generatinglitter continuously.

"Our estimate is that 5,000 farms canproduce 500 megawatt of electricity ata very low variable cost," he said.

The country is now generating about60,000 megawatts of electricity byburning fossil fuel. According to thegovernment plan, 10 percent of thetotal power generation will come fromrenewable energy by 2021.

The renewable technology was not arocket science and was readily avail-able, Taif said adding, "It has variousbenefits — low cost, low carbon emis-sion and carbon trading."

These farms would contribute to 460 to485 tonnes of carbon dioxide emissionreduction, which could lead to anothersource of income for the countrythrough trading in carbon, he added.

"We want to promote clean energyopportunities in Bangladesh andunleash the potential of electricity gen-eration from poultry wastes," he said.

The German technical agency — GIZ,local infrastructure funding institution —IDCOL, and Eastern Bank and BracBank were working together with IFCto promote clean energy, he added.

The IFC official said the governmentcould also encourage private sector toinvest in the sector.

The investors would collect all poultry,dairy and kitchen wastes from farms orhouseholds within the community anduse those for power generation, hesaid.

"Fifty per cent population is still out ofelectricity network and through thisfacilitation, assurance of access toclean energy for the people living inoff-grid areas can come very quickly."

About five million people are engagedin poultry sector, the second largestsource of rural employment in the

country.

The sec-tor, withan invest-ment ofabout $2b i l l i o n ,e n s u r e sfood secu-rity as itp rov idescheapes tsource ofprotein forpeople ofthe coun-try.

Chicken's Litter a CheapSource of Power: IFC

Solution to energy crisis in Pakistanlies in smart grid (Intelligent Energy

Management) and use of solar energyalong with the electricity of Wapda.

This was stated by Prof Dr YaqoobRaziq of University of Tennessee,Chattanooga, US, at the concluding cer-emony of a four-day workshop on “loadmanagement through smart grid” heldat Federal Urdu University.

He said that in Pakistan line losses aremuch more as compared to other coun-tries. Through smart grid not only loss ofenergy can be controlled but load canalso be managed.

“By using smart grid, we can restrict anyhouse, company or factory from usingunlimited load. We can even restrict theresidents from using air conditioners,”he said.

“We can also fix the limit of use of elec-tricity for every house through smartgrid for a certain time period due towhich we can make sure that at leastelectricity for bulbs and other smallappliances will be provided round theclock,” he said.

Chief guest of the workshop, MianMuhammad Javed, founder member ofPakistan Telecommunication Authoritysaid that transmission and distributionof energy can be made intelligent byintegrating the existing power systemwith telecommunication system,including engaging Sensors Networksand Information Technology.

More than 50 participants including for-eign faculty members, teachers,researchers, professionals and engineer-ing students attended the workshop.

Smart Grid:Solution toEnergy Crisis

EPEP

The present energy crisis in theport city of Chittagong can’t beresolved only through local

sources. That is the realization ofKhalilur Rahman, Chairman of KDSGroup of Industries and President ofChittagong Metropolitan Chamber ofCommerce and Industry (CMCCI). Toovercome the gas crisis, his suggestionis to import LNG and supply to the city.

His view backs the policymakers, butruns counter to the experts who thinkimport of LNG is not a feasible optionin terms of its cost as well as theBangladesh market is not ready to con-sume the expensive energy at present.

Rahman, however, thinks that the highprice of LNG is unlikely to be a prob-lem, echoing with what many otherbusinessmen from the country’s majorindustrial hub argue. The businesseswant gas supply at whatever the pricemay be. In an interview with Energy &Power, Khalilur Rahman even demand-ed action against those officials whowould cause delays in implementationof the project.

EP Editor Mollah Amzad Hossain tookthe interview. Following are theexcerpts:

EP: Chittagong has been experiencingenergy crisis for last five years. Why is

this situation? What do you think?

KR: Not only the households inChittagong are experiencing load shed-ding for this energy crisis, the industrialunits are also experiencing the loadshedding. The situation is similar acrossthe country, not only in Chittagong. Itdecreased the industrial production,hampered export businesses. The GDPgrowth couldn’t achieve target due tothe crisis. On the other hand, loadshedding in the residential areas hasbeen hampering regular public life.Students are also being affected. Thecountry, especially Chittagong, is notgetting new industry that is not alsodesired at all.

EP: We would like to know about theimpact of load shedding specially inChittagong.

KR: As you know, many industrial unitswere set up after getting assurance ofgas supply to the city. But, these indus-tries didn’t get gas connections. So,machinery of thousands of crores oftaka remained idle. Many entrepre-neurs are not being able to repay thebank loans as they couldn’t go for pro-duction at all. Many units didn’t get gasconnections even after depositingmoney following the demand noteissued by Karnaphuli Gas Company.These units are also closed.

