Energy Bangla - Petrobangla Gets License for First Time to Explore Coal in Joint Venture

The Bangladesh government for the first time has awarded Petrobangla a license to explore Dighipara coal zone in a joint venture with a competent private mine developer, to be selected as the strategic partner through an open tender.

The government is letting Petrobangla forge a partnership with a private mine developer to tap into the country's coal resources, with the prospect of needing billions of dollars of investment, if the exploration turns out to be successful, said a competent source.

The Bureau of Mineral Development (BMD) on February 27 granted the license to explore the 4,000 hectare Dighipara zone, where high quality coal had been discovered before. It has 100 million tons of proven coal deposit and 600 million tons of probable deposit. Petrobangla applied for the license in 2006.

However the energy ministry started pushing Petrobangla to sign a memorandum of understanding (MoU) with an obscure South Korean consortium headed by a company named Luxon, in contradiction with the government's declared intention of putting out an open invitation for tenders.

Official documents show that letters sent to the Korean address of Luxon and to another member of the consortium, bounced back in the past and the Korean embassy also could not confirm the whereabouts of those companies.

Yet the ministry on Monday decided to ask Petrobangla to frame a joint venture policy under which the MoU will be signed with the consortium.

“This is in clear contradiction with the ministry's earlier approval for seeking a strategic partner through an open tender for exploration and development of Dighipara coal zone,” said a competent source.

Petrobangla already informed the ministry about the contradiction on February 25, clearly stating, “There is no scope for considering any draft MoU for Dighipara coal field development and for setting up a power plant at the mine mouth.”

Petrobangla is waiting for the energy ministry to approve the criteria for bidding for being a partner in the Dighipara coal exploration project. A meeting on the matter is scheduled for Sunday. Once the government approves the criteria for bidding, Petrobangla will go for publishing the tender schedule in the media.

With coal price soaring up to 110 dollars a ton globally due to high demand, investors are showing tremendous interest. Even the future domestic demand for coal is also projected at 13 million tons a year for the next 10 years, for generating additional power to meet the rising demand for the latter, as natural gas supply to generate power will not be able to cater to the demand for power.

Dighipara is one of the five identified areas where geologists earlier detected coal deposits.

Petrobangla is currently running Barapukuria coal mine developed by China while a private company Asia Energy submitted a proposal to develop Phulbari coal mine. Besides, the license for another zone, Khalashpir area, was awarded to controversial and incompetent company Hosaf.

Barapukuria coal mine failed to become profitable due to past corruption and flawed mining designs, Phulbari mine's future also looks uncertain due to controversies surrounding Asia Energy, and Hosaf's venture is too sketchy to be taken seriously.

“Under the circumstances, Petrobangla's Dighipara venture has all the promises to become successful,” said a high official adding, “We believe, if there is no undue interference from powerful lobbies, Dighipara will be the country's first large-scale mine.”

Petrobangla's license says the exploration should refrain from any activity that might adversely affect the bio-diversity and the environment, or harm agricultural land. Prior to the exploration, Petrobangla will obtain permissions from the environment department, ministry of land, the local government, and other relevant departments. The license was issued under the Mines and Minerals Rules, 1968.

On June 27 of last year, the energy ministry approved a decision that Petrobangla may obtain a strategic partner through an open tender upon government approval of the coal policy, and may form a joint venture company with the partner.