India-Bangladesh energy cooperation: Scaling new heights

India-Bangladesh energy cooperation: Scaling new heights

Bangladesh’s excessive dependence on natural gas for electricity generation and its failure to develop other energy alternatives to feed its economy has weakened its energy security. Natural gas, which comprises of 78% share of Bangladesh’s total energy mix, contributes to 85% of its power-generating capacity. High potential endowments but limited proven reserves of natural gas in Bangladesh has resulted in a shortage of domestic gas supply which has impacted it’s power generation and economic output, negatively.

The sector assessment report on energy by Asian Development Bank has stated that, untargeted subsidies, inappropriate gas pricing and the lack of systematic allocation of gas among sectors has contributed in causing excess gas demand, gas shortages and its wasteful use in Bangladesh.

Further, the current rate of domestic production of gas and absence of new gas discoveries has further led to a significant decline in Bangladesh’s Reserves-to-Production ratio (R/P) from 18.3 in 2010 to 8.7 in 2015, signalling an early exhaustion of its gas reserves. This has prompted Bangladesh to take series of measures to revamp the energy sector, under the larger framework of newly formulated Power and Energy Sector Master Plan (PSMP) in September 2016. Interestingly, this plan, inter-alia, has suggested for greater international energy cooperation for Bangladesh, particularly with its neighbours.

Bangladesh aspires to become one of the high-income nations by 2041, however its limited energy endowments, marred by excessive dependence on natural gas, sans new discoveries continues to hamper its energy security, particularly at the time when nearly two-fifth of its 160 million people still remains without electricity.

Many power plants in Bangladesh have failed to generate electricity as specified in terms of power resulting in daily blackouts, which has disallowed planned periodical maintenance. Subsidized power has further impacted the profitability of public sector power generating companies, which now even find difficult to purchase necessary spare parts in advance. With an installed generation capacity of 15,379 MW, Bangladesh continues to face a daily shortage of up to 1,500 MW.

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Thus, these factors have impelled Bangladesh to revamp its energy sector in a way that it provides appropriate weightage to all the energy sources for the sustainable development of energy and power infrastructure. PSMP 2016 has been successful in identifying several vulnerabilities in Bangladesh’s energy sector and accordingly suggested ways and means to address the same, taking into account its susceptibility to climate change as well by advocating for development of clean energy fuels as well as energy diversification. Bangladesh has done well to look at India in addressing some of their energy security challenges.

It is in this vein, Bangladesh PM Sheikh Hasina’s visit to India, earlier this month, assumes greater significance. Her visit could also be a consolidated effort to the earlier visit by India’s Petroleum Minister Dharmendra Pradhan in April 2016, where both the countries discussed to take their cooperation beyond power sector, a mainstay of their existing energy cooperation.

As suggested in PSPM, energy diversification along with cooperation with its neighbour is important to revamp Bangladesh’s energy sector. Thus, energy cooperation between India and Bangladesh can be considered to be in this direction wherein both the countries can explore new avenues of cooperation across energy value chain.

During the visit of Dharmendra Pradhan to Bangladesh in April 2016, Indian Oil Corporation Limited (IOCL) inked an MoU with Bangladesh Petroleum Corporation (BPC) to set up LPG terminal in Chittagong. This terminal, besides meeting Bangladesh’s gas demand, would also carry liquefied petroleum gas (LPG) to north-eastern Indian states, including Tripura, thereby benefitting both the countries. Pradhan’s visit which was also aimed at following up on the ambitious agenda set between India and Bangladesh during the visit of PM Modi to Bangladesh in June 2015, further witnessed a formally entered contract between Engineers India Limited (EIL) and BPC to render a ‘project management consultancy’ for expansion of 3 million metric tonnes per annum (mmtpa) refinery in Chittagong on April 19, 2017.

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Earlier in March 2016, a goodwill rail consignment of 2200 MT of HSD was flagged off from Siliguri to Parbatipur in Bangladesh by Dharmendra Pradhan as a gesture of Indo-Bangla Friendship.

Pradhan’s visit was therefore well thought of in a sense that it succeeded in streamlining not only the visit been made by PM Modi in 2015 but also laid a further groundwork for PM Sheikh Hasina to strengthen energy value chain to include cooperation in hydrocarbon sector as also in exploring common ground in clean energy, such as solar and nuclear.

Appreciating the holistic development of all the energy resources and the need for energy diversification amidst low oil and gas prices, both the countries carried out the second secretary-level dialogue on energy security in Dhaka just before Hasina’s visit to India.

In this dialogue, issues related to augmenting domestic production of hydrocarbons in Bangladesh’s offshore blocks in the Bay of Bengal which are at an advanced stage of exploration and setting up of LNG and LPG terminals in Bangladesh by Petronet and IOCL respectively was discussed.

Bangladesh alsoreiterated its need to get connected with Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline to suggests the importance of natural gas in their economy. Further, a proposal of Indian Oil Corporation Ltd (IOCL) for supplying RLNG to Bangladesh was also discussed.

Thus, with the concerted efforts of the two countries until the visit of Bangladesh PM Sheikh Hasina to New Delhi, shaped up well, as reflected in the following agreements.

  • signing of long-term sale-purchase agreement supply of High Speed Diesel (HSD) through the proposed 131 km Indo-Bangla friendship pipeline between Numaligarh Refinery Limited (NRL) and Bangladesh Petroleum Corporation (BPC) from NRL’s marketing terminal in Siliguri to BPC’s Depot at Parbatipur.
  • Reliance Power signed an agreement with Bangladesh Power Development Board for phase I of 750 MW LNG power project at Meghnaghat near Dhaka entailing an investment of around USD 1 billion, besides signing an MoU with PetroBangla to set up joint venture (JV)of 500 million metric standard cubic feet per day (mmscfd) LNG terminal at Kutubdia Island near Chittagong in Bangladesh.
  • India further agreed to lay a gas pipeline from Dattapulia in West Bengal to Khulna, the third largest city of Bangladesh.
  • Besides, three pacts in the field of civil nuclear energy was also signed relating to cooperation in peaceful uses of nuclear energy, exchange of Technical Information and Co-operation in the Regulation of Nuclear Safety and Radiation Protection and a pact on cooperation regarding Nuclear Power Plant Projects in Bangladesh.
  • They further agreed to intensify bilateral cooperation in energy efficiency as well.
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Thus, given existing energy challenges prevailing in Bangladesh and India’s position in addressing most of these augurs well to take their energy cooperation to new heights.

 

(*) Manish Vaid is Junior Fellow with the Observer Research Foundation, having the research interests in energy policy and geopolitics.
Disclaimer: Views expressed are those of the author.

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