Bangla Desh: The deepening energy crisis

One has reasons to be worried about the future of the country if the projections of the energy experts that natural gas resources discovered until now would be fully exhausted within the next three to four years.

The attempts made in recent years to discover gas reserves onshore, in most cases, have not been successful. The offshore blocks are considered the potential areas of finding hydrocarbon but exploration there involves heavy cost, long duration and troubles from neighbours.

Since neighbouring India and Myanmar have hit large gas deposits in the offshore areas of the Bay of Bengal, there should be sufficient reasons also for Bangladesh to pin much hope on its offshore blocks.

But that is easier said than done. Exploration work in the offshore blocks involves huge cost. Besides, in the case of discovery, carrying of gas to the mainland through pipeline does also involve substantial cost. It is obvious that a poor country like Bangladesh which finds it difficult to get its both ends met cannot afford this kind of expenditure. So, it has to go for international bidding to allow international oil companies (IoCs) to do the exploration work.

The IoCs in such biddings tend to attach conditions favouring themselves more than the countries concerned because of the high-cost involvement, risks and probability factors. They appear to be more stringent while dealing with poor developing countries.

The recent deal signed between Bangladesh and ConocoPhillips on exploration work by the latter in couple of offshore blocks in the Bay of Bengal is a glaring example. Though the details of the deal have not been made public by the government, some conditions that could be known by the courtesy of the media do make it clear that the ConocoPhillips managed to get most things in its favour. The reasons for getting an upper hand by the company have been mentioned above.

Some left parties and experts have raised objection to involving the foreign companies in the hydrocarbon exploration work, terming the move as anti-national. One organisation under the banner of, “National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports” opposing the deal with ConocoPhillips observed a half-day hartal (general strike) in Dhaka last Sunday.

Taking into account the serious energy crisis facing the country, this kind of opposition cannot be supported. But any move to keep the details of the production-sharing contract with any IoC secret also cannot be supported. The government must make the deal public since all resources of the country do belong to the people.

Besides the advantages enjoyed by the IoCs in hydrocarbon exploration, the claims made by neighbouring India and Myanmar on some very prospective offshore blocks that are very much within the territorial limits of Bangladesh has emerged as another major irritant. The government has gone to the UN agency responsible for resolving international maritime disputes to get a solution. But such arbitration work involves a lot of time.

The developments around energy availability do make it almost certain that the gas crisis would worsen in coming years, forcing the country to depend more on imported liquid fuels to generate power and operate motorised vehicles.

The question is: Will the country be able to meet soaring oil import bills in the coming years without hurting normal developments in other areas of the economy? This is indeed a very difficult question that deserves serious attention of policymakers and experts.

No matter what is being claimed by the government leaders and some central bank officials, the country’s balance of payments (BoP) has already come under some degree of pressure because of higher fuel oil, food and capital machinery import bills vis-à-vis lackluster growth of remittance and slow disbursement of foreign assistance. Exports have recorded a robust growth in recent months but that was not enough to offset the rise in import payments.

The import payments have already recorded a rise due to procurement of larger quantities of diesel and furnace oil needed to run a number of rental power plants established by the private operators to meet the ever-widening power deficit. The import of fuel oils would go up further from this fiscal when more and more such plants would go into operation. It is not that higher import payments would end the trouble for the government which would be required to provide a large amount of subsidy because of a gross mismatch between the power purchase costs and sale tariffs.

To lessen the expenditure on account of petroleum-based power plants, the government has been mulling setting up of a number of coal-based power plants. However, keeping a large deposit of quality coal beneath its own soil, those plants would likely to be dependent on imported coal. And the government appears to be not in a hurry to dig out coal from its discovered mines barring one at Barapukuria and feed the planned coal-based power plants. There is no denying that extraction of coal from some of the mines involves a few problems, including displacement of local inhabitants and loss of arable land. But the government must find a way out.

Financial Express