MAC: Mines and Communities

Bangladesh update

Published by MAC on 2007-10-07

Bangladesh update

7th October 2007

The Asia Development Bank (ADB) has sent a "mission" to Bangladesh, using typical "carrot and stick" tactics to promote various highly dubious energy deals. Not least among these is that most controversial of prospective south Asian coal mines, Asia Energy/Global Coal Management's Phulbari project.

The carrot is, of course, ADB investment; the "stick" is a warning that failure by the military-led interim government to wave in foreign investment (including by India's Tata brothers' conglomerate) will impoverish Bangladesh even further.

While Asia Energy itself has expressed some readiness to discuss new terms for resuming operatons at Phulbari, this may be no more than a ploy to preserve its own shaky and shaken reputation in the money markets.

Meanwhile,Bangladeshi analyst, Khondkar Abdus Saleque, has published a revealing account of the alarming degree to which former government and military leaders have been engaged in corrupt energy-related deals,implicating a number of overseas concerns.

Dubbing the current coal mine at Barapukuria a "curse",while demanding a thorough investigation of the background to the Asia Energy deal,Saleque declares:

"People must be made aware of the energy mafia syndicate. There should be mass consciousness and public opinion against plundering of national resources."

Asia Energy wants to renegotiate deal

Staff Correspondent, The Daily star

4th October 2007

Finance Adviser Mirza Azizul Islam yesterday said coal mining company Asia Energy has expressed its willingness to re-negotiate terms of its contract with the government.

"Before this re-negotiation, the government must decide which contractual terms should be revised," the adviser told the press following a meeting at his planning ministry office with the visiting Asian Development Bank (ADB) mission led by Kunio Senga.

At the meeting, the ADB expressed its concern that the government's indecision about the investment proposals of Asia Energy and Tata was giving 'investors a wrong signal.'

"It will be difficult for me to express the government position regarding both these deals because the projects involve not only the finance ministry but also other ministries," the adviser said. Till date, the council of advisers has not discussed any of the projects, he added.

Mirza Aziz said the government had signed the Asia Energy deal in the past.

Amid much controversy about the deal over Asia Energy's proposal for open-pit coal mining in Phulbari, a positive thing came out -- the company is now willing to re-negotiate the terms, he noted.

"To revise the contractual terms, the ministries concerned will have to converge on some decisions. But the coal policy has not yet been finalised. I personally believe that after the coal policy is finalised, we may renegotiate the contract in the light of that policy to get more benefits," the adviser said.

On Tata's $2.5 billion proposal on gas-based steel industry and power plant, he said, "A significant issue here is allocation of natural gas for Tata's project. We have to guarantee gas supply to Tata. Before that we must ensure that we have adequate gas for the guarantee period. Then we have to be sure about our own reserve and immediate gas and power demands, and how much gas we should keep for our own use. "

"Before assessing the gas situation, we cannot give guarantee," Mirza Aziz pointed out. When reminded that the past government had the gas issue analysed by experts, he said, "different experts have different assessments. A local expert has one version while a foreign expert has another version."

Both Asia Energy and Tata proposals are awaiting government nod from 2005. The Asia Energy proposal triggered violent protests in Phulbari in August last year. The protest was calmed down through an announcement that the deal will be cancelled. On the other hand, the Tata proposal became uncertain as it demanded gas supply guarantee for 10 years, and Tata made a gas tariff offer which Petrobangla refused to accept.

Meanwhile, ADB mission chief Kunio Senga told the press that his team discussed, among other things, ADB's assistance for regional cooperation, and a project on building an information superhighway.

"Access to technology is very important. If Bangladesh and its neighbours get together, there will be a multiplier effect of having joint access to information. This will be very helpful for Bangladesh and other neighbours and we'll finalise the other technical scope of the project," he said.

"We talked about energy cooperation. Last year, we invested in the power sector to make it sustainable in terms of providing essential services to the people and the progress of this project is very good. I appreciate the government efforts in this regard."

On coal development, Senga said, "The finance adviser and his team told us about ongoing preparation of the coal policy. We all agreed coal mining is going to give huge potential benefit for power generation. At this moment we rely on gas, which is limited. So, the government has to find alternative sources for power generation. Coal mining is very effective. To ensure coal-generated power, many technical, environmental, social and viability studies have to be undertaken."

