Abstract

Bangladesh's energy infrastructure is quite small, insufficient and poorly managed. The per capita energy consumption in Bangladesh is one of the lowest (136 kWH) in the world. Noncommercial energy sources, such as wood fuel, animal waste, and crop residues, are estimated to account for over half of the country's energy consumption. Bangladesh has small reserves of oil and coal, but very large natural gas resources. Commercial energy consumption is mostly natural gas (around 66%), followed by oil, hydropower and coal. Electricity is the major source of power for country's most of the economic activities. Bangladesh's installed electric generation capacity was 4.7 GW in 2009; only three-fourth of which is considered to be available. Only 40% of the population has access to electricity with a per capita availability of 136 kWh per annum. Problems in the Bangladesh's electric power sector include corruption in administration, high system losses, delays in completion of new plants, low plant efficiencies, erratic power supply, electricity theft, blackouts, and shortages of funds for power plant maintenance. Overall, the country's generation plants have been unable to meet system demand over the past decade. As of 2011, 79 natural gas wells are present in the 23 operational gas fields which produce over 2000 millions of cubic feet of gas per day (MMCFD). It is well short of over 2500 MMCFD that is demanded, a number which is growing by around 7% each year. In fact, more than three-quarters of the nations commercial energy demand is being met by natural gas. This influential sector caters for around 40% of the power plant feedstock, 17% of industries, 15% captive power, 11% for domestic and household usage, another 11% for fertilizers, 5% in compressed natural gas (CNG) activities and 1% for commercial and agricultural uses. CNG is substituting more that USD 0.8 billion worth of foreign exchange annually and is also used in most vehicles on the road. In addition to CNG, Liquefied Petroleum Gas (LPG) is also demanded at around 0.1 million tons. The nation furthermore demands 3.5 million tons of oil imports in addition to almost 2 million tons of diesel to feed oil-based power plants being planned and built all around the country. The additional petroleum and coal imports are causing a disruption in the GDP by as much as 2% annually. The new purchases are affecting improvement initiatives in other sectors causing reduced export earnings and curtailing employment opportunities. This massive failure in the energy sector is mostly attributed to prolonged negligence, inappropriate implementation, inefficiency and lack of planning. To make matters worse, natural gas reserves are expected to expire by 2020. The only coal mine of the country is in the development stage, the reserve of which is also expected to dry up anywhere from 75 to 80 years after the start of their operations. In generating and distributing electricity, the failure to adequately manage the load leads to extensive load shedding which results in severe disruption in the industrial production and other economic activities. A recent survey reveals that power outages result in a loss of industrial output worth $1 billion a year which reduces the GDP growth by about half a percentage point in Bangladesh. A major hurdle in efficiently delivering power is caused by the inefficient distribution system. It is estimated that the total transmission and distribution losses in Bangladesh amount to one-third of the total generation, the value of which is equal to US $247 million per year. In 2011, there were proposals to upgrade the grid technologies to digital smart metering systems and investing in renewable energy technologies to produce 5% of total power generation by 2015 & 10% by 2020, as noted in the National Renewable Energy Policy of 2008.

Introduction
Energy is one of the most important ingredients required to alleviate poverty, realize socioeconomic and human development. The energy prospect is generally assessed on the basis of available commercial sources i.e., fossil fuel like gas, coal, oil etc. In Bangladesh efficient utilization of renewable energy resources is yet to assume commercial dimensions and hence rational policy dissemination on renewable energy usage is essential. The renewable energy covers solar, wind, biomass, small hydro, geo-thermal, tidal, wave etc. in different form. The frightening prospect of scarce non-renewable energy sources in a strife torn world presents one of the major concerns of mankind today. Though, energy derived from oil, gas and coal will play a vital role in meeting a growing demand for many years to come, the realization of the exhaustive nature of worlds fossil fuels have focused interest and effort on harnessing alternative energy resources. Time has come to give recognition to the use of renewable energy resource which is free from environmental pollution, keep control over deforestation and abating atmospheric emissions. Prior attempts to develop renewable energy in Bangladesh have met with limited success due to policy, institutional, financing, market, information, technical and human resource barriers. This policy intends to reduce these barriers and provide a sound and sustainable implementation framework to tap the renewable energy potential of Bangladesh.

