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 on Monday, 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.â€
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.â€
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.
PARTNERSHIP CRITERIA
A company that has experience in mining at least two million tons of coal will be allowed to obtain tender schedule from Petrobangla when tenders will be invited.
The successful bidder must finance the entire project and take the responsibility of managing the mine.
Petrobangla’s basic investment in the deal will be its mining license.
Petrobangla will give bidders scores on the basis of their understanding of the project, and their proposed methodologies and technologies. If a bidder can bring in a Bangladeshi coal mining company as its partner, it will get an additional 5 points.
If a bidder gets the qualifying mark, Petrobangla will consider its financial proposal.
The successful bidder may not hold Petrobangla liable for arranging finances or for any other matter it will have to arrange everything by itself.
The company winning the bid will have to consider that it will have to explore Dighipara prior to developing a mine. Till now, geologists have drilled only four wells in a 1.5 square kilometre area out of 4,000 hectares of land there. Therefore, the strategic partner will have to carry out seismic and geological surveys, feasibility, environmental and social studies, drill wells, and submit mine designs. Once the design is approved, the joint venture company will start developing the area into a mine.
Petrobangla will have clearly specified responsibilities in the partnership, like taking care of the license, paying local fees and license fees, providing manpower, etc. But it will not pay royalty the strategic partner will pay the royalty.
Petrobangla is expecting 10 to 15 percent free share in the coal production.
The joint venture company will pay the corporate tax.
“Then over 10 to 15 years, the strategic partner will gradually hand over the management to Petrobangla,†said an official.
LUXON MYSTERY
As licensing for Dighipara was becoming evident, a Korean consortium comprising Luxon, Kores, Kepco and Posco was lobbying the government hard since last year.
Korean company Luxon Global’s chief made his first visit to Bangladesh in 2005 and signed an MoU seeking a coal mining license saying it would invest 1 billion dollars in the energy sector. But follow up inquiries by the government revealed that Luxon’s official address in Seoul does not even exist.
In September 2006, another Korean company, Kores, seconded Luxon’s proposal specifically proposing that it was interested in Dighipara coal zone. In response, Petrobangla sent letters in December of that year, and in January and February of last year, but the company did not respond. Rather, the last letter bounced back with the remark ‘unknown’. Petrobangla sent the last mail to Kores in March of last year but it could not elicit any answer.
Following the change in the political scenario in January 2007, the activities of Luxon resumed from June. On July 23 of last year, Luxon submitted a data sheet along with a joint work proposal to Petrobangla, saying it had formed a consortium of companies. The consortium designated Luxon as the liaison.
Meanwhile, the Korean government also expressed interest in a government to government understanding on energy sector cooperation. A draft MoU sent by the Korean government specifically referred to Dighipara and coal mining exploration license. Bangladesh however suggested that the MoU would not specify any license or coal zone as it would cover a broad spectrum of energy cooperation.
Luxon has been lobbying the government hard to get its hands on Dighipara, ever since.
But till now Petrobangla has been officially declining the offer saying there is no scope for joint venture with the Korean company regarding the coal field.
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