He went on, "The mining methods -- open-pit and underground -- are being closely reviewed by experts, and we would be guided by the reviews of the advisory committee."

Bangladesh could re-open negotiations with Asia Energy

DHAKA (AFP) — Bangladesh could re-open negotiations with British company Asia Energy on an open-pit mine deal worth 1.4 billion dollars which was abandoned last year, a report said Thursday.

The country's last democratically elected government promised local protesters last August that the project would be cancelled after unrest in which five people and a police officer died.

But new finance minister Mirza Azizul Islam told the Daily Star newspaper that London-based Asia Energy was prepared to re-open negotiations over the mine at Phulbari in northern Bangladesh.

"Before this re-negotiation, the government must decide which contractual terms should be revised," he said, adding that the government also needed to confirm its coal policy.

"I personally believe that after the coal policy is finalised, we may renegotiate the contract in the light of that policy to get more benefits," he said.

A military-backed government took power in January a day after a state of emergency was imposed.

Activists have said the mine project would damage the environment and displace 100,000 people.

Asia Energy said only 40,000 would be displaced, adding that all those affected would be fully compensated.

Under Asia Energy's contract, the government had three months to approve a final proposal submitted by the company in October 2005.

However, the government failed to respond and later told Asia Energy final approval was on hold while it completed its coal policy.

The minister said a three-billion-dollar investment plan by Indian conglomerate Tata was also still pending.

"A significant issue here is allocation of natural gas for Tata's project ... we have to be sure about our own reserve and immediate gas and power demands, and how much gas we should keep for our own use," he said.

Tata's plan for a 2.4-million-tonne steel plant, two power plants, a coal mine and a fertiliser plant was shelved last year by the previous government led by the Bangladesh Nationalist Party (BNP).

It halted the deal after two years of negotiation saying political sensitivities just ahead of polls, which were later cancelled, would make it difficult for the government to make a decision.

Conservationists' group terms ADB 'corporate lobbyist'

New Age

7th October 2007.

National Committee to Protect Oil, Gas, Mineral Resources, Power and Port on Saturday protested against the Asian Development Bank's role as 'corporate lobbyist' for Asia Energy and Tata Group. It also blasted energy and finance advisers to the government for their reported willingness to start stalled negotiations with Asia Energy on Phulbari coal field.

'We are concerned and annoyed at media reports that a visiting ADB mission is lobbying and pressurising the government in favour of Asia Energy and Tata projects,' professor Anu Muhammad, member secretary of the committee, said at a press conference at Dhaka Reporters Unity.

ADB officials are lobbying for the Asia Energy venture even before the Manila-based lender's board is yet to approve the project, which was being framed in violation of ADB's own guidelines for public consultation, dissemination of information, protection of environment and respect for peoples' verdict, he said.

The economics professor questioned why two advisers of the government were searching for opportunity to renegotiate with the UK-based mining company. He alleged that ABD was planning to invest the member-states' money to benefit some companies, not the people. Professor Anu demanded that the interim government must scrap the 'shady agreement' the previous government signed with Asia Energy and that the national coal policy, which is in the making, exclude open-pit mining method.

Committee convenor Sheikh Muhammad Shaheedullah said the people would not accept if the government agrees to Tata's proposals for supplying huge quantity of gas at a time when the country's gas reserve was depleting and power and fertiliser plants were facing gas shortage. Committee leaders Golam Rabbani, Akmal Hossain, Shamsul Alam, Tipu Biswas, Ruhin Hossain Prince and Zonayed Saki were present at the press conference.

CBP denounces ADB lobbying for Asia Energy

Staff Correspondent, New Age

6th October 2007

The Communist Party of Bangladesh on Friday termed 'unwarranted' the lobbying by the Asian Development Bank for awarding the Phulbari coal project to UK-based Asia Energy.

'The nation has rejected the proposal of Asia Energy [to develop Phulbari coal field]. The people of Phulbary won a six-point agreement, including expulsion of Asia Energy, at the cost of blood,' said CPB president Manjurul Ahsan Khan and general secretary Mujahidul Islam Selim in a joint statement.

They said that only an elected parliament could make a decision on the proposal of Asia Energy after taking public opinion as the matter was related with the constitution and would be a major policy decision.

The CPB leaders said that it was true that the delay in making a decision on the issue was sending a wrong signal. 'It is easy to overcome the situation by taking steps in line with the Phulbari agreement and by handing over power to an elected government.

