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No Easy Answers to Energy Questions

by Nuruddin Mahmud Kamal
***Natural gas is a versatile resource. It has played an important role in the country’s economic development. Without an ever-increasing supply of gas from the beginning, the power sector, in particular, might not have reached the level of growth they have achieved today. Therefore, had Bangladesh been compelled to import primary energy (like oil and coal) for generation of electricity, the country’s balance of payments would have been disastrous by now.***
ONE US Senator once said, “Everybody's Ignorant — only about different things."’ Most Americans, according to him. were blissfully Ignorant about what lay behind their gallon of gasoline or oil because it had always been abundant and cheap. There had been little reason to ask any question until the scenario dramatically changed in the mid-1973.
Complexity of the oil industry is such that there are no quick and easy answers to many of the questions we want answered now. It Is also why there are so many misconceptions.
Our most difficult problem is to try and understand the role that prices and profits play in providing incentives and capital to accomplish new exploration targets on the scale necessary' to obtain further hydrocarbon prospects.
Alien the prices of oil soared in the mid-1970s, due to OPEC, major international oil companies announced record net profit Increases in 1974. While oil-producing countries made billions of dollars between 1974 and 75. oil companies' profits also soared. Losers were the consuming nations. Tidal waves of capital for exploration and development of gas fields also became too strong to breast.
When the energy crisis hit the front page of the leading newspapers in the industrially developed world, it became obvious that we. too, needed to know a few things: the size of IOCs' business, their way of working and its impact on our economy. The first and foremost task was to address these issues in a comprehensive manner So. in 1974. the government initiated an Energy Study with the assistance of the ADB and UNDP. An energy strategy’ for implementation of projects was formulated. But. the planners found out soon, for a workable energy policy and legislation to implement it. understanding Its economics as well as certain controversial issues related to it was crucial. The process, unfortunately, lost its way in the political turmoil brought about by the military coup of August 15, 1975.
Quite a few reasons stand in the way of resolution of our energy problems in the near future. We do not do our homework right and. therefore, rely on the foolhardy advice and recommendations from the foreign consultants. Our own professionals, engaged in different organisations, prefer to
spend most of their time and talent to please their bosses, who. in their turn, are driven by the fear of losing their positions acquired with political blessings Professionalism is on the wane. Worse still, objectivity is becoming Irrelevant. Consequently, many of us tend to embroider the past that seldom makes meaningful impact In building a forward-looking society.
Many professionals. 1 am certain, can thoroughly define our energy problems, but due to undue influence of foreign consultants under donor-funded studies, the inevitable continues to happen. There is also no denying the fact that our experts know that we are not so lucky even amongst developing countries In this region. Natural gas. that too not in abundance. is the only available commercial energy resource and the hydro-potential is very limited. The technological and economic problems related to exploration for and exploitation of new energy sources such as solar and wind power have not yet been solved in our connin’ mainly because there Is no institutional support from the government for development of new and renewable resources. Our real energy problem. I dare say. is immediate and shortterm now, without undermining the long-term goals. Moreover. the issues related to energy face undue Interference, particularly in the decisionmaking process. The major problem lies there. Indeed our energy’ problems did not develop overnight and 1 presume there were no conspiracies to create shortages. In fact, our project implementation activities have been very slow and the processes are being complicated by the transaction costs and the bureaucratic tangles.
Natural gas is a versatile resource. It has played so far an important role in the country's economic development. Without an ever-increasing supply of gas from the beginning, the power sector, in particular, might not have reached the level of growth they have achieved today. Therefore, had
Bangladesh been compelled to Import primary energy (like oil and coal) for generation of electricity. the country's balance of payments would have been disastrous by now. Of the present per day generation of electricity about 2400-2500 megawatt (oti average; the highest so far being only 2650 Megawatt against an Installed capacity of about 3680 Megawatt), almost 85 per cent or over 200 MW Is gas fed. The contribution by gas has led to huge saving brought about in the country's oil import bill. Without gas. the oil Import bill would have been at least four times higher than it Is today.
It must also be noted with caution that natural gas. when entirely depleted, would lead the country to a serious energy supply problem. In 1971. consumption of gas was hardly 50 million cubic feet (MMCF) per day. Now it is almost 950 MM-CFD i.e. roughly 18 times higher. Projection for gas use is even higher. So, the country's natural gas has been and will continue to be of enormous development value. The international oil companies (IOCs) are now operating alongside Petrobangla/BAPEX and investing in exploration and development of gas in the country.
But the IOCs cost, both capital and operating, has so far been exceedingly nigh. It Is not unlikely to presume that Instead of cost-cutting and cost control. IOC expenditures are being inflated as has already been observed while scrutinising the claims of Scimitar's -Jalalabad exploration, Cairn's (now Shell) Sangu exploration and development, and Occidental's (now UNOCAL) exploration accounts. Unfortunately, Petrobangla does not posses the capability to monitor expenditures being incurred by the IOCs. It simply does not have adequate know-how. either financial or technical, nor are making any serious effort to improve its in-house capability, nor even hiring specialist companies to monitor and audit the ledgers, bills and books of accounts. Consequently, the IOCs are merrily continuing to gild their expenditures, much to
the discomfort of Petrobangla and the government.
