-Joint UNDP/World Bank
Energy Sector Management Assistance Program
Activty Completion Report
No. 015/84
J
Country: 3NGIADESR
Actvity:   MGM  ASSSSME   STATUS REPORT
APRIL 1984
Report of the joint UNQPAMW Bank Eney Sector Mangmen Assance Pogm
This 'xment has a restricted dibtion. Its contents may not be dsckosed withou
authorization from the Government, the UNDP or the VbrId Bank.



I~~~~~~~
Energy Sector Management Assistance Program
The Joint UNDP/Wiorld Bank Energy Sector Management Assistance
Program (ESIAP), started in April 1983, assists countries in implementing
the main investment and policy recommendations of the Energy Sector
Assessment  Reports  produced  under  another  Joint  UNDP/World  Bank
program.  ESMAP provides staff and consultant assistance in formulating
and justifying  priority pre-invistment and investment projects and in
providing management,  institutional and  policy suppor-U,   The reports
produced under thls Prqgram provide governments, donors and potential
investors with the information needed to speed up project preparation and
implementation.   EISMAP activities can be classified broadly into three
groups:
- Energy Assessment Status Reports: these evaluate achievements
in the year following issuance of the original assessment
report and point out where urgent action is still needed;
- Project Formulation and Justification: work designed to
accelerate the preparation and implementation of investment
projects; and
- Institutional and Policy Support: this work also frequently
leads to the identification of technical assistance packages.
The ?r%gram aims  to  supplement,  advance and strengthen the
impact  of  bilateii1. and multilateral resources already available for
technical assistance in the energy sector.
Fuding of the Prqgram                                     - 
The Prograt is a major international effort and, while the core
finance has been ~irovided by the UNDP and the World Bank, important
financial contribvdions to the Program have also been made by a number of
bilateral agencies.   Countries which have now made or pledged initial
contributions to the programs through the UNDP Energy Account, or through
other cost-sharing arrangements with UNDP, are the Netherlands, Sweden,
Australia, Switzerland, Finland, United Rlngdom, Denmark, Norway, and New
Zealand.
Furtber Infonmation
For further information on the Progran or to obtain copies of
completed ESMAP reports, which are listed at the end of this document,
please contact:
Division for Global and      OR     Energy Assessments Division
Interregional Projects            Energy Department
United Nations Development          World Bank
Program                           1818 U Street, N.W.
One United Nations Plaza            Washington, D.C. 20433
New York, N.Y. 10017



BANGLADESH
ENERGY ASSESSENT STATUS REPORT
APRIL 1984



TABL  OF COITTENS
Pag
II.    WAIN DEVELOPHENTS IN THE DCTY SECTOR
OCTOBER 1981 - NOVEMBER 1983 ....................    3
Energy Demand apd Supply Trends...............    3
Energy Pricing ................. ...... *     .    3
Energy Sectbr Organization....................*    4
Energy Investment in the SFYP.................    4
III.  SMATUS OF MIERCY ASSESSMENT RECOMMENDTSI........         6
Management CapabiL:I of Public
Sector Energy C6.aties....................    6
Hydrocarboon Development and Utilization......o    7
Refinery Operations9........... ...............    9
Energy Efficiency ............*...0*0**.... . *-     10
- - - _____  EnerSy Pricing.........................   12
Renewable Energy Development.................   13
IV.    QICOZ   TECICAL ASSISTABC  TO
Tod               t      la         e     a         15
TEE ENEDl.GYSECThR.......................... ...   16
V.     PIORTIRIS FOR FURTHU TECHNICAL ASSISTANCE
To To    oEEEg m m  SECTOB ........................  18
Electric Power Loss Reduction Program.........   18
Electric Power Tariff Study.o ...............o...   19
Market Potential for Small Scale
Users of Natural. Gas...............o........   19
Better Coordination of External Resources .....   19
STATISTICAL TABLES
1.     Commrcial Energy Consumption Trends,
19757698/83.o.o.o. o..*o*ooo83oo   21
2.     Petroleum Product Prices and Import
Parity, 1989o83*ooeoooooo**ooo    22
3.     Petroleum Product Price Trends, 1981-83o1-83oo***.  23
4.     Natural Cas Tariffs, 198l-831 - 83..*.. o... ooo...    24
5.     Bangladesh Power Development Board (BPDB)
Tariff Structure, March 1984......................   25
6.     Second Five-Year Plan Energy Investment Program....  26