'The question of examining the Asia Energy's deal with the government and starting negotiation afresh does not arise at all,' they said.

They also called upon all to 'beware' of the 'over-enthusiasm' on the part of some quarters over the investment proposal of Tata group.

Proposed USD 2.5 bn Tata project in Bangladesh uncertain

Zee News

6th October 2007

Dhaka, Oct 04: Bangladesh has ruled out any immediate decision on the proposed USD 2.5 billion investment by Tata group, saying it was yet to get a clear picture on the country`s gas reserve to guarantee supply to the Indian conglomerate.

"One of the issues closely related to the Tata investment is the gas reserve as its proposal tags the uninterrupted supply of gas to Tata project for several years.

. . . It is not possible to take a decision as we don`t have any concrete data about the actual gas reserve," commerce adviser Mirza A B Azizul Islam told reporters after a meeting with an Asian Development Bank delegation.

"Before assessing the gas situation we cannot give a guarantee," he said.

When pointed out that the past Bangladesh Nationalist Party (BNP) government of Khaleda Zia had the gas issue analysed by experts, Islam said "different experts have different assessments. A local expert has one version while a foreign expert has another version".

The proposal of Tata and and ASA Energy and Coal Mining Company is awaiting the government nod since 2005.

The Tata proposal became uncertain after it demanded gas supply guarantee for 10 years, and made a gas tariff offer which the state-run regulatory Petrobangla rejected.

The adviser`s comments came as the ADB expressed concern that the government`s indecision about the investment proposals was giving "wrong signals" to investors, sources said.

The past government had in principle accepted Tata`s proposal in 2004 and a series of meetings were held between the two sides. The last round of talks between the Tata group and the government ended on February 10, 2006 amid disagreements.

The apple of discord was supply and prices of gas and electricity to the Tata projects.

During the last round of negotiation, the government had offered gas for the proposed steel and fertiliser plants at the same rate as in the Singapore market while the Tatas' had proposed a rate of USD 1 per unit.

But the high-powered Tata delegation headed by Alan Rosling proposed a price which was one-third to one-fourth of what the government was demanding.

The Tata team had proposed the establishment of a 455 mw coal-based power plant from which it would supply power to the government with a capital investment of USD 430 million and also set up a 500 mw power plant for its own use.

Tata team estimated that the price of coal that it would extract from the mine would be around USD 60 per ton and the price of power it would supply to the government would be between 4.5 cents and 4.8 cents per unit.

Government officials, however, told the Tata team that the price of coal should not be more than USD 30 and the price of power should be 3.1 cents per unit.

Bureau Report

White Paper on Energy Sector Corruption in Bangladesh

Eneryg Bangla Report

4th October 2007

By-Khondkar Abdus Saleque

Lt General (Retd) Hasan Masud Chowdhury, the current Chairman of revamped Anti Corruption Commission of Bangladesh was Energy Advisor to Prof Iazuddin led Caretaker Government for a while. He along with three other colleagues resigned from the CTG protesting against the partisan actions of that CTG. But till he was there he tried to bring meaningful changes to the diabolic energy situation. He was shocked to feel the mismanagement and rampant corruption of immediate past government. He thought that all the corruption and anomalies of energy sector should be thoroughly investigated and a white paper could be published for the citizens to be aware about the depth and diversity of corruption.

One of his predecessors, another retired General turned politician, Anwarul Kabir Talukdar, tried to fight corruption of his own government as State Minister of Power Ministry. But he was unceremoniously removed while he was very vocal against corruption. His own Secretary conspired against him. Both these gentlemen during the brief period in the ministry must have seen a lot of the massive corruption that poisoned the energy sector and brought it to almost ruins. Present CTG has taken lot of initiatives to improve energy situation within the shortest possible time. .Considering the massive crisis these may be only tickle in the ocean but the trend has already been set. Now for the sake of transparency and future accountability all the major scandals of energy sector must be thoroughly investigated and a white paper published so that in future no political government dares to repeat the same.

Corruption in energy sector became rampant since the autocratic regime of Ershad. During his time greatest corruption were made in Scimitar deal in leasing out a large block in Sylhet for exploration including the Haripoor Oil field, Contract with Saipem for construction of North South pipeline from Beanibazar, Sylhet to Ashuganj Brahmanbaria, and Contract with Spie Capag for construction of Brahmaputra Basin Pipeline.