Sector Composition
In Bangladesh efforts have been continuing to make the exploration for energy resources comprehensive and systematic. There are prospects for augmentation of reserves through systematic surveys and exploration, for which investment by the public and private sector is essential. Power sector: The Government of Bangladesh is committed to provide affordable and reliable electricity to all citizens by 2020. However, the nations 1388 million people, only 42 percent have access to electricity, which was only 3 percent in 1971; and per capita consumption is about 140 kwh, still one of the lowest in the world where as on Indias this rate is 561 kwh. Unfortunately, 79 percent of the connected suffer severe load-shedding, and 60 percent of the consumers face low voltage supply. The power sector of Bangladesh is usually characterized by natural monopolies. Conventional wisdom states that since natural monopolies threaten competitive pressures, they should be regulated either by the government, through independent regulatory agencies or directly by public enterprises. Moreover, allowing another firm would increase cost or inefficiency. The Power sector includes the generation, transmission and distribution of electricity among different holdings including residential, commercial, industrial and service sectors under the guidance of the Power Division of MPEMR. At present, BPDB has total installed capacity of generating 4680 MW in 65 units, including the public and private sectors. The Independent Power Producers (IPP) is now producing 1290 mw in 37 units of power plants located at different parts of the country. Power shortage hampers the contribution of power to GDP growth and creates huge excesses/unbearable demand. Under these critical circumstances there is an immediate need to identify or diagnose the major reasons for the unavailability of power as well as the low level performance of the power sector. Gas sector:

Natural gas is currently the only indigenous non-renewable primary energy resource of the country, which is being produced and consumed in significant quantities. Gas, the main source of commercial energy and plays an active role towards economic growth of the country. Natural gas now accounts for about 70% of the countrys commercial energy supply. According to the latest study by the Hydrocarbon Unit of the Energy and Mineral Resources Division and Norwegian Petroleum Directorate, the initial gas in place (proven+Probable) reserve of the 22 gas fields of the country is 28.4 TCF out of which 20.5 TCF is considered recoverable. Out of this recoverable reserve, 5.1 TCF has been consumed up to June 2003 leaving remaining recoverable reserve of 15.4 TCF. United States Geological Survey (USGS) conducted a study for undiscovered gas resource of the country in 2000. According to this study there is a 50% probability of getting another 32 TCF of gas (undiscovered resource). A study jointly conducted by the Hydrocarbon Unit and Norwegian Petroleum Directorate (NPD) in 2001 suggested that there is 50% probability of striking additional 42 TCF of gas (undiscovered resource). Gas consumption in major industries like textile, dyeing, paper, pulp, cement etc. and in the commercial sector, including tea gardens is also increasing steadily. With the gradual coverage of major growth centers with gas distribution network, use of gas as domestic fuel is increasing manifold. Oil Sector: The oil sector in Bangladesh is negligible in comparison with other Asian countries, with proven reserves of only 5.69 million barrels and a production of 2,900 barrels per day, according to an Oil & Gas Journal's Worldwide Survey in December 1999. Up until the 1990s, Petrobangla, the State owned Oil Company, together with its eight operating companies maintained an exclusive monopoly position in the oil and gas sector. In recent years, the Government has sought to encourage foreign oil companies to invest in oil exploration in Bangladesh through private sector participation, with Petrobangla regulating the activities of foreign companies under Production Sharing Contracts, and acting as the sole purchaser of oil and gas from the companies. Currently Shell, Texaco, Cairn Energy, Holland Sea Search, Unocal, Rexwood-Okland and UMC Bangladesh Corporation are active in exploration under six Production Sharing Contracts (PSC) partnerships with Petrobangla, though up to now, oil exploration has not been successful. Coal Sector: Coal may be termed black gold. Worlds 50 per cent energy comes from coal. Bangladesh is sleeping on the black gold mine bed located in the northern districts of Rangpur and Dinajpur, while facing a mounting energy crisis and relies on natural gas as the main source of energy, which is depleting at geometrical progression. In contrast, Bangladesh has proven reserve of 3.0 billion tonnes of low sulphur, low ash, and high caloric value bituminous coal in five discovered coal mines Phulbari, Barapukuria, Jamalganj, Dighipara and Khalsapir. The coal reserves in five fields of Bangladesh are estimated at 3.0 billion tonnes equivalent to 67 tcf of gas, which can conveniently serve the energy needs of Bangladesh for 50 years.

