MAC: Mines and Communities

Fulminating over Phulbari

Published by MAC on 2006-03-25

Fulminating over Phulbari

25th March 2006

Last week, we reported the widespread, and growing, opposition in Bangladesh to the country's proposed new energy policy. Critics fear that it would expose the nation's coal, oil and gas, to exploitation by foreign companies at the expense of the people. [see]

Now, the state's energy and minerals resources advisor has lent backing to this opinion, specifically questioning the terms of the deal with Asia Energy plc - one originally brokered between the UK company and BHP (now BHPBilliton) twelve years ago.

Not content with letting Bangladeshis themselves determine their own energy policy, Asia Energy's British CEO has entered the debate with a broadside against the government's advisor, inter alia claiming that his recent statement could jeopardise the safety of the company's project and staff.

Asia Energy asked not to interfere in govt policy / Lye’s letter stuns energy adviser

by Aminul Islam, NewAge

24th March 2005

Sharply reacting to the letter of the Asia Energy chief in Bangladesh, the government on Thursday asked the company not to interfere with the policy decision of the country after the company had termed ‘unwarranted’ the energy and mineral resources advisor Mahmudur Rahman’s comments on Phulbari coal field agreement.

Gary Lye, chief executive officer of Asia Energy in Bangladesh in a letter to Mahmud on March 19 raised question about the ‘legitimacy’ of the adviser’s remarks that the company’s contract with the government was ‘anti-state’.

‘This issue is a policy matter of the government and you are strongly advised not to try to interfere in the policy decision of a sovereign country,’ Mahmud wrote to Lye on Thursday.

Mahmud on March 16 told reporters, ‘the interest of the country has been compromised with the signing of the agreement with Asia Energy in 1998 and those who had signed the agreement should be tried.’

The people involved in the signing of the original agreement with the BHP Mineral International during the tenure of the previous BNP government in 1994, should also be punished, Mahmud said.

Lye in his letter claimed that the contract was not ‘anti-state’ and it was based on the prevailing laws and regulations of the country. ‘Furthermore the government of prime minister Khaleda Zia approved the contract in 1994,’ he noted.

‘Therefore to contend that the contract is ‘anti-state’ is to imply that the law and the actions of the government are also ‘anti-state’, a position which is plainly absurd,’ Lye wrote.

‘The company is also seriously concerned that your unwarranted statement could well incite violence against our property and personnel. Bangladesh as we all appreciate, is going through a delicate period in terms of internal security and we, along with all other foreign investors, would look above all to the government to protect, and not endanger, our security,’ the letter said.

Lye’s letter surprised the officials of the energy and mineral resources division as well as Mahmud who told New Age that it was unexpected that a foreign company should raise questions about the legitimacy of a government policy.
‘We are surprised to receive your letter. Your observation on the comments made by the undersigned [Mahmud] is unwarranted and totally unacceptable,’ Mahmud wrote to Lye.

He, however, assured Asia Energy that the government would continue to address their genuine security concerns as before.

Meanwhile, the British deputy high commissioner in Dhaka, Stephen Bridges met Mahmud on Thursday and discussed about the Asia Energy related issues.

Mahmud showed him the letter of Lye as well as the reply and apprised him that the company’s development programmes in Phulbari would be approved as per the proposed coal policy and the report of an experts committee.

The experts committee, headed by professor M Nurul Islam, director of Institute of Appropriate Technology of BUET, is likely to submit its report by April.

State of affairs about Phulbari coal mining

by Nuruddin Mahmud Kamal, Financial Express (Bangladesh)

24th March 2006

The Energy Advisor has dealt a severe blow to the ongoing evaluation of the proposal from Asia Energy Corporation (AEC) by declaring the coal exploration deal with Asia Energy as being incongruous with the national interests. The advisor has mentioned that the country's interest was not protected in the coal exploration deal with Asia Energy. Without elaborating the reasons for terming the deal so, the Adviser has quoted a provision of the agreement that "any coal which investor chooses to export, shall not be subject to export fees, duties or assessment of any kind". This [is] administrative adrenaline to a controversial proposal necessitates a reference to the context to evaluate such provision in the Agreement.

Now with such an evaluation of the AEC's proposal by a person no less than an Advisor to the Government, who would dare to be associated with any activities that may expose him or her to, who knows, even to a very grave charge?

The question that may arise as to how such an agreement (?) could get concurrence. The government of Bangladesh (GOB) has not yet published any white paper on the AEC deal for Phulbari coal mining, nor has the Ministry made the so-called agreements public. With the available information it appears that BHP was awarded a mineral exploration licence in August 1994 (as per statement of a former Director of BMD, Mr. M. Mominullah, published in a local daily on March 20, 2006) for the North western part of Bangladesh. This exploration licence was later (1998) assigned by BHP to AEC who, conducted seismic and drilling operations in Phulbari and estimated 572 million ton of bituminous coal at a depth ranging from 400 feet to 800 feet. On the basis of the field exploration and then client-financed evaluation by different groups of consultants, AEC has reportedly submitted a plan for open pit mining of Phulbari coal.