The historic discovery of oil in Haripoor (Sylhet) while developing the well-7 for gas, the field and the block was leased out to an unknown company Scimitar on the basis of an unsolicited offer. Many people think the then autocratic President, Energy Minister and the head of a business house, who were terrible trio in many misdeeds conspired and hurriedly leased the block to this unknown company for their personal benefit. It antagonized the people of the region, professionals and politicians to struggle against the decision and ultimately Scimitar had to leave. Experts believed if a reputed and experienced oil company could be engaged in a proper way it could have done exploration and development in a professional way and explore the oil prospect of the region. Bangladesh could be immensely benefited. Scimitar left but the local beneficiaries were let off the hook. For the sake of peoples knowledge the Scimitar issue must figure in the white paper. Dr. Kamal Hossain played a major role at that stage. So much of the scandal may be known to him.

The author served as Manger (Production) SGFL during the turmoil time and had first hand knowledge of operating the oil field. There was oil show at Kaillastilla also during drilling of KTL 2. Challenger the Drilling Company undertaking drilling was supposed to go back to Golapgonj at the end of the assigned work to explore at oil zone but that did not happen. There was no subsequent effort since then to explore oil in the region. If now CTG take initiative to include Scimitar scandal in a white paper people of Bangladesh will have an insight into the issue.

The next major scandal was related with Saipem. This Italian company belonging to ENI group is one of the largest Pipe line Construction Contractors of the world. It is famous for its quality and workmanship. It is equally reputed in creating trouble and squeezing additional money out of the contract. This company and the Consultant which managed the project Pencol are now blacklisted in Bangladesh

Mr Mark Vaughan the then Project Manger who worked subsequently in Bangladesh on behalf of other company is now in Western Australia Saipem was contracted to construct about 183 KM high pressure gas transmission pipeline from Beanibazar, Sylhet to Ashuganj Brahmanaria to evacuate gas from north eastern gas fields Beanibazar, Kaillastilla, Rashidpoor and Habiganj to national grid. The work as per original program was to be completed in two dry seasons. In Bangladesh it is only possible to work on cross country gas pipelines from November to April. If there is early monsoon rain the construction corridor shrinks still further. This pipeline had to cross several large rivers, low lying boggy areas, clay hills and forest along the ROW. After signing of contract it proposed to complete works in one season for extra money over the contract price. The ROW acquisitions in most parts were not complete. So the implementing agency PIU of Petrobangla did not agree. But Saipem managed to convince the concerned ministry probably in exchange of graffiti. The Chief of PIU was knocked out and Saipem was reportedly given additional money before they even mobilized.

PIU management did not set up a proper project team to control and overview the massive works of this giant project. Experienced pipe liners of Titas Gas, BGSL were not included in the project team. Some inexperienced mid level engineers were mobilized who had no previous proven track records of any pipeline projects of any dimension and some person of questionable integrity managed to find their way due to links with the then Petrobangla superiors.Saipem and the consultants exploited the situation. Through their planted agents they created trouble in the ROW and the construction was intercepted at every place as per its game plan to create claim situation.Saipem mobilized huge fleet of equipments obviously to get idle time and flatten claim.

Unfortunately Bangladeshi supervisory team did not have the experience or flair to counter. The project implementation suffered. It took three years to complete the section from Golapgonj to Ashuganj.A section from Beanibazar to Kaillastilla was abandoned for violence on the ROW. Yet Saipem was paid huge variation against their illegitimate claims by BNP government. The author managed to complete the abandoned section of the pipeline without any trouble at a later stage.

The BNP Energy Minister Khondkar Musharraf Hussain and others were sued .But the case was manipulated and they managed to escape during the tenure of the last BNP regime. Musclemen were sent to a Dhaka Daily office which printed a report highlighting the involvement of Musharraf in the scandal. The Saipem Scandal must be seen afresh, reinvestigated and the criminals must be punished. Among other things it should be seen why Authority agreed to Saipem proposal of letting them built the pipeline in accelerated program although the ROW was not acquired and it was practically impossible to build the pipeline in one season given the degree of difficulties. It should also be seen why Petrobangla did not try to set up a supervisory team of experienced gas pipeliners and let inexperienced group to mess around. The payment of unrealistic huge money over and above the contracted amount must also come under investigation.