.---~~~~~~~~ r   INTRO W CTION
1.1    - The major energy problems in Bangladesh are the high cost of
oil imports to 'meet the country's energy needs, about 60% of export
earnings in recent years, and declining resources of wood and other
traditional fuels estimated to supply roughly two-thirds of total energy
*              consumption.
1.2       In October 1981, a UNDP/World Bank Energy Assessment Mission
visited Bangladesh to-analyze the major issues and options and to prepare
an action program for the energy sector in the medium term. The mission
found  that  part  of  the high  cost  of meeting  the country's  energy
requirements was a reflection of the inefficiency of energy use.  There
were substantial losses in the conversion, transmission and distribution
of  electric  power,  frequent  and  costly  power  outages,  losses  and
inadequate security of supply in the gas sector, an imbalance between oil
refinery production and the country's petroleum product demand pattern
and considerable scope for improving the efficiency of energy use in
-   industry.
1.3       The  mission's  review  of  the  indigenous  commercial  energy
resource base noted the absence of petroleum reserves and fairly limited
economically  exploitable  coal,  peat  4ad  hydropower  potential,  but
stressed   the   importance   of   develop ing   Bangladesh's   substantial
recoverable gas reserves (about 10 trillistn cubic feet). It pointed out
that these reserves, if mAnaged effectively, could contribute greatly to
improving the country s severe commcrcial energy deficit and balance of
payments  rop pol     As for traditional energy resources, the mission
caxI  ittention to the poor forest endowment, stagnating or declining
availability of crop and apimal wastes and the need to begin a massive
tree planting program for natral areas combined with programs to improve
the efficiency of traditional energy use.
1.4       The major findings of the assessment mission were presented in
its final report Bangladesh: Issues and Options in the Energy Sector,
published  in  October  1982.  These  finditgs  related  to:    (a)  the
development  and  use  of  natural  gas;  (b.;  improvements  to  refinery
cqnfiguration; (c) -improvements in efficie:(cy of energy use by the two
major, commercial  energy  consumers  (industry  and  power);  (d)  the
appropriate   level   and   structure   of   commercial   energy   prices;
(e) prospects for the development of rural and renewable energy
resources;  and  (f)  training  and  manpower  development  for  better
management of public sector energy agencies. The report alsb noted that
Bangladesh had been successful in securing large amounts of bilateral and
multilatXra; assistance  for energy development  but  that greater aid
c4bordinatioi  was  needed  to  avoid  duplication  and  improve  project
management.
1.5       This status report briefly outlines significant developments
the .energy sector that have occurred since 1981, and in particular the
actions taken by the Government of Bangladesh (GOB) to implement the



2
major recommendations made by the Energy Assessment. The report also
reviews  ongoing  technical  assistance  to  the  energy  sector  by  the
international donoi community and identifies some of tCie priorities for
further technical assistance to the energy sector.



