SOUTH ASIA REGIONAL ENERGY MEETING, DHAKA,

UNCLAS SECTION 01 OF 04 DHAKA 006292

SIPDIS

AIDAC

MISSIONS FOR ECON OFFICERS, POL OFFICERS AND USAID
DIRECTORS
SECSTATE WASHDC FOR USAID/ANE BUREAU/AA, JIM KUNDER AND
MARK WARD; SAA/DIR, KAY FREEMAN, RICHARD STEELMAN, EBONY
BOSTIC, MICHAEL METZLER, ERIC PICARD, NITIN MADHAV;
SPO/DIR SUSAN FINE, REBECCA MAESTRI; TS/DIR TONY CHAN,
JOHN WILSON, CINDY LOWRY; EGAT/I&E/DIR JUAN BELT, GORDON
WEYNAND, ELLEN DRAGOTTO; E&E/EG/EI ROBERT ICHORD;
NSC/SA DIR CLAUDIO LILIENFELD; STATE/SA DAS JOHN
GASTRIGHT, PDAS DON CAMP, DIR JOHN SCHLOSSER, ANISH GOEL;
DEPT. OF ENERGY/INTERNATIONAL ENERGY COOPERATION/EUROPEAN
AND ASIAN AFFAIRS DIR ROBERT PRICE, TOM CUTLER; AND DEPT.
OF COMMERCE/INTERNATIONAL TRADE/PAUL HUEPER; WORLD BANK
GROUP/USED MUNEERA SALEM-MURDOCK.
BANGKOK PLEASE PASS TO RDMA DIR RICHARD WHELDEN

E.O. 12958: N/A
TAGS: ENRG US IN NP CE PK AF TH
SUBJECT: SOUTH ASIA REGIONAL ENERGY MEETING, DHAKA,
BANGLADESH, DECEMBER 6-7, 2005


SUMMARY


1. THE EIGHTH MEETING OF THE USAID SOUTH ASIA REGIONAL
INITIATIVE FOR ENERGY (SARI/ENERGY) WAS HELD IN DHAKA,
BANGLADESH ON DECEMBER 6-7, 2005. THE FOCUS OF THE MEETING
WAS REGIONAL ENERGY SECURITY THROUGH TRADE, INVESTMENT AND
ACCESS. THE MEETING WAS ATTENDED BY 115 PERSONS FROM THE
PRIVATE AND PUBLIC SECTORS OF THE EIGHT COUNTRIES OF SOUTH
ASIA, USAID SOUTH ASIA MISSIONS, USAID/ANE, USAID/E&E AND
USAID/EGAT. PRESENTATIONS WERE MADE ON ENERGY SECURITY AND
REGIONAL TRADE OPTIONS BY PRIVATE AND PUBLIC SECTOR LEADERS
FROM THROUGHOUT THE REGION. SEVERAL SARI/E PROGRAM
ANNOUNCEMENTS WERE MADE INCLUDING REDIRECTION OF THE
PROGRAM TO ENERGY SECURITY IN SOUTH ASIA, THE IMPENDING
LAUNCH OF A REGIONAL ENERGY MARKETS INITIATIVE, LAUNCH OF
THE WIND AND SOLAR MAPPING OF AFGHANISTAN AND PAKISTAN, AND
THE RELEASE OF THE REGIONAL ENERGY SECURITY REPORT. A USG
ONLY MEETING WAS HELD AT WHICH THERE WAS A STRONG
ENDORSEMENT FOR THE OUTCOMES OF THIS MEETING AND THE
REDIRECTION OF SARI/E, A REQUEST FOR A FORMAL SARI/E
ADVISORY BOARD MEETING AS PART OF A MISSION DIRECTORS
MEETING, A REQUEST TO REVISIT THE PROPOSED BUDGET REDUCTION
FOR SARI/E IN FY06. END SUMMARY

OVERVIEW


2. THE EIGHTH USAID SARI/ENERGY SEMI-ANNUAL REVIEW
MEETING WAS HELD IN DHAKA, BANGLADESH ON DECEMBER 6-7,

2005. IN TOTAL 115 PARTICIPANTS ATTENDED OF WHICH 82 WERE
HOST COUNTRY STAKEHOLDERS FROM AFGHANISTAN, BANGLADESH,
BHUTAN, INDIA, MALDIVES, NEPAL, PAKISTAN AND SRI LANKA.
OTHER ATTENDEES INCLUDED REPRESENTATIVES FROM USAID
WASHINGTON AND FIELD MISSIONS, IMPLEMENTING CONTRACTORS
AND GRANTEES.