The other project accomplished by Titas almost simultaneously was awarded to Spie Capag. The lowest bidder of the work, another French Company, was not given the work.The evaluation was manipulated at the beginning. Some persons got some additional benefit. The company failed to complete one of the major river crossings of Meghna at Ashuganj- Bhairab axis. There was a consequent arbitration which Titas lost. There were many scandals in the project. There were few anticorruption cases bulb the corrupt elements managed to get off the hook. The issues may be reinvestigated and published in white paper.

The entire issue of Second Round Bidding for leasing out blocks during Awami League time may be revisited. Why and how Tallow a little known Irish company which initially did not qualify was preferred over Chevron Texaco and Petronas in block 9. Rumor goes that some influential persons of the then government were taken care of by the Tallow. It should also be seen why Bangladesh signed such PSCs at block 5, 7 & 10 which allowed the IOCs not to do explolatory works at their allotted blocks for 5 years yet not relinquish those. If only this provision was not there we could see some discovery in these block (Khulna, Jessore and adjoining areas) by now which could be so useful.

Both mining projects at Barapukuria and Madhya Para must be thoroughly scanned to identify loopholes, corruption and mismanagement. Huge amount of taxpayers money were drained out there for little dividends. The local agents and some energy sector officials made merry. The coal mine has already become a curse for the nation. The Phulbari Coal project should also be investigated and anomalies and corruption if any must be found out.

The other major scandal is the award of Petrobangla Jalalabad Gas Field to Occidental. Scimitar discovered the field. It became Petrobangla property following exit of Scimitar from the scene. There was no reason to hand it over to another tiny tot Occidental. There was definitely foul play in this which should be explored. It is an onshore gas field and relatively easy structure. Bapex could very well develop this field and GCL could build transmission infrastructure. The unworthy company caused a blow out at Magurchara and damaged gas resource and property. Bangladesh could not or did not take proper action to recover due compensation. The parliamentary committee of energy did not have access to the report. Report remained under cover till expiry of Awami tenure. BNP government also did not proceed in right direction to recover compensation. The Magurchara episode should be revisited. There were ample scopes to expel Occidental from the block at that stage as they failed to meet their minimum obligation there at that time. We compromised and let them off the hook. Nation has right to know what went wrong.

The award of Bridge section pipe line construction contract to Hyundai the bridge contractor along the Bangabandhu Jamuna Multipurpose Bridge may also be reinvestigated. They failed to complete the work the work first time due to gross negligence. The pipe string fell into the river during hydro test .Although they rebuilt it. But the award of the contract to them despite of their no previous experience and lack of efficient supervision by the managing agency may be revisited. There was an investigation by an Army General at that time as far as can be remembered.

The other major scandal which must be investigated is the handing over of Feni and Chatak gas field along with unexplored Tengratilla to Niko in the name of marginal gas field development. Both Awami League and BNP are equally responsible for this. Niko destroyed our resources. Whatever is the outcome of the Arbitration regarding Petrobangla claim Niko must leave Bangladesh as soon as possible.

Turning to the power sector investigation should be made whether irregularities were really made in the ward of contracts to the developers of Barge mounted plant at Khulna, Baghabari and Siddhirganj. The ward of Contracts to IPP at Meghnaghat and Haripoor should also be revisited. BNP led 4 party government had foul play in award and project management of Tongi power plant. It should be also seen what went wrong at Siarjgonj PDB- Summit Joint venture initiative. Why the government did not proceed at the last minute to ward the contract. Investigation should also be made to find out why the same developer which miserably failed at Tongi was allowed tomes around at Chandpoor and Fechuganj. The ward of Meghnaghat -2 to Belhasa – Orion also did not follow proper process .This should be investigated, the responsible persons should be punished and the matters must be published in the white paper.

The present unbearable energy situation is the consequence of years of mismanagement and sponsored corruption. People are suffering. The corrupt persons sucked tax payers' money. They have every right to know who the culprits were and what went wrong. As Chairman ACC himself was very keen to investigate and publish white paper on energy sector anomalies CTG may endeavor to do it before they hand over power to elected government. This is probably the best time to dig out all those sad episodes. People must be made aware of the energy mafia syndicate. There should be mass consciousness and public opinion against plundering of national resources. White paper on energy issues of last three decades will be a useful guide to guard against future misdeeds.


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