The coal at the Phulbari mine remains untapped. And the debate continues as to mine or not to mine; but given the energy crisis already upon us, can
we afford to dawdle?
we afford to dawdle?
A PROBE Report
It is not long ago when controversy raged over the Phulbari Coal Mine. While pragmatism held that Bangladesh needed the coal, and needed it fast, there was also the emotional side of the debate which highlighted environmental aspects and other factors. It was a politically volatile time too and decisions in this regard remained “safely” in limbo. However, time has passed and now it is possible to view the matter with objectivity. With the energy crisis not just looming large, but actually upon us, it is high time that the pros and cons be weighed in realistic terms.
The four-letter word which currently features in every other discussion, dialogue and seminar in the country, is ‘fuel’. Fuel is a matter of growing concern, a concern growing out of all proportions. There is, of course, gas. At one time it was said that Bangladesh was virtually floating on gas. But now it is time to take a realistic look at the situation. With an exponential increase in the dependency on gas for industry, motorised vehicles, et al, it is clear that this total dependence cannot continue for long. The upward spiral of international prices of petroleum rules out the continued traditional use of this fuel for vehicles, putting further pressure on gas reserves. CNG has become not the alternative fuel, but the fuel where cars are concerned. In fact, with diminishing gas reserves and general uncertainty about the reserves to be tapped in future, there is need to free up Bangladesh’s natural gas to be used for vehicles and such purposes.
Experts in unison will agree that there is no more time to waste in conjecture. And there are certainly not enough funds to waste on an increase in exported fuel. The country must pursue alternative energy sources; there is no two ways about it. Given the existing natural resources of Bangladesh, coal is the obvious solution to the energy crisis. And Bangladesh has coal. It has high quality coal with less than 1% sulphur content, almost on par with coal from Newcastle. Already mining has been undertaken at Barapukuria, though for certain reasons there have been glitches in the system.
It is Asia Energy which now is all set and ready to begin mining at the Phulbari Coal mine which has deposits enough to produce 15 million tonnes of coal annually over the 35-year span of the project’s life. In fact, Asia Energy is the only foreign investor that has carried out exhaustive exploration of the mine area along with environment and social impact studies. So if coal is a solution to the energy crisis, it is imperative that the mining begin with immediate effect at Phulbari. Asia Energy is all revved up and ready to go. With the draft coal policy on he brink of being approved, there really now is no need for further delay to give a go-ahead for the mining to begin. Time is of essence. In fact, one official of Asia Energy points out, “had the project started up on schedule, then the first power station would be operating on coal by next year.”
The delay in the start-up of the project was caused, to the most part, by a section of protesters who demonstrated against the open-pit method of mining. However, taking into consideration all the pros and cons, Asia Energy clearly sees that this is the best way to go about it. Given the geological conditions at Phulbari, the coal seam thickness and depth of coal from the surface, open pit mining is deemed as the safest and most economical way of extracting coal from the mine. As opposed to the open pit method, underground mining has high safety risks which include mine flooding, spontaneous combustion, high humidity, high temperature and extensive ground subsidence with permanent land loss.
On the other hand, open pit mining ensures that 90 per cent or more of the resources can be extracted. Underground mining where the coal seam is thick may allow only 20% of the coal resources to be extracted. Protestors argue that open pit mining will displace a large section of the population, rendering them homeless. It will pose as a threat to the flora and fauna and also cause desertification of the area. Asia Energy experts point out that nowhere in the world where open pit mining has taken place have there been instances of desertification. Additionally, the company has a long-term plan to address all these various impacts of the project, including displacement, ecological imbalance, etc.
“In the first place,” an official of the company points out, “if you look carefully at the map of the Phulbari coal mine project area, you will see that it is certainly not as densely populated as most areas of Bangladesh. Secondly, neither is it a forest area thick in foliage and animal life.” However, since there will certainly be displacement of the local populace and felling of forestry, to whatever extent, Asia Energy has plans for sustainable environmental management as well as responsible management for social impacts.