Today, some of the senior-most bureaucrats would hopefully recollect the influx of Arab students in the mid- 1970s in the US educational institutions. Those trained personnel from the Arab countries. Malaysia and Indonesia occupied the driving scat of energy-related organisations, even private companies in the Middle East and South East Asian countries respectively. The first six production sharing contracts (PSCs) in the mid 1970s for off-shore oil exploration in six-blocks provided an annual budget of one million US dollars by each IOC for training of Petrobangla and government officials connected even remotely with the country's energy’ sector. Yet. It is alleged that, full advantage of the non-refundable training fund under PSC was not fully availed then and is not being availed even now. rather the officials use this fund for frequent visits abroad. It is also deplorable that Petrobangla's recruitment of fresh graduates from the universities have almost come to a standstill over the previous several years, let alone training them. Unless some serious effort is made to upgrade the ca-pacity of personnel involved in the energy fields, the political and economic targets of the country would remain unfulfilled.
Sometime back, in the early 1990s. I read a story’ that illustrates an important point about the present day energy' problem in our country.
Creator of Sherlock Holmes, Sir Arthur Conan Doyle, while in Paris, one day called a taxi, threw in his suitcase and got in
Before he could say a word the driver asked. "Where to. Mr Conan Doyle?"
The surprised author said. "You recognised me?"
“No", the driver replied. "I've never seen you or your photograph."
“Then how do you know I'm Conan Doyle?"
"Well," the driver said. "I read in the paper that you were
vacationing in the south. I noticed you arrived on a (rain from Marseilles; you have a tan that conies from spending a week or more In the sun; from the Inkspot on your middle finger I deduced you were a writer; you have the keen look of a medical man; and the cut of your clothes is English. Putting all together. 1 felt surely you must be Sir Arthur Cohan Doyle."
Sir Doyle was amazed.
“From the way you recognised me from all these small observations, you yourself are the equal to Sherlock Holmes."
"There Is one more thing." said the driver.
"What Is that?" Conan Doyle asked.
"Your name is printed on your suitcase."
As regards our energy problems, unless they are clearly spelled out. we don't see them coming, even if there are definitive clues. In retrospect, we can see now what should have been deduced earlier. We now have to think, plan and act to avert more serious consequences. One of our greatest weaknesses is complacency. Once the headlines and the A-B gas pipeline problems were over In Petrobangla in 1998. and some new power plants came Into operation, there has been a growing tendency to believe that we don't have gas supply problem or electricity problem — that the name on the suitcase is somebody else's!
There may be no such thing as a crisis to end all crisis, but at least the dropping of the energy bomb has opened our eyes to see how connected everything Is from the ankle to the neck. Unfortunately, we have not been able to secure the correct roadmap as yet. Nonetheless, there are always stories behind stories. The situations that led to the dropping of energy’ bomb passed through crisis, intrigues and dramatic incidents where allegedly the international oil companies were involved.
For instance, soon after Iran's Prime Minister Dr Mosadegh nationalised oil operations. in came back-door intrigues, riots, bloodsheds by a
group of wrestlers and butt hers wilh open sword in the streets of Tehran (hat eventually led to his ouster. The king. Reza Shah Pahlevi, had already fled the country. Much later It became a public knowledge that C IA had been directly Involved In the machination \The Invisible Government by David Wiser)
Meanwhile, the major oil companies suffered a setback in Iraq, the fourth largest Middle East oil producing country. General Abdul Karim Kassem took over the government through a military coup and he reversed the pro-western policy In oil production and marketing. He wanted the Iraq Petroleum Company, with its British. French and American ownership to relinquish the majority of the area of its monopoly oil concession But. that began the longest deadlock in the history' of the oil Industry. The oil companies and their governments were not sitting Idle. Soon the scenario changed. This time the casualty was General Kassem. He was overthrown and brutally killed.
On the Fareast, In Indonesia. President Sukarno passed an Oil and Gas Law In 1960, which, in effect, nationalised the oil Industry, providing that only state enterprises could develop hydrocarbons and foreign companies could work as contractors. This posed a serious problem to the concession owners -Caltex, Shell and Exxon etc. They were not ready to give up both management control and the exclusive right to set oil prices. Then came a deadlock for long time years. In 1963 President Sukarno Issued on ultimatum which came as a bombshell to the oil companies. They hatched a new conspiracy. President Kennedy and President Sukarno finally settled the three-year controversy in three days but the nationalist leader of Indonesia was overthrown shortly afterwards and in came, through the kitchen door. General Suharto.
The OPEC, which was created In 1960, was still strug-fling to assert itself. Sheikh ariki. the Saudi Oil Minister, the man who organised OPEC and was too much of a firebrand. was dismissed by the King reportedly on the advice from external powers. Dr Zaki Yamani was inducted as the new oil minister of Saudi Arabia. He provided the OPEC prudent leadership before he. too. disappeared in the desert of Arabia one fine morning.
The writer is a retired Additional Secretary and Jormer Chairman, PDB