Author : Manish Vaid

Originally Published 2013-01-08 00:00:00 Published on Jan 08, 2013
Bangladesh has to change its energy policy resulting from demand outstripping the current supply. The country believes in energy autarky with focus solely on use of indigenous resources. But frequent changes of regimes and policies by subsequent governments has only helped arrival of more international oil and gas companies in the Bangladesh market.
Plug in to cross-border recharge
Since its inception in 1971, Bangladesh and India have had a relationship fraught with mistrust. The situation failed to change despite political transformations in Bangladesh under democratic civilian regime from 1991-2006 and 2009 onwards.

But Bangladesh hopes to break new ground with the upcoming general elections in 2014. Bangladesh's leader of opposition, Khaleda Zia made this clear during her visit to India in early November. Zia believes that incumbent government would not be in a position to extend its tenure having failed in continuing with the good work of 2006-2008 when almost all independent regulatory bodies including Election Commission, the anti-corruption commission and public service commission were revamped to bring in better governance. Interestingly, both these nations will be witnessing fresh elections in 2014.

The critical energy scenario in India and Bangladesh and changing geopolitical dynamics in the South Asian neighbourhood have created enough reasons for the two countries to align with each other, irrespective of who rules them. The democratic transition in Myanmar has revived the possibility of Myanmar-Bangladesh-India gas pipeline, which otherwise would have cost India a fortune covered as it a longer distance through the North Eastern states. Besides Myanmar and Bangladesh are also negotiating some other land and maritime disputes. These are likely to become a template for sorting similar disputes between India and Bangladesh in the Mahanadi deepwater basin by 2014.

Both India and Bangladesh have a favourable geo-strategic and economic presence in this region and further developments like retreat of NATO troops from Afghanistan is making this region even more important not only to distant countries like the US and Russia but also to regional stakeholders like China, Pakistan and Myanmar.

But the biggest reason for these nations to integrate would be to satiate the energy thirst of its folks resulting out of the robust increase in population, urbanisation and increased economic activities. Amid rising energy demand and fall in natural gas production, both the countries can look for regional energy integration to reap the benefits of cost optimisation through mutual investments.

Bangladesh has to change its energy policy resulting from demand outstripping the current supply. The country believes in energy autarky with focus solely on use of indigenous resources. But frequent changes of regimes and policies by subsequent governments has only helped arrival of more international oil and gas companies in the Bangladesh market.

One of such opportunity was opened last month by the ruling Awami League (AL) which has invited Indian oil and gas companies in dispute free 12 offshore hydrocarbon blocks in Bay of Bengal. This government has asked Petrobangla and Bangladesh Petroleum Exploration & Production Company Limited (BAPEX) to facilitate participation of Indian companies. These blocks which have been unexplored and are believed to be of high potential have been marked for Bangladesh by International Tribunal for the Law of the Sea (ITLOS). Since exploration activities began in Bangladesh nearly 100 years ago, only 64 exploration wells have been drilled to date covering 2,07,000 square kilometres, making this country as one of the least explored nations in the world. (Source: Md. Mosharraf Hossain, Former Chairman of Petrobangla, "Exploration Hydrocarbon in Bangladesh: Prospects and Potentials", ICEP International Seminar 2000, Tokyo, November 15, 2000).

India's geographical proximity to Bangladesh lends a natural advantage to ONGC Videsh Limited (OVL) which already has a minimal presence in some hydrocarbon blocks in Bay of Bengal. It can make the bidding even more competitive by cutting overhead costs. Furthermore, the Production Sharing Contract (PSC) for the project is quite attractive as it doesn't have any corporate taxes, signature bonus or royalties to be paid and the investing company is allowed to repatriate the profit accruing from such equity stake. So even the bidding does not allow export of gas OVL must grab this opportunity with both hands.

Of the 12 blocks, nine (SS-02, SS-03, SS-4, SS-06, SS-07, SS-08, SS-09, SS-10 and SS-11) are in shallow sea waters with an area in a range of 4,463 sq km to 7,692 sq km and three (DS-12, DS-16 and DS-21) are in deep sea waters with an area ranging from 3,190 sq km to 3,516 sq km. According to BP Statistical Review of World Energy 2012, the proved natural gas reserves of Bangladesh are 12.5 trillion cubic feet whereas its production stood at 1.9 billion cubic feet per day.

According to estimates by Wood Mackenzie in 2006 Bangladesh's domestic gas reserves could be depleted by 2020. Shortage of natural gas has prompted the country to mull importing gas from various sources including India through Shiliguri-Rangpur route, Myanmar through Myanmar-Bangladesh-India gas pipeline, thereby making amends of its past act and just recently from Turkmenistan through Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline.

Moreover, there should be an augmentation of cooperation in energy sector between India and Bangladesh in a holistic manner. In January 2010 these nations have agreed to cooperate in energy sector to tackle the electricity crisis in Bangladesh and have already initiated a joint venture between India's National Thermal Power Corporation (NTPC) and Bangladesh Power Development Board (BPDB) to set up coal power plant in Khulna district in Bangladesh in addition to proposed 1320 MW power to be transferred back to India in case of surplus power generated through a transmission link set up by Power Grid Corporation of India. Last year in March a Power Purchase Agreement between NTPC Vidyut Vyapar Nigam Limited (NVVN), a wholly owned subsidiary of NTPC and BPDP was signed under which 250 MW of power will be exported to Bangladesh out of the unallocated quota of power available with the Ministry of Power, Government of India.

Similar initiatives both in power and hydrocarbon sectors by these countries will certainly help improve their energy situation. All these developments would also boost other bilateral exchanges. This would also help other countries in the region develop a model for strategic and economic regional bilateral and multilateral cooperation.

(Manish Vaid is a Research Assistant with Observer Research Foundation)

Courtesy: The Financial World

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Manish Vaid

Manish Vaid

Manish Vaid is a Junior Fellow at ORF. His research focuses on energy issues, geopolitics, crossborder energy and regional trade (including FTAs), climate change, migration, ...

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