Vol. 5 Num 493 Fri. October 14, 2005  
Front Page

Dubious leaderships, graft led to gas crisis
Energy sector slow on development, quick on questionable dealings

One indication of the performance of AKM Mosharraf Hossain as the state minister for energy between October 2001 and June 2005 is his ouster from the cabinet on grounds of taking benefits from controversial Canadian company Niko.

Mosharraf Hossain was one of the two ministers who were convicted in graft cases during the previous BNP regime. He was also a key player in negotiations for the Kafco deal, in which the interest of Bangladesh was undermined. There are allegations of bribery for undermining the national interest in this deal. As a civil servant, Mosharraf served the autocratic Ershad government to the point that his integrity and moral character were always in question.

With such a background, the appointment of Mosharraf as the state minister for energy was a surprise-- especially when the country's energy sector had become a vital area for investment, development and international focus. Most importantly, the issue whether Bangladesh should export gas or not had become so sensitive that people had been expecting a minister with a solid background to steer the nation out of this controversy and focus on real works in the sector.

Mosharraf was mandated to lead new gas discoveries and productions, fresh gas infrastructure development, develop mines and mineral resources and ensure a sound financial and administrative management in the gas sector.

But on almost all accounts, Mosharraf failed to deliver. There were widespread allegations of corruption, misuse of power, undermining of national interest in various deals and systematic weakening of different organisations that he was supposed to lead.

Mosharraf played a key role in the highly controversial Niko deal, and was largely responsible for the persistent gas crisis till late 2004. He reportedly helped stall the massive Dhaka Clean Fuel Project allegedly to protect tender manipulators in his sector.

Almost all tenders in the gas sector, involving hundreds of crores taka, suffered due to Mosharraf's interventions. He was seen promoting the interest of certain businessmen of the 'alternative power house' of the government in procuring a drilling rig, pipeline construction and various sub-contracts. When press reports specifically pointed finger at some corrupt employees in the gas sector, he was found busy in protecting them.

Mosharraf also systematically damaged the chain of command in Petrobangla and its nine affiliates by promoting and placing his nominees, although as per the government rules all posts in these bodies should be decided by Petrobangla itself.

Natural gas became a sensitive political issue before the 2001 election because international oil companies wanted to export gas, saying that Bangladesh has enough of it. Oil companies also projected some figures showing that Bangladesh is floating on potential gas reserves with an estimate ranging between 32 trillion cubic feet (tcf) and 80tcf. Government experts, however, refused to accept such predictions.

When Mosharraf took over as the state minister for energy, he openly took the side of the export-lobby. There was also tremendous pressure from western countries on the government even before the election. But anti-export opinion among the public was too strong for the government to ignore.

To offset this anti-export opinion, the government formed two national committees consisting of experts and economists. These committees included at least two Buet experts who worked as consultants for Unocal, the US company that had particular offers for exporting gas. But the reports of these committees watered down the debate. Their reports dismissed the hype that Bangladesh is floating on gas, showing that from 2015, the country is set to face a gas crisis.

By the end of 2003, the global political scenario changed and the US pressure became weak. This gave the BNP government the scope to sweep the gas export issue under the carpet. Unocal itself changed its direction and focused on gas development for the local market.

For two years, Mosharraf was busy making public statements in favour of exports. This narrow focus severely affected gas production, new discoveries and the overall focus of gas sector governance.

Mosharraf's only 'success' in his tenure was to make Bapex sign a joint venture agreement (JVA) with a Canadian oil company that was found disqualified in the government evaluation in the second round block bidding in 1997. This agreement violates the constitution, undermines national interest and it is now under the purview of a writ petition.

Mosharraf was so enthusiastic about Niko that he signed the approval of the JVA deal on behalf of the prime minister, who is also the energy minister.

Three marginal gas fields and one unexplored gas field were awarded to Niko. Of those, Niko is producing gas from the Feni marginal field. Mosharraf forced Petrobangla to take Feni's gas without any sale agreement, compelling Petrobangla to pay $4 million in April 2005 to Niko's account illegally-- again, without any billing.

Niko proved the government's 1997 evaluation correct on two clear cut accounts through two blowouts in Tengratila, one in January and the second in July-- just a month after Mosharraf was kicked out of the cabinet.

Mosharraf spent a great deal of time to look after Niko's interest even after the January blowout.

Receiving $20 million from its insurer, Niko was busy using the money for its own gains instead of compensating for the damages it had done. In March, with Mosharraf's help, Niko illegally constructed a 19km pipeline, using pipeline of the Dhaka Clean Fuel Project (DCFP) in Tengratila.

Neither Mosharraf nor his predecessor, Mahmudur Rahman, took any action against Niko. They formed probe committees. The committees submitted reports, solely blaming Niko for mishaps. But they punished Bapex employees and talked tough on managing compensation from Niko. And curtain was brought down on those reports.

The demand for gas was around 1,100 million cubic feet per day (mmcfd) of gas when BNP came to power. By October 2005, this demand surpassed 1,450 mmcfd.

As Mosharraf wasted two years campaigning for exports, he found the gas infrastructure in deep trouble by the end of 2003 and by late 2004, the gas supply shortfall became so severe that many gas-fired power plants had to remain shut.