3. BEGUN IN 2000, THE USAID SARI/ENERGY PROGRAM FOCUSES
ON REGIONAL APPROACHES TO MEET SOUTH ASIA'S ENERGY
SECURITY NEEDS. THE OBJECTIVE OF THE PROGRAM IS TO
PROMOTE ENERGY SECURITY IN SOUTH ASIA, WORKING TOWARD
HARMONIZED MARKETS FOR REGIONAL ENERGY TRADE AND
INVESTMENT, AND INCREASE ACCESS TO DIVERSIFIED CLEAN
ENERGY SUPPLY.


4. THE PRIMARY THEME OF THIS MEETING WAS REGIONAL ENERGY
SECURITY THROUGH CROSS BORDER TRADE AND INVESTMENT.
LEADING POWER COMPANIES AND KEY PUBLIC SECTOR
REPRESENTATIVES FROM INDIA, BANGLADESH, BHUTAN OTHER
SOUTH ASIAN COUNTRIES AS WELL AS CENTRAL ASIA, SAARC, AND
ASEAN GAVE PRESENTATIONS ON THE NEEDS AND ISSUES FOR
REGIONAL ENERGY SECURITY AND CROSS-BORDER TRADE AND
INVESTMENT. A HIGHLY ENGAGED AND OPEN DIALOGUE ON OPTIONS
FOR TRADE TOOK PLACE BETWEEN ALL PARTICIPANTS WITH ACTIVE
QUESTIONING FROM THE NEPAL AND PAKISTANI DELEGATES. USG
PARTNERS OBSERVED A NEW AND STRONG LEVEL OF ENTHUSIASM
FOR ENERGY MARKETS AND TRADE BY THE REGIONAL
PARTICIPANTS. IN ADDITION, THE PARTICIPANTS ENDORSED THE
SARI/E PROGRAM STRATEGIC OBJECTIVE.


5. THE PARTICIPANTS EXPRESSED STRONGLY THAT SOUTH ASIA
PROVIDES SIGNIFICANT OPPORTUNITIES FOR ENERGY INVESTMENT,
DEVELOPMENT AND TRADE. THE INDIGENOUS RESOURCES ARE
SIGNIFICANT AT APPROXIMATELY 47,000 MILLION TONS OF OIL
EQUIVALENT (MTOE),OF WHICH SOME 800 MTOE IS ANNUALLY
RENEWABLE. YET ACCESS TO ENERGY IS AT LESS THAN 50% ON
AVERAGE WITH AN ANNUAL TOTAL CONSUMPTION OF APPROXIMATELY
600 MTOE. CRITICALLY, THE ENERGY RESOURCES ARE INEQUITABLY
DISTRIBUTED AMONG THE COUNTRIES. THUS THE OPPORTUNITIES FOR
COST-EFFECTIVE CROSS-BORDER TRADE AND INVESTMENT TO DEVELOP
RESOURCES AND FOSTER ENERGY SECURITY IS IMMENSE, BUT AT
PRESENT ONLY ABOUT 0.1 PERCENT OF TOTAL ENERGY IMPORTS ARE
INTRA-REGIONAL. INDIA IS LEADING THE WAY WITH THE CREATION
OF NATIONAL ENERGY MARKETS, AND WILL SERVE AS THE KEY
REGIONAL MARKET. YET PROGRESS MUST BE MADE IN ORDER TO
BRIDGE GAP BETWEEN MACRO-LEVEL INTENTIONS FOR ENERGY
SECURITY, AND MICRO-LEVEL IMPLEMENTATION OF INTRA-REGIONAL
TRADE AND INVESTMENT.


6. GOING FORWARD, USAID'S SARI/ENERGY PROGRAM WILL LAUNCH A
REGIONAL ENERGY MARKETS INITIATIVE TO IDENTIFY AND ADDRESS
KEY OBSTACLES TO FORMATION OF REGIONAL ENERGY MARKETS TO
SUPPORT BILATERAL AND REGIONAL ENERGY TRADE AND INVESTMENT.
SARI/ENERGY WILL LOOK TO SUPPORT SAARC ENERGY CENTER AND
SOUTH ASIA ENERGY SECURITY INITIATIVES. THE PROGRAM WILL
CONTINUE TO PROMOTE IMPROVED CLEAN ENERGY ACCESS, AND
LEVERAGE SARI/ENERGY PROGRAM RESOURCES AND LESSONS LEARNED
TO MEET US OBJECTIVES IN AFGHANISTAN AND PAKISTAN.
PARTICULAR EMPHASIS WILL CONTINUE ON THE CENTRAL ASIA TO
SOUTH ASIA ENERGY CONNECTION THROUGH AFGHANISTAN AND
PAKISTAN.

