‘LNG cannot be our solution, nor can another FSRU’

This excerpt is from a TBS special, hosted by Sharier Khan, senior executive editor of The Business Standard. The guest for this edition of the show was Khondaker Golam Moazzem, chairman of the Knowledge Hub Institute and an industrial economist. They discussed what the new government has promised on the energy crisis and whether it can deliver. Moazzem argued that the ambitions are broadly right but the urgency is missing — that the LNG-and-FSRU path deepens a costly dependence, that gas exploration and renewables deserve priority over coal, and that what is lacking is day-by-day delivery.

Six months in, is the government handling the energy crisis well?

The Middle East crisis changes character by the day — the latest being the closure of Bab al-Mandeb, which has thrown even our Saudi oil supply into doubt, after the earlier difficulties over Iranian oil. 

So, the government's plea that much of this was inherited may be fair. But six months is time enough, and regarding the immediate crisis, it could have been far more proactive. Take management: the top posts at both Petrobangla and the BPC were run by acting officials for a long stretch, and only last week were full-term heads finally put in place. That it took the government this long to grasp that two such crucial institutions need permanent leadership in a crisis is itself a weakness. 

On LNG, contracts were handed to unfamiliar companies and then dishonoured; of the roughly 83 long-term contracts that were meant to be signed, I hear perhaps 13 will actually materialise.

The interim government cancelled a great deal wholesale — 31 solar contracts, Summit's second FSRU. Did that hurt us?

It inflicted lasting damage, especially to investor confidence, and foreign investors have still not regained it. 

Now, many of the Awami League-era letters of intent were politically influenced, given to people with no business background, and cancelling those may well have been justified. But cancelling everything wholesale, without judging merit, was wrong. 

If you were moving from the Quick Enhancement Act to the Public Procurement Act, there should have been an interim arrangement — phasing the contracts, reviewing them for quality with experts, keeping the sound ones — rather than stopping everything. 

And the irony is that the same direct-purchase method that was criticised for killing competition is still being used, sometimes at inflated prices. The government now needs to be far clearer about the principles on which it reviews these contracts.

What could have been done immediately that was not?

Gas found in several places over these six months could have been brought onto the national grid — that was not impossible. Tengratila is already resolved; Bangladesh won that case, so why can we still not add it? I am told it is stuck in the bureaucracy — a tender process over which, well, who wins and who does not — and so it is being delayed. 

Sundarpur, where gas has also been found, could be connected quickly. This is the heart of my argument: I am not asking for the crisis to be solved today. I am asking whether the work that must be done today, for the gas that will arrive in six months or a year, is actually being done today. I want to see each day's implementation, permission by permission.

Would a task force help?

Yes. In a crisis, every concerned ministry and department should be working together, around the clock, through a mechanism sitting in the Prime Minister's Office; that is how you get fast results. 

There have been good moves — last week the prime minister told parliament that any renewables imported over the next six months would come in at zero duty. That is genuinely positive: if you truly want rapid adoption, you clear the path fast, as Pakistan did when it opened up and the investment flowed in. It takes the bureaucratic tangle out of the way.

The Rooppur nuclear plant was set to be inaugurated in late August, and that deadline has slipped. What are your thoughts on it? 

It is very unfortunate, and all sorts of rumours are circulating. A sudden fire, a sudden technical fault at a nuclear plant — these things create suspicion that something else is at play. The government itself should be ensuring that, at this moment, no one anywhere can push any process backwards, because we are in the middle of an electricity crisis, a gas crisis, a fuel crisis. 

The 300-megawatt grid line was ready; only this new technical problem stopped the power coming. Making sure it is fixed fast is urgent.

Where should the government put its highest priority?

Gas exploration, above everything — onshore and offshore. And here something surprises me: the onshore wells now in production are yielding only 60% of their capacity, and I want to know why the other 40% is missing; in some wells, apparently, the budget needed is simply not being released. 

The two FSRUs, too, are meant to deliver 1,100 million cubic feet a day but are delivering only 600 or 700 — well short of capacity, and that must be examined, because fixing it raises supply immediately. Bhola's gas can be brought in by pipeline; it is said that the money spent on just two shiploads of LNG in a year would pay for that pipeline, and if we find gas in the Bay of Bengal later, the same pipeline serves. The offshore first tender drew no response; it has rightly been re-tendered, with time until November.

