ENERGY SPECIAL ASSISTANT WELCOMES US COMPANIES'

C O N F I D E N T I A L SECTION 01 OF 02 DHAKA 001041

SIPDIS

DEPT FOR SCA/PB AND EEB/ESC
COMMERCE FOR TRADE ADVOCACY CENTER BRIAN WILLIAMS
COMMERCE ALSO FOR ITA DIANA FONOVICH
TREASURY FOR YEE WONG

E.O. 12958: DECL: 10/04/2018
TAGS: ENRG PREL PGOV ECON PINR EINV BG
SUBJECT: ENERGY SPECIAL ASSISTANT WELCOMES US COMPANIES'
BIDS, SEES TANGLED FUTURE FOR COAL POLICY

REF: A. DHAKA 517

B. DHAKA 684

C. DHAKA 773

Classified By: Ambassador James Moriarty, Reasons 1.4(b),(d)

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SUMMARY
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1. (C) According to the Special Assistant to the Chief
Adviser for Energy, a Malaysian firm's bid for the Bibiyana
power plant in northeastern Bangladesh is nearly final. The
door remains open for GE, which was interested in the
Bibiyana project, to bid on other projects, however,
including a proposed plant at Sirajganj in northwestern
Bangladesh. A contract with Conoco Phillips to explore for
gas in eight offshore blocks submitted during the third
hydrocarbons bidding round in May 2008 awaits the Chief
Adviser's signature. Tamim said the Caretaker Government was
not likely to adopt a new coal policy before the end of its
tenure, further slowing the Government of Bangladesh's
response to the country's energy shortage.

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POWER PLANT POWER PLAY
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2. (C) In a September 30 meeting with the Ambassador,
Professor M. Tamim, Special Assistant to the Chief Adviser
for the Ministry of Power, Energy, and Mineral Resources,
said he had recommended the government approve a bid by
Malaysia's Powertek for the Bibiyana power project, despite
the bid's being on the &high side8 of what the government
was willing to pay. PowerTek, which planned to use Siemens
equipment, was the sole bidder for the development of a power
generation plant near the Bibiyana natural gas fields in
northeastern Bangladesh. Despite GE's interest in the
project, the Government of Bangladesh (GOB) had disqualified
GE's local partner, Summit Corporation, because the GOB had
considered Summit's capitalization insufficient to finance
the project. (NOTE: GE has sought USG advocacy assistance
for the project in the past. The Bibiyana power plant will
be located near Chevron's Bibiyana gas field, and gas from
that field will power the plant. Chevron considered bidding
on the Bibiyana power project, but did not in the end, due in
part to the terms of the GOB's tender, which a number of
sources called unworkable. END NOTE.)


3. (C) Special Assistant Tamim suggested other planned power
plants were still in play for GE. He identified a project at
Sirajganj, which currently had two bidders, including
PowerTek, adding that GE still had time to find a new partner
for this project. Highlighting Bangladesh's energy crisis,
Tamim noted that Petrobangla, the state petrochemical
company, estimated it would not be able to produce enough
natural gas to support the Sirajganj plant until 2011.

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SURVEYING THE DEEP: OFF-SHORE GAS EXPLORATION
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4. (C) According to Tamim, the contract for Conoco Phillips
to survey eight blocks in the Bay of Bengal for natural gas
awaits the Chief Adviser's approval. GOB officials hope that
seismic surveys will be conducted during the upcoming dry
season, between October and May (Refs A and C). Tamim
admitted that some blocks would be disputed by Bangladesh's
neighbors, but he did not believe the disputes would impede
contract signing. (NOTE: Bangladesh is negotiating with
India and Burma on the demarcation of territorial waters in
the Bay of Bengal. END NOTE.) Tamim said the GOB also
planned non-exclusive seismic surveys for the 19 as yet
unassigned blocks using the same company chosen by Conoco
Phillips. These surveys could then be used for future gas
exploration projects.


DHAKA 00001041 002 OF 002


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THE FUTURE OF COAL
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5. (C) Tamim was pessimistic about the future of the
controversial coal policy, which he said "leftist" protestors
had maligned. (NOTE: The GOB has said it must issue a coal
policy before projects could move forward to exploit the
country's sizeable reserves of high-quality coal. Asia
Energy's project in Phulbari in northwestern Bangladesh,
which would use U.S. financing and equipment, has been
stalled in part due to the lack of a coal policy. END NOTE.)
Tamim said the fastest way to begin coal mining would be to
use Petrobangla's existing licenses for two sites, since new
licenses were on hold pending finalization of the coal
policy. With regard to Asia Energy's project, Tamim said
another stumbling block was royalties, which he said the GOB
should seek to renegotiate. Tamim asserted that Asia
Energy's existing contract for the Phulbari coal field called
for a guaranteed rate of return in excess of GOB policy at
the time the contract was signed.

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CHEVRON DISPUTE NEARS RESOLUTION
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6. (C) Tamim predicted the dispute between Chevron and
Petrobangla over tariffs charged for use of GOB gas pipelines
would be resolved through negotiation without the need for
arbitration. He told the Ambassador he had directed the
issue be resolved by December, before the International
Center for Settlement of Investment Disputes (ICSID) was
scheduled to hear arguments on the dispute.

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COMMENT
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7. (C) Tamim expressed frustration at criticism from energy
development opponents he characterized as leftist and opposed
to multi-national corporations working in Bangladesh. Tamim
claimed these critics, which had described him as a &tool8
of the World Bank, were spreading the misconception that gas,
coal and electricity from proposed projects would be exported
if not sold to the GOB, when in fact energy was also being
sought by other domestic buyers. He said he was unwilling to
take a public stand against these partisan protestors due to
his status as a member of the neutral Caretaker Government.
In order to address the country's energy crisis, Tamim said,
political parties needed to come to agreement on the
technical issues of energy policy, rather than grand-stand
and engage in public protests against coal and other energy
matters.


8. (C) Comment: Bangladesh's power and energy sector has
failed to develop adequately in part due to special interest
groups that have opposed numerous projects on social and
environmental grounds; there is also resistance in some
quarters in Bangladesh to foreign investment in these
industries and to the export of excess energy and power to
neighboring countries like India. Gas supplies from existing
fields are running out, hindering the progress of proposed
new power plants. The GOB is developing new sources of energy
at a glacial pace. The Caretaker Government's fear of
protests against development of coal resources has kept
Bangladesh from exploiting its vast and rich coal resources,
which could help alleviate the country's energy crisis.

Moriarty