Bangladesh finance minister AMA Muhith, in his proposed speech for the national budget for 2015-2016 financial year, has proposed allocation of Total Tk 18,540-crore for the Power Division and the Energy and Mineral Resources Division. The proposed allocation is about 6% of the total allocation. In his budget speech, the minister informed the parliament of various achievements in the sectors and also the plans to achieve the energy and power sector vision of the government. The text of his budget speech and Energy & Power analysis are discussed below

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Coal-based Power Generation: Considering that coal will be the main fuel after 2015, we have finalized a plan to establish coal-based power plants. Some of the important steps are: forming Bangladesh-India Friendship Power Company for setting up 1 thousand 320 MW coal-fired power plant at Rampal, signing an agreement with JICA for the construction of 1,200 MW coal-based power plant at Matarbari, installing four power plants at Moheskhali with combined capacity of 4,800 MW electricity each, generating 1,200 MW and another coal power plant of 1,320 MW at Payra in Patuakhali with the financial assistance of China, Malaysia, South Korea and Singapore. At the same time, agreements have also been signed to establish coal power plant to generate 1,411 MW electricity under public-private partnership.

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EP Observation:

Power System Master Plan the guiding document of government initiatives and actions. PSMS has a vision to achieve generation capacity of 24,000 MW by 2021 and 40,000 MW by 2030. The present generation capacity is 11,265 MW and actual average generation is 7500MW. The present fuel mix of power generation as per the presentation of Secretary Power Division in a Seminar in Dhaka in March 2015.

Fuel     % Contribution
Natural Gas     62%
Furnace Oil     21%
Diesel       8%
Power Import       5%
Coal       2%
Hydro       2%

The finance minister’s budget speech could have mentioned about the fuel supply challenges and the necessity for adopting diversity of fuel mix.

We like to mention here that PSMS for achieving 2030 vision has a planned fuel mix as below

Fuel     Proposed Contribution
Domestic Coal : 11,250MW     29.07%
Imported Coal :   8,400MW    21.71%
Gas /LNG        :   8,500MW    22.87%
Nuclear           :   4,000MW    10.34%
Regional Grid   :   3,500MW      9.04%
Others             :   2,700MW       6.98%

It is seen above that domestic coal will become the major fuel for power generation by 2030. But, finance ministers budget speech has no mention about exploration and development of domestic coal resource or domestic coal based mine mouth new power generation plan. Finance Ministers budget speech in previous years always had some mention about mining own coal. This year the absence of it indicate a policy shift.

The requires of extensive import infrastructure coal ports, storage facilities, coal sourcing etc are also not mentioned in case of imported coal based power generation.

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Nuclear Power Plant: As a long-term solution of power crisis, we have undertaken a plan to generate 2,000MW and 4,000 MW electricity from nuclear energy by 2022 and 2030 respectively.

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EP Observation:
The first project for Nuclear power generation with active support and assistance at Roopoor is advancing in the right direction. Very soon, the clear assessment can be made when and how much Nuclear power may be added to national power grid.

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 Power Import under Sub-Regional Cooperation: We have fixed a target to import 6,500 MW electricity by 2030 from the neighboring countries. Since November 2013, we are importing 500 MW electricity from India. Import of additional 600 MW is under process. Discussion on importing hydro electricity from Nepal, Bhutan, Myanmar and northeastern region of India is in progress.

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EP Observation
6500MW from regional grid is a new target from 3500MW previously planned. The agreements and MOUs those are planned to be concluded and initialed during the Indian Prime Minister’s visit to Bangladesh may give some indication. Hydro power import from Nepal, Bhutan and eastern states of India is a possibility. These are talked for a long time. We expect the changing paradigm of regional geopolitics makes it happen in the foreseeable future.

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Renewable Energy: We have established Sustainable and Renewable Energy Development Authority (SREDA) with the intention of generating 2000MW electricity from the renewable energy sources by 2020. We have also launched a programme to produce 500MW electricity from solar energy.

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EP Observation :
Mere setting up of SREDA and setting a target for renewable energy by 2020 means little until special tariff; fiscal packages are not provided as incentives for expansion and development of renewable energy. Achieving 2000MW from renewable energy by 2020 will require some major reforms through fiscal packages for renewable energy soon.

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 Transmission Line: Till December 2014, about 3,31,000km transmission line has been constructed to supply electricity to 1.62-crore users. There is a plan to construct 10 thousand km new transmission line and 1 lakh 50 thousand km new distribution line to bring everybody under electricity coverage.