The government wants to develop four coal mines. What's your view on it?

I have serious objections. The coal we mine at Barapukuria costs $176 a tonne, while the coal we import for Payra costs $96. Why is our own coal dearer? Because the way we extract it is highly inefficient — which is why generation at Barapukuria has reached around Tk12 per unit against Payra's Tk10.45. 

So, even in pure economic terms, I see little prospect in coal; going down that road would mainly serve some foreign companies and an old coal lobby that is still interested. I would put the highest priority on gas instead.

You have praised the renewables push. What is stopping it?

The permissions. An investor must clear both SREDA and the Rural Electrification Board, and both will entangle you — paper after paper, SREDA re-demanding the very import documents you have already shown, when this could be a single online window where one clearance flows automatically to the others. 

The Board is the bigger problem: it fears that promoting rooftop and irrigation solar will cut its own income, which comes from selling grid electricity, so it withholds permission, there is a great deal of bribery, and a permit meant to take three months takes six months or a year — industrialists have built everything and cannot get cleared. 

The government — by which I mean the Prime Minister's Office and the Power Division — should be taking a daily report from each agency on how many companies it cleared that day.

The merchant-power rule lets a producer sell directly to any customer, wheeling through the grid. Is it working?

The principle is right, but the Power Grid Corporation is asking an abnormal price to wheel the electricity — around Tk3.25 per unit, when the government's own cost is roughly 25 paisa. A commercial charge of 75 or 80 paisa would be fine; Tk3.25 is not. 

A state institution's philosophy should not be profit-maximisation. Frankly, the time for merely reminding these bodies of that philosophy has passed; the government now has to direct them — set a target for how much merchant-power electricity must flow through the grid each week or month, so the companies actually work towards it.

Much of the blame for high power costs falls on capacity charges. Is that fair?

You cannot say the capacity charge is not a cause. Some reserve margin is reasonable — industry grew and more power was needed — but not 40%, and the government must own the question of on what logic so many plants were approved when we still cannot draw more than 16,000 or 17,000 megawatts. 

On our own figures the capacity we already have will meet demand until about 2030. So we went for an excess we did not need, and we are paying for it; and the contracts were struck well above market rates — this happened with renewables too — which is unforgivable. The liability rests with the government.

The plan is to build two or three more floating LNG terminals by 2029. You are not persuaded. Why? 

LNG cannot be our solution, and nor, I would say, can another FSRU. What is the gain in spending $2 billion over two years on a new terminal when I cannot even supply the LNG we need now? 

Consider the cost: importing LNG cost us Tk5,900 crore in 2018, when it met 5% of supply; now it costs Tk60,000 crore, meeting 30%. I would say the same of the diesel-based Eastern Refinery expansion. You cannot, on one hand declare that you are shifting to renewables and nuclear — which means less diesel and less LNG in future — and on the other lock yourself into 20 or 25 years of fossil-fuel infrastructure to recover the investment. 

Do that, and no one will invest in the alternatives. Battery technology has moved on; we now have 10 and 12-hour systems, not six — indeed a fifth of those 31 cancelled projects were battery-operated.

What must the government actually do?

First, put the right, professional people in charge, without the test of political loyalty; too many senior positions in the power division and the independent producers are still held by the previous government's former officials, and that nexus makes neutral decisions hard — if need be, bring capable people back on deputation or contract. 

Then, do what today demands. I can hand you at least 10 agencies and give each a clear responsibility — the BPDB, the PGCB, the Rural Electrification Board, SREDA, the Dhaka and other distribution companies, the North-West Power Development Company, Petrobangla, BAPEX, RPGCL, and the finance and planning ministries. 

Let each set monthly targets and publish them; let a task force in the Prime Minister's Office monitor them and report to the public, amount by amount and date by date; and let the new parliamentary standing committees do the same. 

The yardstick for any political government is simple: Can it deliver? An honest man who cannot deliver is not what this moment needs.