Let the Coal Policy debate come to an end

State Minister for Power, Energy and Mineral resources Nasrul Hamid on February 02 pledged to adopt a Coal Policy within the shortest possible time. The Financial Express reported on the following day that the newly-appointed State Minister also has a plan to adopt an appropriate Energy Policy for possible utilisation of the fast depleting energy resources of the country.

The Coal Policy-related statement of the minister makes a news headline because the coal policy has remained pending since 2005. All the successive advisers and ministers for power and energy and mineral resources made pledges on various occasions to adopt the policy but failed to deliver.

There are differences of opinion on the need for a separate Coal Policy for mining and utilisation of coal resources of the country. Some expert feel that the issue of the pending coal policy has been used as an excuse for not developing domestic coal resources. Relevant government officials usually refer to the absence of coal policy for not taking measures for the development of domestic coal resources despite the fact that the country has been facing multiple problems due to the shortage in the supply of primary energy. Dr. M Tamim, the former Special Assistant to the Chief Adviser to the last Caretaker government, said in an interview with the Energy & Power magazine (February 01, 2014): "I do not think a separate Coal Policy is essential for mining coal. The relevant acts and rules are already there…..in case of any additional requirement, the conditions can be included in the Contract."

Now, the government needs to act and if it feels necessary the finalisation of the coal policy should not wait.

Government officials have been repeatedly stating that a target has been set to generate 50 per cent power from coal within 2030. The Power Division has signed a number of contracts for the construction of imported coal-based power plants. But many experts are of the opinion  that there is really no feasible and economic option but to extract domestic coal for generating electricity at an affordable price to the consumers.

The issue of cost of power generation has become further critical as no significant gas discovery has been made in the last 14 years. The existing power generation systems rely 78 per cent on gas. Sangu gas field, discovered in the shallow offshore in 1996, and supplied gas to Chittagong area from 1998. The Sangu field dried up and was abandoned in October 2013. The cumulative gas production from Sangu field was 488 billion cubic feet. Unfortunately, there has been no more commercial gas discovery in the offshore since then. The offshore gas processing plant at Chilimpur and other gas transportation infrastructures built for Sangu field remain idle and no one knows if Petrobangla will be able to extract any gas from the offshore in the near future. For last several years no new investment by international oil and gas company was recorded in Bangladesh for exploration of oil and gas. From the existing one, government's dependence on Chevron has been increasing. More than 50 per cent of the total gas production has been secured from Chevrons' Bibiana, Maulvibazar and Jalalabad fields under Production Sharing Contracts.

As the country continues to suffer from gas supply shortage of 500-600 million cubic feet daily, the government is apparently  happy with increased production of Bibiana field (the field alone supply 36 per cent of the daily total production of gas). As more and more gas is extracted from Bibiana field, there is a danger that the field will dry at a faster rate. Government plans to import LNG (liquefied natural gas) - at least 500 mmcfd equivalent -primarily to meet the demand for Chittagong area. But again, experts maintain that the LNG import will not solve the problem for primary energy supply.

In the Asian region, thermal coal price is approximately one-third of LNG. Moreover, importing of 500 mmcf equivalent LNG will cost (at USD 15 per mmcf) approximately  USD 2.75 billion annually. If the imported LNG is planned to use in the power plants, the cost for electricity generation will not be less than imported liquid fuel-based electricity. The impact of imported liquid fuel-based power generation on the country's balance of payment has been a topic of discussion for the last couple of years.

Therefore, sustainable power at an affordable price for healthy economic development will demand steady and cheaper options of primary energy sources. If Bangladesh continues to increase its dependence on imported costly fuels for generating electric energy, it will be exposed to manifold economic and political uncertainties. We may recall that the average production cost of electricity grew from Taka 2.5/unit in 2009 to Taka 6.5 per unit in 2013 and the domino effect on the power tariff escalation on our everyday life. Although the raise in  power tariff was inevitable to reduce the pressure of energy subsidy on the economy.

The 'cheap' natural gas has been depleting fast due to policy dilemma regarding the development of the coal sector. Private sector investment in power generation remains slow in the absence of security of primary fuel supply and due to the prevailing uncertainties in local electricity market's behaviour. Moreover, the private investor would prefer to see the government's initiatives for the development of infrastructure facilities for import of coal and LNG for generating power. The ports and inland waterways are not yet ready for bulk import of coal and LNG into the country. Experts fear that without the balanced mix of primary energy the targets of power generation will not be possible.  

The target of enhancing coal-fired power generation can be attained if initiatives for domestic coal development are taken without delay. Otherwise, the much-talked-about shift to coal-fired power generation (50 per cent of the target production) will miss the deadline.

Author, a mining engineer, writes on energy and environment issues.  [email protected]