$400m Power Plant Deals Offer Bangla New Hope

Bangladesh has signed $400 million worth of contracts to set up three barge-mounted power plants. The investment is part of larger multi-billion-dollar investment plans which international power, oil and gas companies are proposing for the country, after recent discoveries of new gas fields.

But the investment proposals may bring fresh political difficulties for the government as any large-scale power and gas development plan will inevitably involve exports of gas to India. This is a politically sensitive subject in Bangladesh where the opposition parties frequently accuse the government of selling out to New Delhi.

Despite these problems, Bangladeshs fortunes are changing in a way few expected only several months ago. The government, which has been under pressure to explain the widening gap between the demand for and supply of electricity and the resulting frequent power cuts, is now able to boast of having attracted foreign investors to generate an extra 300mw of electricity in less than 10 months time, when the three plants are expected to come on stream.

 

The plants will be set up on a build, own and operate basis. Negotiations are continuing with other companies for a fourth plant of 100mw capacity.

These negotiations are expected to be completed in the next couple of weeks. After that, we plan immediately to start negotiating with the companies shortlisted to set up fixed power plants, Nuruddin Khan, the energy minister, said.

Japans Marubeni, the Swiss-Swedish group Asea Brown Boveri and the UKs Midland Power are among companies shortlisted to establish three fixed power plants with a combined capacity of about 800mw over the next few years. The US oil company Unocal is reported to have proposed a fourth fixed 300mw power plant near Shahabazpour gas field in the south of the country, to which it has the initial right of exploration.

At a total cost of $2 billion, the new power plants, with combined capacity of about 1,600mw, will nearly double the countrys ability to generate electricity to about 4,000mw over the next five years.

All the power plants will eventually be fuelled by gas from the recently discovered fields, delivered through new pipelines which are yet to be planned and laid.

The international companies and financial institutions involved believe Bangladesh will have enough gas to pay for the electricity and the pipelines.

Their optimism follows the recent discoveries and the enthusiastic response by international oil and gas companies to the governments March invitation to bid for gas exploration rights in central and western parts of the country.

The government has signed gas production sharing agreements with Cairn Energy of the UK and Occidental, the US group, under which it will receive a total 300 million cuft of gas per day from the fields in the Bay of Bengal and the northern Sylhet region.

But the agreements make it clear these companies will have to be paid in hard currency for almost 20 per cent of the gas, to cover investments and profits.

The government has to export part of its gas, an executive of a US oil company said.

The government will have no choice but to export gas to neighbouring India, at least for the first few years until local industries generate enough hard currency, said an expert of another company, pointing to the near impossibility at the moment of laying pipelines across Myanmar, Bangladeshs other neighbour, to Thailand.

Enron International, the US company, has already drawn up the outline of a proposal for an integrated gas pipeline network.

Such a network of pipelines could eventually connect Bangladesh to India, as well as the gas fields in the north-east Indian state of Tripura to West Bengal though Bangladesh.

THE HOT LINE

Companies shortlisted for the three power plants: Japans Marubeni, the Swiss-Swedish group Asea Brown Boveri and UKs Midland Power.

Negotiations continuing with other companies on setting up of another power plant of 100mw capacity

US Unocal is interested in a 300mw plant near Shahabazpur

Over the next five years Bangladeshs power generation capacity is slated to double to 1,600mw