Finance minister AMA Muhith has recently placed his budget proposal for the finacial year 2016-2017 to Bangladesh National Assembly.
The proposed budget allocation for power and energy sector in 2016-17 is less than the revised allocation of 2015-2016.
There are logical justifications for that. Most of the projects in power and energy sector gets delays for various visible and unforeseen reasons.
In such situation experience suggest that part of allocations for the sector remains unutilized. Perhaps in budget preparation this year this was taken into consideration.
In the energy sector most of the Gas Transmission Company Limited (GTCL) gas transmission infrastructure expansion and development projects are at the last stage of completion. It needs only the residual allocations in 2016-17.
Power projects are being implemented under Joint Venture and G to G bilateral arrangements.
Moreover, ECA financing is being endeavored. Low price of crude oil and petroleum products have relieved Bangladesh Petroleum Corporation (BPC) and Bangladesh Power Development Board (BPDB) of the operating losses that they incurred during high crude price.
Government is not required to pay subsidy to these state owned enterprises. In summary budgetary allocations for power and energy sector as proposed appear practical. There is no concern that this may affect the power and energy users.
However, the technical and managerial capacity of energy and power projects implementation agencies and monitoring units of the government need to significantly enhanced for avoiding delays in projects implementation and ensuring proper quality control.
Government must also seriously review exploration and exploitation of own coal and expedite petroleum exploration. Appropriate gas utilization plan must be adopted. Economic pricing of power and energy must be rationally developed.
Discussion about Power and Energy Sector
Proposed budget has a target for achieving adding another 16,086 MW installed power generation capacity by 2021.
29 power plants of total capacity 7,296MW are under construction, tender process of another 20 power plants with a capacity of 6,681 MW are at advanced stage and 8 more plants with a capacity of 4,435MW are at planning stage. Another power plant in private sector at Maheskhali is under negotiation.
Proposal appears highly optimistic. But the reasons behind delays of implementation in major projects were not mentioned. There is no information why vast majority of rural population and in towns outside major cities are suffering from irritating power load shedding?
Alternate Fuel for Power Generation
There is mention about fuel diversification for power generation. Coal, diesel and furnace oil, nuclear power and renewable sources would make greater contribution side by side to natural gas. There is mention for coal as the preferred fuel option.
Fuel diversification is a must in view of the rapid depletion of discovered gas resource. But there was no mention about domestic coal exploitation. How can sustainable fuel supply at affordable price be achieved if domestic coal resource remains below the surface and exclusively rely on imported fuel?
Coal and LNG may be relatively cheaper now. But there is no guarantee how long it will remain within the affordable limit of Bangladesh?
Moreover, there can be interruption of imported fuel value chain for global or regional geopolitics. What will happen then to exclusive imported fuel based power generation? What will happen to energy security?
Proposed budget has mention about 6,500 MW power import from regional countries by 2030. 600 MW power is currently being imported from India and another 500 MW import is under process.
The issues and options of regional and subregional power trading are being discussed for almost one and a half decade with very nominal success.
India is the major power producer and user in the region. But India has huge deficit also. Bhutan is the only country of the region which has surplus at this moment. But it has commitment to export to India. Nepal has huge generation potential. But most of these are not tapped yet.
Nepal suffers from chronic power deficit though under contract it exports power to India. Any power import from Nepal and Bhutan requires developing additional power generation capacities and power transiting through Indian Territory to Bangladesh.
India is not power surplus country. Some of its regional may have surplus but other regions have major deficit. The issues and challenges of South Asian Association for Regional Cooperation (SAARC) region power and Energy Grid are in discussion for a long time.
USAID, World Bank, ADB and SAARC Secretariat worked and are working. Technically the issues are manageable, commercially it is viable. We believe governments of the region have political will and commitment. But geopolitics and fragile bilateral relations among nations are major hindrances.
Gas Reserve Expansion and Production Enhancement
Proposed Budget has an announcement about an ambitious project of Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) drilling 108 wells including 53 exploration wells by 2021. He mentioned that about 943-1,105 MMCFD gas will be produced from these wells.
The history of gas exploration in our region from 1908 to 2016 has evidence of 83 exploration wells drilled by different IOCs and Petrobangla /BAPEX. BAPEX has drilled 35 wells, including 3 exploration wells under its own program from 2009-2015.
In view of above it is highly unlikely that BAPEX with its present technical, financial and managerial capability can successfully implement such a gigantic project in 5 years.
Moreover, without successfully confirming commercial discovery through exploration and testing it is not wise making speculation of finding and quantifying gas find.
Budget proposal has no mention about plans for offshore exploration, deep water PSC and letting out exploration in the onshore frontier areas outside BAPEX allocated blocks and ring fenced area for PSC bidding.
LNG Terminal and LNG Import
There is mention about 138,000 cubic meter capacity FSRU installation at Maheskhali and LNG import. There is also mention about 2 more land based LNG terminal construction at Maheskhali and Payra.
There is announcement of governmentcommitment for resuming gas connections to Industrial consumers in 2018
FSRU at Maheskhali and LNG import is under discussion since 2010. 500 MMCFD equivalent LNG may start flowing in the national gas grid in 2018.
Without detail techno economic feasibility study for land based LNG terminals for assessing the costs and other technical challenges of LNG terminals in our coastal areas it cannot be ascertained whether or not land based LNG terminal will be feasible for Bangladesh at this stage.
The present deficit of gas as per official statement in a 2,740 MMCFD gas production scenario is over 500 MMCFD. But taking all unmet demands into consideration the deficit now may be 1,000 MMCFD and growing.
By 2018 there is every possibility that production capacity will further deplete and demand will grow. Chittagong region itself has about 300 MMCFD gas deficit even now.
Unless demand side is managed through drastically reducing gas supply to captive generation, domestic and CNG, gas supply situation in 2018 may not significantly improve even with 500 MMCFD equivalent LNG import.
Government in its past term in 2009 adopted various plans and initiatives for confronting the prevailing power and energy crisis.
There were short term contingency planning, midterm consolidation planning and long term sustainability planning. In June 2016 the overall situation is under control and is gradually improving. The installed capacity of power generation has reached 14,539 MW.
Per-capita power use is now 371 kWh. 76% of population has now access to power. Renewable energy is contributing about 430 MW. 600 MW is coming through import from India.
There exists some deficit in actual practise both in power and energy though power generation capacity is way above demand.
Primary fuel supply shortage and constraints in power transmission and distribution system leave significant capacity remaining idle and end users gets about 70% of generated power for system constraints. The highest generation that could be achieved so far is 8,348MW on April 9, 2016.
Gas production capacity is 2,740 MMCFD from 20 producing wells. The deficit is over 500 MMCFD. Proven recoverable reserve of gas is depleting.
Government has launched initiative for importing LNG and expediting exploration and development for new gas resources.
Government has also adopted plans for diversifying fuel mix for power generation and expanding use of LPG in domestic, commercial and replacing CNG with LPG for vehicular use.