Environmental management
Asia Energy has extensive plans in place to manage environmental impacts such as water, soil, air, noise, waste and biodiversity. By extracting underground water, Asia Energy will ensure the supply of water for domestic, agricultural and industrial use and meet the demand of drinking water in and around the project area, including the Phulbari township. Allaying any fears of desertification, some of the extracted water will be injected back to maintain ground water levels. Extracted and treated water will also be pumped back into rivers and other water bodies of the area, further removing the threat of aridity. The company also is committed to rehabilitate the land used in the project to its proper state for agriculture and other uses.
Social management
Displacement of local populace was a matter of great concern to the local people where the project was concerned, but Asia Energy is committed to resettle around 40,000 people, including 2300 indigenous people. They will be provided with ample rehabilitation support. The people will be relocated only after the rehabilitation arrangements are complete. Fair and full market price compensation will be provided for land, trees, crops, houses and other assets. Financial assistance will also be given for a period of time to support affected people while they attain their previous income levels. All this will be done in a very participatory manner, in consultation with the local communities, public representatives and other stakeholders. This engagement will continue throughout the project.
Benefits
The benefits of the Phulbari coal mining project are multifarious and long-term. They far outweigh any other concerns which may have risen regarding the project. As Asia Energy is committed to addressing these concerns in tangible terms, it is time to concentrate of the benefits of the project, on exploiting the opportunity to use the coal for the development the nation so sorely needs. Bluntly speaking, it is time for the tree-huggers to take a reality check.
The project will generate sizeable revenue for the government, both directly and indirectly. Over the life of the mine and based on an average coal price of US$50 per tonne, the government will earn an estimated US$ 4.43 billion in corporate taxes, royalty payments, custom duties and income tax on employees’ wages. Bangladesh Railway and the Mongla Port Authority will earn about US$ 2.64 billion. Unlike gas, coal mining in Bangladesh is not covered by any Production Sharing Contract (PSC). The companies are expected to pay corporate tax, income tax for its personnel, VAT, duties, royalties and other government service charges. Asia Energy’s contract has no provision for full cost recovery. The full financial risk is taken by the investor.
The Phulbari Coal Project has a planned life of 35 years. This may be extended. Studies determine that 15 million tonnes of coal per year must be mined and sold to ensure the project remains economically viable and is able to meet the huge production costs as well as meet its environmental and social commitments. In addition to providing a new source of energy for the country’s domestic demands for several decades, Phulbari will also generate foreign exchange earnings and drastically cut down on coal import. It will also spawn the growth of support industries. As a benchmark coal mining project, Phulbari will also activate the acceleration of the overall coal mining industry of the country. With the desired upgrading to the railway and deep-water port facilities, further economic benefits are inevitable.
Importantly, about 50 % of the projects net earnings will go to the government’s coffers. And as the coal policy is on the brink of approval, the government can be secure in ensuring optimum benefit for the project.
The Bangladesh Vision
The Phulbari Coal Project, in fact, has such potential that it can make significant contribution to Bangladesh’s efforts in achieving the Millennium Development Goals. Poverty alleviation is one of the most significant features of MDG and this project is a milestone in economic development. And with a coal-fired power station in place, electrical power for all by 2020 will not seem so unrealistic as it does now, with only 38% of the population currently coming under the power supply net.
Coal, now
The bottom line is we need coal and we need it now. It is a new and reliable source of energy which will provide Bangladesh with energy security, new power stations, reliable power supply and economic development. Phulbari mine will lead to regional infrastructure development. It will save on natural gas, increase revenue and generate employment. In a nutshell, this pioneering project will pave the way for the next generation. It will be a landmark in encouraging foreign investors to look at Bangladesh.
Vigilance
While Asia Energy’s Phulbari Project is certainly promising, it is up to Bangladesh to ensure that the nation can reap the most from the project. It is up to Bangladesh to remain vigilant that commitments are kept and targets are met. Vigilance is also needed against vested quarters out to resist the project. It is the people who matter and their interests must be safeguarded. Any misgivings in the mind of the people will soon diminish as benefits of the project accrue.
PROBE REPORT
Date: 15-21 August 2008, Bangladesh
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