Home Commentaries & Articles The Energy at the Vanguard of Bangladesh-India Ties

The Energy at the Vanguard of Bangladesh-India Ties

On March 26, 2021, when Bangladesh will be celebrating its 50th  Independence Day and 50 years of Bangladesh-India diplomatic relations, Prime Minister(PM) Shri Narendra Modi’s presence as a Chief Guest would highlight an extension of special bonding between the two countries, that surpasses the strategic partnership. Earlier, in his address on December 17 at the e-summit, PM Modi called Bangladesh, a ‘key pillar’ to India’s Neighbourhood First Policy’, while celebrating the ‘Golden Victory year’. In a Joint Statement at the virtual summit, both the countries touched upon all the aspects of bilateral relations, including some of the important issues like cooperation in combating Covid-19 and energy.  PM Modi’s visit to Bangladesh would be yet another opportunity to cement several of these agreements and understanding reached so far. In this regard, Bangladesh Foreign Secretary Masud Bin Momen’s three-day visit to India in January 2021 was a step to prepare the ground for PM Modi’s upcoming visit to Dhaka. 

As far as energy cooperation between these countries goes, there have been concerted efforts to enhance Bangladesh-India energy ties, and collaboration in the power sector has been the most striking feature of this. Over the last few years, the energy cooperation between the two countries has been intensified and during the last summit, these nations reflected upon to deepen this cooperation across the energy value chain. This included the acceleration of the implementation of Friendship Pipeline, and Maitree Super Thermal Power Project; signing of the Framework of Understanding on Cooperation in the Hydrocarbon Sector; and agreeing to enhance cooperation in energy efficiency and clean energy, including in advanced biofuels, to strive towards renewable sources of energy. 

Besides, Bangladesh and India agreed to further strengthen their sub-regional cooperation, under the Bangladesh, Bhutan, India, Nepal (BBIN) initiative, and the Bay of Bengal Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), with energy as a noticeable feature in both. 

Cooperation in the Power Sector

As aforementioned, the power sector has become one of the hallmarks of Bangladesh-India relations. However, their cooperation has now expanded to include hydrocarbon and renewable energy as well, keeping in mind the balancing addressing of energy poverty and sustainable development goals. Earlier in 2017, various Indian companies proposed to invest $9 billion in several energy projects in Bangladesh as follows. 

  • $1.6 billion (bn) deal between EXIM Bank of India and Bangladesh India Friendship Power Company Limited for debt financing of the construction of 1320 MW coal-fired Maitree Power Project in Rampal, Bangladesh. 
  • $3.15 bn deal between NTPC Vidyut Vyapar Nigam Limited and Bangladesh Power Development Board (BPDB) for the supply of power from Nepal, in addition to $138 million deal for supply of additional 60 MW of power from Tripura to Bangladesh. 
  • $2 bn deal with Adani Power and $1 bn deal with Reliance Power to supply electricity and set up plants in Bangladesh. While Adani agreed to supply 1600 MW power to Bangladesh from its coal-fired plant at Godda in Jharkhand, Reliance Power agreed to set up a 750 MW gas-power plant, the first phase of 3000 MW, in Meghnahat, Bangladesh. 

Hydrocarbon cooperation

Some of the hydrocarbon projects included, Memorandum of Understandings with Petrobangla and Petronet LNG for LNG terminal use, with Reliance Power for setting up 500 million metric standard cubic feet per day LNG terminal at Kutubdia Island, and with Indian Oil Corporation for LNG cooperation.

An agreement between Numaligarh Refinery Limited and Bangladesh Petroleum Corporation for the construction of a 129.5 km-long oil pipeline (Indo-Bangladesh Friendship Pipeline) between Siliguri and Parbatipur, Bangladesh, for transporting diesel was also signed. Bangladesh imported 4.8 mt of high-speed diesel in 2017-18, including 1-1.5 lakh kilolitre supplies by rail from India beginning 2016, resulting in high transportation cost. Further, on October 5, 2019, during the last visit of PM Sheikh Hasina to India, both the Prime Ministers inaugurated a project on sourcing bulk LPG from Bangladesh to Tripura by using Bangladesh Trucks.

As regards hydrocarbon resources in Bangladesh, it is rich in exploitable natural gas accounting for 75.4% of its total commercial energy consumption. Of the 27 gas fields discovered so far since 1955, total gas initially in place (GIIP) has been estimated to be at 39.0 trillion cubic feet, out of which the estimated total recoverable gas reserve (Proved plus probable) is 27.12 TCF. Up to December 2017, as much as 15.22 TCF gas was produced, leaving only 11.91 TCF of recoverable gas. 