AEC is now contemplating to start open pit mining in Phulbari area on the basis of 6.0% royalty only, by the year 2007. It is claimed that environmental clearance for the said project has already been obtained. Foreign finance has been mobilised. In addition, they are going to collect money through initial public offering (IPO) in the local stock exchange market. All are, thus, set to go for the project whose nature has seriously been questioned by none other than the Adviser to the Energy Division.

The Advisor has admitted that BHP signed the agreement in 1995 while AEC took over the project in 1998. The grey area in his statement is whether any new agreement was signed with AEC in 1998 or they (AEC) were just the assignee of the agreement signed between the Bureau of Mineral Development (BMD) and BHIP in 1995.

If these were two separate agreements and if export provision was not in the agreement signed in 1995, but incorporated in 1998, then of course, the concerned officials must explain their conduct. The issue should not be mixed up. Also some officials should not also be shielded by saying that those involved during both the regimes are responsible for the two agreements for striking the deal against national interest. It is not clear how two agreements could be signed for a single project with two different companies at the same time? In any case, the issue needs to be dealt with, properly.

It may sound ludicrous to suggest that all concerned being responsible ones should dissociate themselves from such a deal any more. This is more so that the deal has been termed by a very responsible person as being against national interests. If must also be ensured that those who were responsible for such a deal either justify their stand or face charges as could be brought against them by the judicial process of the country. Under the present circumstances, it will be only befitting to review the proposed open pit mining and export of coal. Otherwise, there will be double standard involved in the process of the activities relating to the project.

It has been mentioned by the Honourable Energy Adviser that the deal should not be scrapped as it is an international agreement. But it must first be made clear whether the deal cannot and should not be termed as an international contract. The contract does not involve any international forum, institution or even an international company. It is an agreement between two local institutions -- namely between AEC and the Bureau of Mineral Development (BMD). Is it not a fact that the AEC has been formed in Bangladesh under the Companies Law as Asia Energy Corporation (Bangladesh) Pty Ltd.? So legally, it is a Bangladeshi company. As such no international convention will be at stake to deal with such a case. Further the deal was not made outside Bangladesh and no multinational or international agency was involved in the contract. For the irregularities of not abiding by terms and conditions of the contract, non-submission of the documents and returns in accordance with the Mines and Minerals rules of 1968 to the BMD, the question may be raised whether the agreement signed earlier by BHP or AEC does stand valid. The contract itself as mentioned by the Hon'ble advisor is asymmetrical. The AEC through BHP has taken advantage of the simplicity or stupidity of the other party i.e. BMD and incorporated conditions which will be detrimental to the interest of the nation. These, if analysed in the light of natural justice, should go in favour of Bangladesh to revisit its terms and conditions.

It will not be out of context to refer the case of Dhabol Power Plant Project in Maharashtra in India; when Maharashtra signed an agreement with Enron for installing power plants under an Independent Power Purchase (IPP) deal. After the election in India, the new government there re-examined the terms and conditions of the Dhabol Project and found that the contract was against Indian interest. The contract was scrapped with no consequences whatsoever for the Government of India.

In the light of what has been stated by the Honourable Adviser about the deal, will it be fair to proceed with it without a scratch? Incidentally, the draft Coal Policy itself now smells a rat due to the inclusion of provisions which appear to justify the 'wrong deeds' done earlier. It is necessary to revise the "proposed" coal policy as well.

What was happening concerning Phulbari coal was only part of the drama which was moving toward its climax. Now, even after knowing the fact, should a flawed proposal be implemented? That is a basic point for consideration.

Road march to protest at Fulbari coal extraction by British company

NewAge, Dhaka, Bangladesh

22nd March 2006

The National Committee to Protect Oil, Gas, Mineral Resources, Power and Port on Tuesday demanded cancellation of the Fulbari coal extraction treaty with the British company, Asia Energy, immediately.

The committee leader at a press conference at the Dhaka Reporters Unity auditorium said they would organise a tougher movement to press home the demand.

The committee will launch a three-day Dhaka-Fulbari road march on March 23-25 where left leaning political party leaders will take part.

The march will start after a rally at Muktangan in the capital on March 23 in the morning.
The marchers will hold road side rallies, rallies in the towns on their way and finally they will hold a rally at Fulbari in Dinajpur on the concluding day on March 25.

The member secretary of the National Committee, economist Anu Muhammad, said the proposed Fulbari coal mine extraction by open pit method would earn no national interest. It would create a huge amount of loss besides environmental pollution.

The committee convener, engineer Sheikh Muhammad Shaheedullah, former Power Development Board chairman Noor Uddin M Kamal, former Petrobangla chairman SK Abdullah, politician Nurul Hasan, Abdus Salam and Ruhin Hossain Prince were present in the press conference.


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