Recent Energy Factors

Widespread wastage singled out for perennial gas crisis (Prudent running of gas, fertilizer plants stressed) Currently, the demand for natural gas in power plants in both public and private sectors is around 1,156 million cubic feet per day, around 56 per cent of the total output of around 2,060. According to the energy experts and top executives: 1. Rampant gas wastage in almost every sector, especially in power plants, fertilizer factories and other industries, ought to be blamed for the country's perennial natural gas crisis. 2. Many of the country's gas-guzzling fertilizer factories and power plants are timeworn and are running inefficiently resulting in consumption of huge volumes of natural gas. 3. The demand for natural gas in power plants would have been almost half the demand if the power plants had been run efficiently. However, A Bangladesh Power Development Board (BPDB) official said the country has around 30 plants and units that are now running beyond their expected operational tenure. Its been found that, among the aging power plants and units, five are over 40 years old, 11 are aged 31-40 years, and 23 are 21-30. Because of the aging power plants the generation capacity of the older units has decreased by 30 to 50 per cent over the period. As per standard rule a power unit should be rendered out of operation after completion of 20-22 years. But, its been observed that the government resorts to running some power plants even beyond 40 years resulting in the wastage of a huge quantity of natural gas. Tender for offshore gas, oil hunt by year-end Recently, the government has decided to float tender for international bidders to search for oil and gas in the shallow waters of the Bay of Bengal by the end this year to ease gas shortage. Energy Division officials said at an inter-ministerial meeting they have decided to seek biddings from international oil companies (IoCs) to explore hydrocarbon in the potential eight blocks in the shallow waters of the offshore Bay. A senior Petrobangla official said that Since the shallow water is free from maritime boundary disputes with neighbouring Myanmar and India, Bangladesh will continue exploration in that part of our economic zone in the Bay. There were some problems Bangladesh faced in case of gas, oil hunt: Bangladesh's natural gas scouting faced a major blow in 2009, when the neigbouring India and Myanmar raised complaints of overlapping their maritime boundaries with that of Bangladesh in their 'economic zone' in the Bay. Due to disputes on the maritime boundary, only seven foreign firms submitted bids for 15 blocks out of 28 gas blocks offered in the offshore areas in the last round of bidding in 2008. The government is now in talks with the neighbours to settle the maritime boundary disputes for embarking on exploration in the prospective offshore structures and weather the country's perennial energy crisis. Bangladesh in its last round of bidding in 2009 selected US oil giant ConocoPhillips for exploring gas and oil in the five blocks and Irish company Tullow for two blocks in the offshore areas. Later, both Tullow and ConocoPhillips refused to drill in its offshore blocks due to disputes over the sea-boundary. A senior Petrobangla official said since the country has been facing nearly 500 million cubic feet (mcf) of gas supply shortage a day; the government has taken the move to hunt for hydrocarbon in the offshore shallow waters, where there is no maritime dispute. He also said the upcoming PSC would not allow export of gas .They may offer a price of five US

dollars for per 1000 cubic feet of gas to the IoCs; the government has stopped gas supply to household units and is giving limited connections to other consumers including industries and commercial establishments. Geo-technical survey for LNG terminal starts at Moheshkhali State-owned Geological Survey of Bangladesh (GSB) is conducting a geo-technical survey in Moheshkhali Island in the Bay of Bengal to facilitate building of the country's first liquefied natural gas (LNG) terminal there. The GSB will find out soil structure, its formation and other necessary geological data to help build the LNG terminal at a suitable location in Moheshkhali island and they are hopefully complete the study within February. Petrobangla earlier short-listed four firms and asked them to submit final bids by April 15, 2012 to build the LNG import terminal. Bermuda-based Golar LNG Energy, a consortium of US' Astra Oil and Excelerate Energy, South Korea's Samsung C&T Corporation and India's Hiranandani Electricity are the short-listed firms qualified to build the floating LNG terminal with a capacity to handle five million tons a year of LNG, re-gasification capacity of at least 500 million cubic feet per day and berthing and mooring facilities for LNG ships with a capacity of 138,000-260,000 cubic metres. Separately, state-owned Gas Transmission Company Limited has moved to lay a 91-km Moheshkhali-Anowara gas transmission pipeline to carry re-gasified LNG from the terminal to shore. Bangladesh in January 2011 signed a memorandum of understanding to import four million tons per year of LNG from Qatar Petroleum. Bangladesh's private sector has also recently been allowed to import LNG under the country's newly formulated import policy. Problem of this point: 1. Bangladesh is now facing a severe gas crisis with gas output hovering around 2,060 mmcfd against the demand for more than 2,500 mmcfd. 2. The re-gasified gas from the terminal is planned to be supplied to the port city of Chittagong where the supply shortfall is most acute. 3. Gas transmission constraints are hampering carrying out of natural gas from gasrich northeastern Sylhet region to southeastern port-city Chittagong where hundreds of industries remain shut and many more have squeezed operation due to gas crisis. 4. Until the terminal is built, there is limited capacity in existing pipelines to take gas to southeastern Chittagong from the energy-rich northeastern region. Besides, Bangladesh will require LNG to operate its planned new LNG-based power plants. Solutions: 1. State-run Bangladesh Power Development Board (BPDB) will build an up-to-850mw LNG-fed power plant by sponsor on a build-own-and-operate basis, a senior BPDB official said. 2. Australia-based Poten & Partners is providing Bangladesh with the consultancy services for carrying out the country's first-ever import of LNG.