EP: Have you any study from your met-ropolitan chamber?

KR: The specific observation of theChittagong Metropolitan Chamber ofCommerce and Industry (CMCCI) isthat no long-term industrial planningcan be implemented by the presentproven gas reserves of the country. Wedon’t see any prospect of big gas fieldin near future. The couple of smallfields discovered in recent times will

Khalilur Rahman

‘LNG is theAnswer’

45

INTERVIEW

The gas crisis in Chittagong hasnot been created overnight. There

should have been alternativethought when we witnessed lessproduction in Bakhrabad. Also,

steps should have been takenwhen production started to be

decreased in Sangu.

not be able to contribute significantrole. In this perspective, we’ve todecide to import LNG. Otherwise nonew industry will be set up. We’ll notget foreign investment. Many foreigninvestors, who were interested to investin Bangladesh, changed their mind andwent to other countries.

EP: Many think that the energy crisis inChittagong is due to continuous igno-rance of the successive governments.What do you think?

KR: Once Chittagong was declaredcommercial capital of Bangladesh. Ifyou judge the situation before and afterthe announcement, you’ll find that theobservation is right. The largest indus-trial area of the country is inChittagong. But, there is no specialeffort to supply gas and electricity forthe industries although export process-ing zones get special facilities.However, the present government’sattitude towards Chittagong is positive.Honorable Prime Minister in 2009 hadannounced to import LNG and we hadexpected that the LNG would be sup-plied by 2012.

EP: Data show that the generationcapacity of plants in Chittagong area is1,200 MW. But, Chittagong experi-ences load shedding although thedemand is 700 MW. What do youthink?

KR: You see electricity in other areas isused mainly for household consump-tion and official purposes. But, the lionpart in Chittagong is used for industries.Half the electricity demand is beingsupplied to Chittagong. Not onlyChittagong dwellers are losers of theshort supply, but the entire countryfrom the economic point of view. Thepeople are being deprived of the bene-fits that would have been possible if thegas and electricity supply remainedequivalent to their respective demand.Export earnings also being affected, asa result. The existing industries areforced to consume expensive energyfor lack of grid supplies, making prod-ucts expensive and forcing the peopleto buy products at higher prices. Theexport goods are also losing competi-tion in the international market.

EP: How do you evaluate the contin-gency measure like closing down offactories to face the situation thatemerge out of gas supply shortage?

KR: Although it is said that the demandfor Chittagong is 400 MMCFD, theactual demand is higher. The industrieshaving demand note are not includedin this list. I think, if a decision is takento supply 600 MMCFD gas to

Chittagong, there will be demand formore within a month.

The gas crisis in Chittagong has notbeen created overnight. There shouldhave been alternative thought when wewitnessed less production inBakhrabad. Also, steps should havebeen taken when production started tobe decreased in Sangu.

Considering the gas crisis, a step wastaken in 2009 to import LNG. Severalvisits were also made to Qatar. But, weare not watching any step after wepassed half of 2012. If any quarter isinvolved in the bid to foil the PrimeMinister’s plan of importing LNG, theyshould be identified and punished.

EP: Do you think the plan to importLNG is really pragmatic?

KR: The annual gas demand inChittagong at present would be 1.0TCF. Petrobangla is already in a suffo-cating situation. If the situation contin-ues, not only Chittagong, but also theentire country will watch a disastrousconsequence.

You see all the steps taken to minimizethe gas crisis are adhoc or interim. Notonly for Chittagong, but to meet thedemand for entire country and to runthe wheels of the economy the countrywill have to go for importing LNG. Thetalks about the high cost of LNG areworthless. You see people accepted thetariff of the electricity although it wasincreased in phases one after another. Ithink the situation will be same in caseof LNG. If the government ensuresLNG, the consideration will be gettinggas supply, not its price. Moreover, theprice comprising both local gas andimported will be at tolerable level.

EP: Another aspect, how do you lookinto the government’s bid to go forcoal-based power plants with importedcoal, leaving domestic coal unutilized?

KR: You must see the power situationhas improved. Now-a-days, there isalmost no load shedding. The presentgeneration is almost 6,000 MW. But,the government is discouraging newconnections. The actual demand ismuch higher than the generation com-prising all options like rental, quickrental and IPPs. So, I think the govern-ment took right decision in going forimported coal-based power plants,instead of sitting idle for local coal. Ifwe can produce our own coal, the coalimport will decrease automatically.

46

EP

Not only the householdsin Chittagong areexperiencing load

shedding for this energycrisis, the industrial

units are alsoexperiencing the load

shedding. The situationis similar across thecountry, not only in

Chittagong. It decreasedthe industrial

production, hamperedexport businesses. TheGDP growth couldn’tachieve target due to

the crisis.