According to the BP’s Statistical Review of World Energy 2020, while natural gas production in Bangladesh increased from 18.7 billion cubic metres (BCM) in 2009 to 28.7 BCM in 2019, with 8% growth per annum, natural gas consumption increased to 34.4 BCM in 2019 from 18.7 BCM in 2009, registering an annual growth of 25.3%, signifying a huge surge in gas demand. While this raised the concerns for meeting future natural gas demand which at best could be met for only 12 years, it has prompted Bangladesh to rely heavily on imported liquefied natural gas to help bridge the burgeoning gap between demand and its onshore gas production. Interestingly, out of 27 gas fields, only two are situated on the offshore waters of Bangladesh, which needs to be developed urgently. 

This has prompted Dhaka to attract foreign upstream players to explore its offshore waters. In this regard, ONGC Videsh Limited (OVL) has already planned afresh to initiate drilling of an offshore exploratory well to delineate natural gas reserve in shallow sea block SS-04, after the findings of two dimensional (2D) seismic surveys. Earlier, the Petrobangla signed two production sharing contracts (PSCs) with OVL, the operator of blocks SS-04 and SS-09, on February 17, 2014, which was set to expire in February 2019. However, Petrobangla had extended the PSCs by 24 months until February 2021 and thereafter for further two years until February 2023. These shallow-water wells are scheduled to be drilled from October 2021. 

In the latest instance to deepen energy cooperation in the hydrocarbon sector, Bangladesh and India has agreed to form an equal joint venture to set up an LPG terminal in Bangladesh to import LPG. This would help reduce the cost of LPG imports and making it affordable to the people of Bangladesh. 

Sustainable recovery through low-carbon push

Even though Bangladesh and India are showing an upward trajectory in their energy cooperation led by the power sector to meet their burgeoning energy needs amidst faster economic development, to make their respective energy system cleaner, secure, resilient, and cost-effective, both the countries will have to review and reset cooperation towards sustainable recovery post-Covid-19. 

In this regard, a new set of perspectives is needed to foresee a better future for their citizens, wherein energy transition is at the heart of recovery plans with the sustained rebound of carbon emissions and local air pollution. A joint effort both at the bilateral levels and through sub-regional cooperation towards deep decarbonization by Bangladesh and India would be the right step towards a sustainable future for the region. 

Their sustained engagement to jointly deal with the Covid-19 pandemic concerning health and uninterrupted supply chains should now go beyond the obvious and include efforts towards a low carbon economic future. Decarbonization of the power sector and electrification of transportation are some of the efforts these countries should look at soon. Such initiatives should now be the new normal under their joint efforts towards enhancing cooperation in energy efficiency and clean energy with greater thrust on renewable sources of energy, like solar and wind, as mentioned in Joint-Statement of Indo-Bangladesh Virtual Summit

With solar PV, wind, and batteries expected to continue getting cheaper, a shift towards renewables and battery storage would help reduce power subsidies in both countries, while benefitting from an unprecedented fall in solar and wind power tariffs, a regular phenomenon in India. Solar power tariff saw a further new low in December 2020, when it was recorded at ₹1.99/kWh from ₹2/kWh in November. This calls for revisiting of some of the existing power cooperation between Bangladesh and India. This could also address the growing concern of worsening overcapacity in the Bangladesh energy system, wherein overall power capacity utilisation in the fiscal year 2019-20 was just 40%, down from 43% in the prior year, as noted by the BPDB. 

Moreover, given Bangladesh is expected to cancel its entire project of coal power plants, the construction of which hasn’t started yet, under its broader shift towards cleaner energy, companies like Adani Power would have to revisit its planned investment in Bangladesh, where it would supply electricity from Godda, Jharkhand. To cope with this challenge, Bangladesh’s Sustainable and Renewable Energy Development Authority has already come out with a Draft National Solar Energy Roadmap, wherein it aims for a high-deployment solar installation program with a target of up to 30,000 MW of solar to be installed by 2041. Indian companies invested in Bangladesh power projects should be mindful of their evolving energy policy shift towards clean energy. 

Any futuristic energy cooperation between Bangladesh and India should consider evolving global energy system, which offers an opportunity of a greater role of batteries and cleaner energy fuels, such as green hydrogen, attributed to the falling cost of solar and wind. Thus, clean energy technologies in the form of batteries and hydrogen-producing electrolysers fit well into sustainable recovery plans alongside the ongoing energy cooperation between these countries. 

LEAVE A REPLY

Please enter your comment!
Please enter your name here