The slight improvement in the crisis early this was not because of Mosharraf's efforts. At the start of this year, Unocal brought under production the Moulavibazar gas field, adding 105 million cubic feet per day (mmcfd) of gas and greatly helping resolve the crisis for a period.

However, the crisis forced Mosharraf to support Bapex and Sylhet Gas Field Company Ltd (SGFCL) in their bid to drill two development wells in Fenchuganj and Haripur fields. Bapex and SGFCL chipped in with 50mmcfd and 15mmcfd from these fields after 2004.

Mosharraf played a key role in having Niko produce 40mmcfd of gas from the previously abandoned Feni gas field from October 2004. But this operation too was shrouded in controversies.

On the exploration side, the only companies trying to tap new resources are the Tullow, Chevron-Texaco and Bapex in block 9. The Chevron-Texaco was not happy with Tullow, which was a favoured company of the previous Awami League government. This unhappiness led Chevron-Texaco to quit Bangladesh by improperly selling its shares to Niko, the BNP government's favoured company. This sell-out has virtually stagnated all activities in the block 9 till now.

At the same time, the Shell Oil also decided to sell its shares to the British company Cairn before quitting Bangladesh. The Shell bought these same shares back in 1998 and started operating in the Sangu field.

On the other hand, the Unocal, which is the key player in the country's gas sector now, held the block 7 under a five-year moratorium, which means that the company will not explore the block till 2006.

The Unocal is also developing the Bibiyana gas field, which is a major gas field, with the aim to bring it into operation from 2006. However, Mosharraf's inaction in take a pipeline project to offload the Bibiyana gas is likely to defer its operation to 2007.

The construction works of new pipeline suffered from irregularities and nepotism. The prime example is the Asian Development Bank (ADB)-financed $220 million Dhaka Clean Fuel Project (DCFP), which requires installation of hundreds of kilometres of pipes between Dhanua and Aminbazar and within the greater Dhaka city.

In the pipeline procurement bids, Mosharraf promoted businessmen of the 'alternative powerhouse' of the government. This move not only ruled out competent and cost efficient suppliers, but also delayed the DCFP by a year.

Mosharraf also forced the Titas gas company to lend out 19km pipes of the DCFP to the Niko. This slowed down the Titas component of the project, inviting irregularities in serious jobs.

This project aims at improving the CNG supplies network. The project was supposed to end by June 2005. But now it will not end before December 2006.

When Mosharraf assumed his position, the Gas Transmission Company Ltd (GTCL) already started a major construction of the 82km Ashuganj-Habiganj pipeline. Therefore, he can not claim to have initiated any major pipeline job.

However, the nation saw a lot of Bogra-oriented development works. Being the prime minister's constituency, Bogra became a key focus for all ministries. Consequently, Mosharraf led a northern pipeline construction to cater to a small segment of consumers. This pipeline is not major, but it brings a good number of northern districts within the gas supply network.

Among vital transmission lines which did not get attention are the 35km Ashuganj-Manohardi pipeline and Bakhrabad to Meghnaghat pipeline.

The Ashuganj-Manohardi pipeline scheme is being delayed due to the interest of the businessmen of the 'alternative powerhouse'. The pipeline, which was due to be complete by June 2005, is now expected to be done by June 2007. This delay is already affecting gas supplies to industrial areas of Jaidevput, Narsinghdi and Ghorashal.

Both the two under-construction mines of the country saw almost no progress. Both the Maddhyapara Hard Rock and Barapukuria Coal mines kept on draining out national resources while giving the nation nothing in return.

The mines are behind schedule by seven years and both are implemented through the shady Supplier's Credit system in which no credit came to Bangladesh, although the nation kept on paying back the North Korean and Chinese lenders.

The hard rock project remains incomplete by a vital 8 percent and presently there is no contractor. The coal mine was shut down earlier this month when deadly gas emission took place for flawed operation.

Both these deals were hatched by the previous BNP energy minister, Khondoker Mosharraf Hossain. AKM Mosharraf, who prided himself in completing the anti-national Kafco deal, could have at least finished the mines.

Both Mosharraf and Mahmudur Rahman treated Petrobangla and its affiliates, from the beginning, as their adversaries, not their comrades. Their dubious leaderships further dispirited employees in general when all transfers and postings were meddled with. Petrobangla now has nearly 60 percent of its posts vacant. There is not even an attempt to fill up the vacancies.

The last transfers and postings in Petrobangla were surprisingly directed by the Prime Minister's Office (PMO). Yet, only six to seven years ago, except for a few vital positions, all transfers and positions were decided by Petrobangla and their affiliates themselves.

One of the major reasons for such intervention is the huge business prospects in Petrobangla and its affiliates. Petrobangla earns more than Tk 2,500 crore a year while a section of corrupt officials drain out more than Tk 200 crore from the Titas gas company alone. Manipulation of tenders roll bribe money up to top management in the gas sector, which The Daily Star highlighted in numerous reports.

While Mosharraf categorically rejected all allegations of corruption against him to The Daily Star, it is alleged that through his selected men in Petrobangla and its affiliates, hefty amount of money was siphoned off on a monthly basis.

Mosharraf's tilt against Petrobangla manifested many times. When Petrobangla issued a notice on Unocal claiming compensation for the Magurchhara blowout, he blasted Petrobangla.

Mahmudur similarly is alleged to have favoured Niko over Bapex. Following the second Tengratila blowout, he suspended two Bapex officials to 'punish' Niko.