Thursday, March 5, 2009

Petrobangla's U-turn to get tied Polish loan for Dighipara coal

Sharier Khan, The Daily Star, March 5, 2009

In a self-contradictory move, Petrobangla has asked the government to obtain a Polish-tied aid credit to assign Polish company Kopex for a techno-economic feasibility study for development of coal deposit in Dighipara.

In a letter to the ministry on February 24, Petrobangla sought clearance for this credit deal saying if it is cleared, the exploration activities in 40-square-kilometre Dighipara coal deposit can be launched within 2009.

But on January 21 last year, on the basis of Petrobangla's opinion the government informed the Polish government that it could not accept the tied aid credit because as a licence holder of the Dighipara coal deposit, Petrobangla was set to find a strategic partner for exploration and later development of the deposit.

Petrobangla in 2005 estimated that such a study would require 18 months to complete at a cost of Tk 26.8 crore.

But it was Kopex that proposed this feasibility study. Serving as a consultant of the struggling and very poorly implemented Maddhyapara hard rock mine project, Kopex proposed to Petrobangla on May 17, 2007 that it was interested for this feasibility study.

As a follow-up, the government wrote to the Polish government and received a proposal of a tied aid credit on October 11, 2007.

Back then, Petrobangla was seeking the ministry's clearance of an Invitation for Expression of Interest (EOI) to find a strategic partner. It viewed the Kopex proposal as an independent move and it rejected the idea.

Till now Petrobangla has not published the Invitation for Expression of Interest to find its strategic partner because the ministry said it should be done after the government approved the draft coal policy.

The four-year-old draft is gathering dust due to political indecisions. However, other file work has meanwhile been completed.

On December 21 last year, the Bureau of Minerals Development (BMD) approved the Dighipara coal zone licence for Petrobangla and as per the licence, Petrobangla paid the government the annual fee for 2008 upon marking the licensed area.

Now instead of finding a strategic partner through an open tender, Petrobangla says, "It is the right time to conduct the Techno-Economic Feasibility Study." Petrobangla does not have the efficient manpower, technical manpower and financial strength for this study, it said in its February 24 letter.

The letter added the non-approval of the coal policy did not appear to hinder such a study as it would be carried out as per the terms and conditions of the BMD licence.

Petrobangla adds that the Polish government was still open for the tied aid credit and praised Poland as one of the top 10 countries of the world in coal production that had 400 years of experience.

In the early nineties, tied aid credits like supplier's credits in Maddhyapara and Barapukuria gave scopes of corruption. Both the Maddhyapara hard rock and Barapukuria coal mines have suffered many years of implementation delay and poor project designs.

Both of the companies failed to achieve the actual goal, inflicting heavy losses on the government. But at the same time, the local agents of the companies and the companies that developed these mines made profits.

The strategic partner is supposed to provide finances and technical expertise in exploring and later developing the coal deposit with Petrobangla.

The Geological Survey of Bangladesh (GSB) discovered high quality bituminous coal in Dighipara in Nababganj upazila of Dinajpur during its 1995-2004 exploration.

Through drilling only five boreholes in 1.25 sq km areas, GSB found coal in five layers having a thickness of 62 metres at depths ranging 323 metres to 408 metres.

It is primarily estimated to have a deposit of 100 million tonnes.

However, the deposit has the prospect of being spread in a five square-kilometre areas having 500 million tonnes of coal.

To confirm this prospect, Petrobangla would have to undertake detailed work programmes.

Petrobangla was given the licence when a number of international companies were seeking the same for Dighipara exploration and development.

Bangladesh will need 13 million tonnes of coal every year for the next 10 years to generate additional power to meet its rising demand, as the natural gas supplies to generate power will not be able to cater this need.