USAID SARI/ENERGY INITIATIVES FOR ENERGY SECURITY


7. CONTRACTORS AND GRANTEES OF SARI/E INCLUDE NEXANT,
INC., U.S. ENERGY ASSOCIATION, U.S. CHAMBER OF COMMERCE,
WINROCK INTERNATIONAL, AND U.S. NATIONAL RENEWABLE ENERGY
LABORATORY. EACH OF THE SARI/E IMPLEMENTING PARTNERS
PRESENTED THEIR ACCOMPLISHMENTS AND PROPOSED FOLLOW-ON
ACTIVITIES.


8. RECENT SARI/E RESULTS AND ONGOING ACTIVITIES TOWARD
ACCOMPLISH THE US OBJECTIVES OF REGIONAL ENERGY SECURITY
INCLUDE A NUMBER OF ACTIVITIES, THE FOLLOWING OF WHICH ARE
EXAMPLES:


9. REGIONAL ENERGY SECURITY - SARI/ENERGY RELEASED ITS
REGIONAL ENERGY SECURITY REPORT, AUTHORED BY LEADING SOUTH
ASIAN EXPERTS. THESE SARI/E CHAMPIONS PRESENTED THE
FINDINGS OF THE REPORT AT THE FIRST MEETING OF SAARC ENERGY
MINISTERS IN OCTOBER OF 2005. THE PRINCIPLES WERE ENDORSED
BY THE SAARC ENERGY MINISTERS AND FORWARDED TO THE SAARC
SUMMIT. THE SAARC DHAKA DECLARATION ALSO INCLUDED THE
ESTABLISHMENT OF A SAARC REGIONAL ENERGY CENTER IN
ISLAMABAD.


10. CROSS-BORDER TRADE AND INVESTMENT - SARI/ENERGY IS
PROVIDING SUPPORT TO THE GOVERNMENT OF AFGHANISTAN, WORKING
WITH USAID/KABUL, ON POWER IMPORT NEGOTIATIONS FROM
NEIGHBORING CENTRAL ASIAN COUNTRIES. THE PROGRAM ALSO
PROVIDED SUPPORT TO THE BANGLADESH-INDIA TATA GROUP CROSS-
BORDER POWER SECTOR INVESTMENT CURRENTLY UNDER NEGOTIATION.
SARI/E IS RAMPING UP SUPPORT ON THE JOINT VENTURE PROPOSAL
BETWEEN NEPAL OIL CORPORATION AND THE INDIA OIL
CORPORATION. RECENTLY, THE PROGRAM COMPLETED AN LNG IMPORT
POLICY FRAMEWORK FOR PAKISTAN BASED ON REGIONAL
EXPERIENCES. SARI/E ALSO WORKS TOWARD IMPROVED ENERGY
REPORTING AND COVERAGE, WITH OVER 285 ARTICLES ON REGIONAL
ENERGY COOPERATION AND DEVELOPMENT PUBLISHED IN LEADING
NEWSPAPERS AND MAGAZINES.


11. CLEAN ENERGY ACCESS - SARI/ENERGY LAUNCHED THE WIND AND
SOLAR RESOURCE MAPPING FOR AFGHANISTAN AND PAKISTAN. THIS
HAD BEEN DONE PREVIOUSLY FOR SRI LANKA AND THE MALDIVES,
WITH DEVELOPMENT OF A GEOSPATIAL TOOLKIT TO ANALYZE COST-
EFFECTIVE SYSTEM OPTIONS FOR ANY SITE. THE DECISION SUPPORT
TOOLS ARE NOW BEING ADAPTED FOR AFGHANISTAN AND PAKISTAN.
THE SMALL GRANTS PROGRAM PROVIDED SUPPORT IN BANGLADESH
THAT LED TO CONSTRUCTION OF 27 BIOGAS PLANTS. THE PROGRAM
ALSO FACILITATED CREATION OF A RURAL ENERGY CENTER IN
INDIA.


