The folly of energy exports

We need to ensure that our domestic fuel consumption needs are met first, argues M. Firoze

One common urban scene, to which our middle class mindset has inured itself, is the spectacle of poor children and women folk gathering tree leaves and twigs in a leafy suburb, and sorting municipal rubbish for waste paper. They scavenge for fuel to cook. In rural Bangladesh, cow dung, jute sticks, and trees provide the fuel for the majority of our countrymen.

According to the US government's Department of Energy (DOE), which undertook a landmark study of global energy sources and consumption patterns, more than 50% of the Bangladeshi population depends on municipal and animal wastes, and the lucky ones on firewood, for their energy needs. The electricity scenario is worse, only 20% have access to electricity.

The cost, human and economic, in terms of environmental degradation which is the result of cutting trees for firewood, and the health hazards of prolonged inhalation of smoke from burning animal waste, firewood and municipal rubbish, is enormous. I cannot put a figure to it, but the fact that more than one-half of our fellow citizens are directly exposed to such hazards on a daily basis, and that the entire nation will ultimately suffer the consequences of deforestation, should be ample cause for national alarm.

Our gas resources are being depleted fast, and if we do not strike a major field the size of Titas or Bakhrabad in 2-3 years we will very soon have to choose between using gas to generate power or to make urea fertilizer. Food will compete with electricity. Coal is a viable alternative energy source for power generation, and this precious resource should be used solely for that purpose.

This is plain common sense, and good business sense as well. Coal burnt in well-designed small cast-iron stoves can be a viable alternative cooking fuel in the rural areas, and can help conserve our forests. Using coal for power generation should not be difficult. Immediate contracts can be modeled on a production-sharing basis, which we have done for the gas fields. Power generation can also be started in a small way in 2-3 years if quality international firms are given an opportunity.

The coal export policy was crafted by governments whose definition of success was guided by a demeaning "15% commission" mentality. How else can one explain the sheer absurdity of exporting coal from an energy starved nation? The able government of Dr. Fakhruddin Ahmed has done a commendable job of ridding the country of the corrupt elite, and it should have no hesitation in throwing out any deals which are relics of a corrupt era.

The government should also throw out the unsuccessful contractor of the Barapukuria coalfield, which could not show any results in the last 16 years! We need a bit of aggressive diplomacy with the Chinese government, with whom we have a very flourishing economic relationship, but were badly let down in this case by one of their state owned corporations. The Chinese ambassador in Dhaka is very outspoken in defending his country's commercial interest; I wish our legation in Beijing could do a similar job.

One of the consequences of the kickback culture was that internationally reputed and capable energy firms stopped doing business in Bangladesh. The government has to woo them back by pre-qualifying only capable and reputed international firms for the bidding process, and kicking out the tainted and incompetent ones.

The Chinese have the world's highest coal mine accident rate, and are considered the least efficient among the global players in the coal industry. The country has paid an enormous price, not only in terms of power shortages but in lost industrialization and job creation as well, by awarding contracts to such novices. At the least, the government can appoint a reputed international coal-consulting firm to ascertain the causes behind the fiasco.

At the same time, the government should set up a national commission consisting of the country's best minds in energy and power generation, economics, law and environmental science to frame an energy policy for the country. The commission should prepare a draft policy that can be publicly debated, and every shade of opinion can be considered on its merit. The three successive elected governments interpreted their mandate as a license to engage in shady backroom deals. There was never any open and spirited public debate on a proposed draft plan on matters of national significance.

On a fundamental level, the proposed energy policy and the energy security plan must prepare the nation for the day when the country's meager gas and coal reserves are exhausted. Renewable energy sources: wind, solar and bio-fuels are three promising areas.

The world's leading petroleum companies are spearheading the commercialization of these alternative energy sources. India's proven gas deposits are nearly 3 times more than Bangladesh's, even more if one takes into account the fact that it does not use gas for power generation. Yet it has a national policy of encouraging solar, wind and bio-fuel energy.

This is to actively discourage fossil fuel use and promote renewable energy.

Our most cherished middle class indulgences is an eternal flame which silently burns in our kitchens, for cooking, and for drying linen throughout the long monsoons, all for less than Tk 1,000 a month. A garments worker's, or a rickshaw puller's, family ends up spending more on kerosene purchase every month. As a percentage of their incomes, a poor working class family living in the slums spends far more than a middle class apartment dweller. The proposed energy policy should take into account this inequity, as well.

One of the most controversial investment proposals was presented by the Tata Group of India, which the previous government was powerless to either approve or reject. Undoubtedly, such procrastination sends a very poor message to global investors. The principal reason: the absence of a guiding policy on natural gas use.

Since we do not have an energy policy, Tata was at liberty to demand absurdly low prices for natural gas from the Bangladesh government. It is interesting to note that Tata never demanded such concessions from the government of India, simply because India's gas fields are a corporate entity. The Gas Authority of India Ltd. (GAIL) has very clear rules for gas sales contracts. In effect, the Indians have an energy policy in place, while we do not.

According to a CIA estimate, updated last year, Bangladesh is ranked 40th in terms of proven deposits of natural gas (300,200 billion cubic metres), while India is ranked 26th (853,500 billion cubic metres). It should be borne in mind that India's entire power generation is based on coal and hydroelectricity; gas is used in India only for high value projects such as fertilizers and plastics chemicals. Despite the relative abundance of natural gas, and having many other alternative sources of energy, India's GAIL has a 50-year vision and plan for gas procurement and consumption.

Tata needs gas at its iron ore mines at Jamshedpur, and Bangladesh is the nearest source of gas for a gas-based iron reduction plant. Since exporting gas is politically unacceptable for Bangladesh, the solution is to build the plant in Bangladesh, convert the iron ore to flat steel, and re-export the same to India. This is gas export under the garb of investment. The alternative for Tata is to build an enormously more costly (by a factor of 4 or 5) coal- based steel plant.

We can never take a decision on major investments, foreign and domestic, unless we have a well-crafted energy strategy and an energy plan which clearly looks ahead, 50-60 years in the future. This is well within the economic lifetime of most large investment projects, such as Tata's

The energy plan will have to prioritize the use of finite energy resources such as natural gas: For urea fertilizer production, for food security? For transportation? For power generation? Or for reducing iron ore to make steel for export, such as the one being proposed by Tata? By raising imported petroleum prices to world market levels, and by giving tax breaks to CNG ventures, we can eliminate BPC's crippling losses as natural gas will be used extensively as vehicle fuel. We will also have a fatter reserve of foreign exchange.

Transforming the country's gas fields and the coal mines into corporate entities, with equity participation by reputed global energy giants, should be a national priority on a scale with the deep sea project in Cox's Bazar. Corporate entities are self-sustaining, and will spend their profits and retained earnings to build the infrastructure of renewable energy sources.

M. Firoze is a General Manager in the country's largest steel manufacturing company, BSRM.