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EP Observation:
Power transmission and distribution areas are very important for ensuring uninterrupted quality power. The age-old T & D system urgently requires updating and modernization. If possible there must be smart grid and smart metering system. Grid operation and control must be automated as far as practicable.

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Expansion of Energy Production Capacity and Import of LNG: Technical capacity of BAPEX has been enhanced more than ever before so as to dig more exploration wells in the prospective areas. On the other hand, in order to reap the benefits of maritime boundary dispute resolution with India and Myanmar, we are conducting 3D seismic surveys and working on signing production sharing contracts. At present, we have 26 blocks in the deep and shallow water ready for exploration.

Production capacity of Barapukuria Coal mine has been increased by adopting advanced technology. If we start extracting coal from the north side of the mine by using an open method, 110 million MT of coal could possibly be extracted over the next 25 years with an estimated 4-5 million MT coal per year. Besides, initiatives to install an LNG terminal and import LNG to meet ever increasing energy demand are underway. Hopefully, we will be able to supply gas from imported LNG by mid-2017.

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EP Observation: The maritime boundary dispute has been settled for few years now. Still there are very little activities in offshore exploration. The budget speech does not indicate clearly when the fresh bidding for offshore (deep water) will be launched? Model PSC may need significant updating for making it truly investment friendly for attracting genuine IOCs for very challenging deep water exploration.

We are not aware whether expansion of mining by the present long wall top caving mining method will bring significant added recovery. Barapukuria is the most ideal candidate for open pit mining. Government committee also suggested for a pilot open pit mining project at Barapukuria. The budget speech has reference of it but it did not discuss about the other mines.
LNG import initiative for reasons known to all was stuck in quick sand. The LNG was supposed to be available in Chittagong gas franchise by 2013. It will be still challenging to make it available by 2017 judging by the way the projects are advancing. The gas price needs to be adjusted before LNG starts to be flowing in national gas grid.

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 Natural Gas and its uses: Natural gas is a valuable resource but its estimated reserve is small in our country. As per preliminary estimate, the total gas reserve is 38.2 trillion cubic feet with extractable net reserve standing at 14.6 trillion cubic feet. Currently, gas is mainly used in power generation and industrial production. Gas is also used in private households in different cities of the country. In principle, we need to do away with allowing further household gas connection. Gas exploration activities have been strengthened while preparations have been made for LNG import. A gas reserve has been discovered in Bhola and a gas-based power plant will soon be established there. Presently, Dhaka and Rashidpur industrial area are regularly receiving gas supply. But, its supply to Chittagong and northern and southern regions of Bangladesh is quite limited. To increase supply of gas, we will have to step up gas exploration within our maritime boundary. At the same time, formulation of a long term integrated master plan for exploration, extraction, import, distribution, and use of gas is urgent as well as important. I would like to draw the attention of all concerned to this issue.

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EP Observation:
This is a very important area that budget speech has addressed. Bangladesh must have an appropriate strategy for natural gas utilization. The remaining gas reserve, future possible discovered gas and LNG must have only value added use. LNG options for domestic, commercial use must be exploited and if necessary assisted with subsidy. All future gas connection should be given to industries only and that too set up in special industrial zone and using energy efficient appliances. Supply of gas for domestic and commercial use must be gradually phased out and replaced with LPG making this easily available. LPG may also replace even CNG in phases.

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Power and Energy Saving: We have, meanwhile, started installing pre-paid meters in all households in phases over the next three years to ensure economic use of electricity. Beside the expansion of energy production, we also place emphasis on saving of energy by 10, 15 and 20 percent within 2016, 2021and 2030 respectively through saving and conservation of energy in the industrial, commercial and residential sectors. To this end, we are formulating the 'Energy Efficiency and Conservation Master Plan'. Steps are underway to implement energy auditing and energy management programmes in industries. Alongside, we have undertaken energy star labeling programme to encourage the use of efficient appliances among people.

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EP Observation: Great initiative. Energy conservation and energy efficiency drives can save at least 50% of the energy that are now being misused. Even some power plants and fertilizer plants are wasting huge gas for their inefficient and obsolete process. Majority boilers in industries are inefficient. Properly conducted energy audit and strong monitoring of energy uses are essential for Bangladesh achieving energy sector vision.
Budget should have discussed institutional strengthening and capacity building of Power and Energy Sector. It should have addressed pricing adjustment of power and energy.

We hope honorable parliamentarians will have lively discussions on budget allocations for energy and power sector and arrive at rational allocation which may even be higher than what has been proposed.

BDST: 1524 HRS, JUN 5, 2015
RS