12. REGIONAL HARMONIZATION - THROUGH THE GRANTS PROGRAM A
SET OF HARMONIZED STANDARDS FOR MICRO-HYDRO IN INDIA, NEPAL
AND SRI LANKA HAS BEEN DEVELOPED. THE PARTNERSHIP PROGRAM
RESULTED IN SHARING OF INDIA AND BANGLADESH TRANSMISSION
GRID CODES WITH AFGHANISTAN AND PAKISTAN, ASSESSMENT OF
RETAIL PRICING BETWEEN INDIA AND PAKISTAN, AND
STRENGTHENING OF A POTENTIAL INDEPENDENT REGIONAL
REGULATORY ASSOCIATION.


13. PRIVATE SECTOR VOICES FOR REGIONAL ENERGY TRADE AND
INVESTMENT - THE SARI/E SPONSORED SOUTH ASIA REGIONAL
ENERGY COALITION, COMPOSED OF REGIONAL BUSINESS LEADERS AND
ASSOCIATION EXECUTIVES, BOARD OF DIRECTORS AGREED TO
CONSTITUTE A MARKET POLICY FORUM IN EARLY 2006 TO IDENTIFY
REGIONAL ENERGY MARKET DEVELOPMENT IMPEDIMENTS, AND TO
DEVELOP AND INITIATE A POLICY ROAD MAP TO ADDRESS THESE
IMPEDIMENTS. THE REGIONAL BOARD ALSO AGREED TO INCREASE
ITS AMERICAN COMPANY MEMBERSHIP IN ORDER TO BETTER
REPRESENT THE NEEDS OF FOREIGN INVESTORS IN THE SOUTH ASIA
ENERGY SECTOR.

RECOMMENDATIONS OF REGIONAL WORKING GROUPS


14. DURING THE MEETING THREE WORKING GROUPS WERE
ESTABLISHED TO IDENTIFY CRITICAL OPPORTUNITIES AND NEEDS
IN EACH OF THE FOCAL AREAS OF ENERGY SECURITY. COMPRISED
OF REGIONAL ENERGY SECTOR LEADERS AND SARI/ENERGY
PARTNERS, THE GROUPS RECOMMENDED AND COMMITTED TO WORKING
TOWARD THE FOLLOWING:


15. REGIONAL ENERGY SECURITY - SUPPORT THE NEW SAARC
ENERGY CENTER IN PAKISTAN TO MAKE IT OPERATIONAL; DEVELOP
A REGIONAL ENERGY MASTER PLAN WITH GUIDANCE FROM REGIONAL
EXPERTS; PREPARE A CONCEPT PAPER FOCUSING ON A PROPOSED
SOUTH ASIA INFRASTRUCTURE DEVELOPMENT FINANCIAL
INSTITUTION. THERE WAS RECOGNITION THAT AT PRESENT SARI/E
IS THE ONLY REGIONAL ENERGY PROGRAM IN SOUTH ASIA.


16. REGIONAL MARKETS FOR TRADE AND INVESTMENT - A
WORKSHOP ON HOW SHORT- AND LONG-TERM ENERGY MARKETS CAN
WORK IN SOUTH ASIA; WORK ADDRESSING THE ROLE OF INDIA IN
INTEGRATING A REGIONAL GRID; EMPHASIZED NEED TO TAKE
SMALL, REALISTIC INITIATIVES TO DEMONSTRATE CROSS-BORDER
ENERGY TRADE; HOLD DISCUSSIONS HIGHLIGHTING CROSS-BORDER
INVESTMENTS AND TRADES UNDERWAY; AND IDENTIFY STRATEGIC
PUBLIC-PRIVATE PARTNERSHIP OPPORTUNITIES FOR ADDITIONAL
CROSS-BORDER TRADES. THESE ARE AREAS IN WHICH THE
SARI/ENERGY REGIONAL ENERGY MARKETS INITIATIVE WILL WORK.


17. INCREASED ACCESS TO CLEAN ENERGY SUPPLY - RECOGNITION
OF NEED FOR TRAINING, CAPACITY BUILDING AND INFORMATION
SHARING IN OFF-GRID AND GRID-BASED SOLUTIONS, INCLUDING
LNG, CNG, WIND, SOLAR AND HYDROGEN; ENDORSED THE USE OF
THE SARI/ENERGY RURAL ENERGY NETWORK AS A BASIS FOR
PROMOTING CLEAN ENERGY ACCESS THROUGHOUT THE REGION.