-3-
II. MAIN DIVMLPNTS IN THE MN"Y SECTOR:
OCTOBER 1981 -  OVIBR 1983
Energy Demand and SupPly Trends
2.1       The growth of commercial primary energy demand averaged 7.3%
per year between FY78 and FY82 with large yearly fluctuations.  In FY83,
however, overall energy demand actually declined by 4%, due mainly to
depressed economic conditions; GDP grew by only 2.5% in FY83 compared to
5.9% in FY81.   The major recent change in the composition of energy
supply has been the replacement of imported petroleum by domestic natural
gaS.   Between FY81 and 83,  petroleum demand declined by 14%, while
natural gas demand grew by 36%.   However, petroleum imports are still
very costly to the economy, accounting for about 60% of export earnings
mainly due to poor export performance.   Currently,  total commercial
primary energy demand is on the order of 3 million toe with the following
shares by fuel: natural gas, 51X; petroleum, 421; and the remainder (coal
and hydro) 7%. Trends in energy demand by product are presented in Table
1 of the Statistical Anine (SA).
Energy Pricing
'2.2      Petroleum Products.  The prices of all major petroLeum products
have been raised at or above their economic cost (see $A Tables 2 and
3).  Furthermoref,.the Ministry of Energy and Mineral Resources is now
authorized to increase pstrotlum prices by up to 1OZ automatically, in
response to increasing costs.
2.3       Natural Gas.  The Energy Assessment made preliminary estimates
that the levelizet cost of gas to bulk consumers in the Eastern Zone of
Bangladesh ranged from TK 17.05/MCF (US$.90/MCF) to TK 12.4/MCF
(US$0.66/MCF). The July 1982, tariffs for bulk consumers were raised to
about 80% of the lowet level of this range.   Recently, the long run
marginal supply cost of gas was recalculated by IDA staff to take account
of depiaciation of the Taka between 1981 and 1983 snd capital goods
import  inflation.    The  estimate  now ranges from TK 16.3/MCF to TX
27.0/MCF.    Based on  these costs,  bulk tariffs after the July 1983
increases amount to 70% of the lower end of this range.  (See SA Table
4). The Energy Assessment also pointed out that tariffs for residential
consumers were about one-third the cost of servicing them.  In June 1983
monthly charges for unmetered consumers were increased from TK 35 to TX
45 for one burner households (28%) and from TK 65 to TK 80 for two burner
households (23%).   The extevt to which natural gas prices should be
raised will depend on various factors including the cost of supply, the
amount of domestic financial resource mobilization required and the
potential impacts on consumer. A gas tariff study will soon address this
issue.
2.4       Electricity.    Although  progress  has  been made  in  raising
tariffs, the average BPDB tariff increase from TX 0.99/kWh in FY82 to
TK 1.30 in FY83 still brings electricity tariff levels to about 75% of



-4-
the  present  LRMC  estimate  (TK  1.75/kWh).    The  most  recent  tariff
structu<re  is given  in  SA Table 5 which reflects an average  tariff
increase from TX 1.33 in FY83 to TK 1.48/kWh in March 1984. At the same
time an automatic fuel price adjustment clause of up to 10% was added to
the tariff-structure. Also, chere are plans for restructuring tariffs to
reflect costs associated with peak and off-peak loads and a changeover to
time of day metering is under implementation.  A new tariff proposal is
now under study by the Bank.
Energy Sector Organization
2.5        kecent developments include the start, in August 1983, of a
ADB/UNDP financed Energy Planning Project to assist the Planning
Commission formulate a long-term energy plan covering the next 20
years.   The Bangladesh Petroleum Institute (BPI) has been created to
centralize training, geological data analysis and advisory services for
hydrocarbon exploration and development. A director has been appointed
but BPI is not yet fully staffed and GOB needs to determine the extent to
which similar fu%ctions currentLy performed by Petrobangla and the
Geological Survey should be transferred to BPI.  There have been two
developments in the organization of renewable energy work: renewable
energy planning is now the responsibility of the recently established
Renewable Energy and Energy Economics section of the Planning Commission
and project implementation in this sector is now carried out by the
Energy Division of the--Ministry of Energy and Mineral Resources. Also
within the Minwstry, an Energy Monitoring Unit (MIMU) has been established
to oversee energy conservation activities. -=
Energy Investment in the SFYP
2.6       During the April 1982 Aid Group Special Session on Energy, IDA
offered assistance to the Government of Bangladesh (GOB) in preparing a
detailed Priority Investment Program for Energy (PIPE) for the near term
FY83-85. This project subsequently was carried out under the UNDP/World
Bank Energy Sector Management Program (ESMP). PIPE resulted in an energy
investment project portfolio put together by GOB, IDA and other aid
agencies.   Most of the PIPE projects have been included in the latest
version of the Second Five Year Plan (SFYP) which indicates total energy
investment in 1979/80 prices of TK 20.52 billion (US$1.3 billion) or
18.5% if all public sector investment for the period from FY81 to FY85.
This allocation is about 30% lower than that indicated in the original
SFYP, reflecting COB's tight budget, but it still accounts for about a
fifth of all public sector investment over the plan period.
2.7       The electric power sector accounts for about 70% of total
energy  sector  investment.   Of  the  total TK  14.36  billion  (US$0.92
billion) allocated to this sector, 86% is for BPDB's generation,
transmission  and  distribution  program.       The  rest  is  for  Rural
Electrification Board (REB) programs of electricity distribution through
consumer cooperatives (Pally Bidyut Samity or PBS). Most of the TK 6.14
billion (US$0.39 billion) allocated to the hydrocarbon sector (95%) is
for Petrobangla's exploration and development programs with the remaining