Fiscal Incentives in Energy Sector

Though there were some problems among the above discussions. The govt. of Bangladesh offering some incentives to create an appropriate Business Environment:

 Renewable energy project sponsors whether semi-government, private companies (foreign or local), NGOs shall be exempt for corporate income tax for a period of 15 years. 100% depreciation in the first year for solar photovoltaic, solar thermal projects and 100% depreciation in five (5) years for wind, biomass, geothermal, tidal and small hydro projects. The sponsors will be allowed to import plant and equipment without payment of customs duties, VAT and any other surcharges as well as import permit fee provided that the equipment is not manufactured or produced locally. Repatriation of equity along with dividends will be allowed freely. Exemption from income tax in Bangladesh for foreign lenders to such companies. The foreign investors will be free to enter into joint ventures. The Instruments and Deeds required to be registered under local regulations will be exempted from stamp duty payment. Power generation has been declared as an industry and the companies are eligible for all other concessions which are available to industrial projects. The private parties may raise local and foreign finance in accordance with regulations applicable to industrial projects as defined by the Board of Investment (BOI).

Other Facilities and Incentives for Foreign Investors in Energy Sector

The following facilities and incentives would be provided to private sponsors: Tax exemption on royalties, technical know-how and technical assistance fees and facilities for their repatriation. Tax exemption on interest on foreign loans. Tax exemption on capital gains from transfer of shares by the investing company. Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements. Exemption of income tax for up to three years for the expatriate personnel employed under the approved industry. Remittance of up to 50% of salary of the foreigners employed in Bangladesh and facilities for repatriation of their savings and retirement benefits at the time of their return. Facilities for repatriation of invested capital, profits and dividends. TAKA, the national currency, would be convertible for international payments in current account. Re-investment of remittable dividend to be treated as new foreign investment. Foreign owned companies duly registered in Bangladesh will be on the same footing as locally owned companies with regard to borrowing facilities.

Findings

Limitation and ineffectiveness of the energy acts and magistracy Absence of adequate public and private investment in power generation. Absence of cost-reflective tariffs. Absence of primary fuel supply chain. Ensuring financing for Public and Private sector projects is a major challenge. Assurance of transparency and a level playing field in every aspect of the procurement process. Distributional inefficiency and reduction of access to electricity.

Recommendations
Government should instruct Petrobangla and the Geological Survey to undertake continued exploration of potential energy resources in Bangladesh. Available reserves should be designated for a programme of accelerated investment in generating capacity, not for export or for expanded fertilizer production. The Government of Bangladesh should place a very high priority on establishing the credibility of an energy regulatory commission. It is crucial to establish a regulatory regime that encourages private investment, while still assuring customers that prices remain reasonable and supply remain reliable. The REB customers would be expected to cover the costs of generation, transmission, and distribution. In exchange, they should have priority access to the power generated. Any power surplus to local needs would be sold to the nationalgrid. The government should continue to facilitate substitution of CNG for liquid petroleum fuels. The government should undertake high profile social marketing activities intended to improve utilization of biomass fuels in rural areas.

Conclusion
The public utilities in the energy sector in Bangladesh are in a deep financial crisis, partly due to an inappropriate tariff structure, problems with maintenance, system loss and low collection rates. At the same time, consumers access to electricity and gas is constrained, while load shedding reduces the quality of the power supply. In contrast to many other developing countries facing the same types of problem with their public utilities, Bangladesh is in the favorable position that nature has provided the country with a significant volume of hydrocarbons in terms of gas. Although the size of these reserves is disputed, the gas represents an additional energy supply in Bangladesh as well as for the whole region. In contrast to many other developing countries facing the same types of problem with their public utilities, Bangladesh is in the favorable position that nature has provided the country with a significant volume of hydrocarbons in terms of gas. Although the size of these reserves is disputed, the gas represents an additional energy supply in Bangladesh as well as for the whole region.