USG MEETING


18. THE USG PARTNERS MEETING TOOK PLACE AT THE END OF
THE FULL REGIONAL STAKEHOLDERS MEETING. THE MEETING WAS
FOCUSED ON IMPLEMENTATION OF THE CHANGES SET FORTH IN THE
SARI/E DECISION MEMO SIGNED BY ANE/AA IN SEPT 2005, WHICH
REDIRECTED THE PROGRAM TOWARD REGIONAL ENERGY SECURITY
AND ESTABLISHED A MISSION DIRECTOR LEVEL ADVISORY BOARD.


19. THE USG PARTICIPANTS, MANY OF WHO HAVE BEEN INVOLVED
WITH SARI/E IN PAST YEARS, NOTED THE POSITIVE SHIFT THAT
HAS OCCURRED IN THE PROGRAM. THEY NOTED THAT THE REGIONAL
PARTICIPANTS DEMONSTRATED A GREAT DEGREE OF POSITIVE
MOMENTUM AND DIRECT DISCUSSIONS ON HOW TO IMPLEMENT
CROSS-BORDER TRADES. INDIA WAS REPRESENTED IN STRENGTH
AND LED THE DISCUSSIONS ON TRADE AND INVESTMENT
OPPORTUNITIES WITH THEIR NEIGHBORS IN THE REGION. THERE
WAS A POSITIVE RECIPROCAL RESPONSE AMONG THE SOUTH ASIAN
COUNTRIES, PARTICULARLY PAKISTAN AND NEPAL. THE
PARTICIPANTS FROM THROUGHOUT THE REGION DEMONSTRATED A
HIGH LEVEL OF PERSONAL COMMITMENT AND SHARED A SENSE OF
MOMENTUM TOWARD CROSS-BORDER TRADE AND COOPERATION IN THE
REGION. THE COMMENT WAS RAISED THAT THIS WAS A VENUE THAT
HAD NOT EXISTED IN THE PAST.


20. THE USG PARTICIPANTS EXPRESSED GREAT CONCERN THAT THE
REDUCTION IN THE FY06 BUDGET LEVEL FOR SARI/E OF 2.252
MILLION DOLLARS WILL SIGNIFICANTLY IMPACT THE ABILITY OF
THE PROGRAM TO IMPLEMENT THE OBJECTIVES APPROVED IN THE
DECISION MEMO. A LEVEL SHOULD BE ESTABLISHED ON A
CONTINUAL ANNUAL BASIS BY ANE THAT MEETS THE NEEDS OF THE
PROGRAM TO IMPLEMENT THE APPROVED OBJECTIVES. THIS
LEVEL, IN PAST, HAS BEEN BETWEEN 5 TO 7 MILLION DOLLARS A
YEAR.


21. OF THE NINE USAID ADVISORY BOARD MEMBERS, TWO MISSION
DIRECTORS AND FOUR TECHNICAL DESIGNEES WERE PRESENT. TWO
ADDITIONAL USAID TECHNICAL OFFICES, EGAT AND E&E, WERE
ALSO PRESENT. THOUGH THERE WAS A MAJORITY BOARD
REPRESENTATION, IT WAS STRONGLY FELT THAT THE FIRST
ADVISORY MEETING SHOULD BE HELD AT THE PRINCIPAL LEVEL.
THE CONSENSUS WAS THAT A MEETING OF USAID MISSION
DIRECTORS AND ANE OFFICE DIRECTORS WOULD BENEFIT THE
REGION ON A NUMBER OF AREAS BEYOND JUST ENERGY. AS SUCH
THEY SUGGEST THE CONVENING OF SUCH A MEETING IN MAY/JUNE
OF 2006 IN THE REGION. AT THAT MEETING THE SARI/E
ADVISORY BOARD WOULD FORMALLY MEET FOR THE FIRST TIME AND
WOULD BE ABLE TO EFFECTIVELY FUNCTION AS INTENDED IN THE
DECISION MEMO. IN THE MEANTIME A VIRTUAL SARI/E BOARD
APPROACH WILL BE NECESSARY. THIS VIRTUAL APPROACH WILL
BE USED TO FINALIZE THE RESULTS FRAMEWORK BY THE TIME OF
THE FIRST FULL BOARD MEETING.


22. THIS CABLE HAS BEEN CLEARED BY USAID FROM ALL
PARTICIPATING POSTS.

CHAMMAS