5% divided among the Bangladesh Petroleum Corporatior (for extending LPG
recovery, a lubricating oil plant and new tankers), the Geological Survey
of Bangladesh and the Ministry of Energy.   The rest of the energy
allocation, TK 1.49 billion is for renewable energy development.



-6-
III. STATUS OP EMERGY ASSOSSMENT RECONMENDATIONS
Managemzent Capabiliti of Public Sector Energy Companies
Recommendations                                         Status
Update    the    technical    and  GOB  has  begun a  training  program with
managerial  skills of the senior  assistance from IDA as part of the Energy
refinery staff.                      Efficiency  and  Refinery  Rehabilitation
Project to upgrade the skills of existing
and  new refinery  staff.    Some  senior
refinery  staff  will  be  sent abroad  to
attend seminars and to foreign refineries
for exposure to modern refinery management
over   a   three-year   period.      Junior
engineers,  draftsmen and operators will
receive both classroom and on the job
training.    The detailed  design of  the
program  is  expected  to  be  completed
shortly.    The ADB/UNDP  Energy Planning
Project will help in the ongoing assess-
ment of long-term training needs.
(a) Natural Gas Subsector
Institute a  I xpower development  The Government has initiated a training
program  for  the  electric  power  program  with  assistance  from  IDA  in a
and    natural    gas    sectors,  Petroleum   Exploration   and   Promotion
including     training,     better  Project which  includes  a component  for
remuneration,    and    additioAal  seismic data acquisition and training in
qualified staff.                     its processing and interpretation, as well
as other areas of petrr-ieum geology.  It
also provides technital assistance to
upgrade'Petrobangla's financial system and
review the company's legal framework for
oil exploration, focusing on ways to
strengthen the company's capability to
negotiate  production  sharing  contracts
with foreign oil companies.  In addition,
a hydrocarbon data bank is being developed
and staff trained to operate it with
assistance from  USAID.    The  Bangladesh
Petroleum   Institute   (BPI),   recently
established with a grant from UNDP, is
expected to function as a center for data
gathering and analysis, and for training.



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(b) Electric Power Subsector
In the electric power sector, GOB has
embarked on a Power System Master Plan
Project, with assistance from the ADB,
which will provide resident experts in
load  forecasting,   thermal  generation,
hydropower    generation,    transmission
network   planning   and  ,power   system
economics to assist a special planning
cell of BPDB prepare a least cost system
expansion  plan.      The  study  will  be
conducted   in   Dhaka   using   available
computer   facilities    and   additional
facilities   provided   for   under   the
Project.   Training in system studies is
also being provided under a cooperative
program with the Electricity Generating
Authority of Thailand.
(c) Civil Service Remuneration
The problem of low remuneration in the
public sector energ  agencies,  p in most
government agencies'in Bangladesh, has not
been addressed.
Hydrocarbon Develogment and
Utilization
GOB has begun a program of exploration
Take measures to attract foreign  promotion which includes seismic surveys,
oil   companies   back   to   oil  a   data   processing   center,   and   a
exploration.                         hydrocarbon habitat- study.  This program
is assisted by IDA and the resulting
analyses will be used by GOB in a
promotional   package   for   interested
international oil companies.
Initiate a program of extensive  The Government is conducting seismic work
seismic work in the Western Zone  in the Western Zone with assistance from
where  a  fairly  dense  regional  IDA, the Federal Republic of Germany and
grid  is  required  to  identify  United Kingdom.
promising structutes.
Undertake   production    Feismic  GOB is carrying out seismic surveys for
work, using modern technologies  seven producing gas fields in the East
and equipment, in the producing  covering 900 line km.  These surveys are
gas  fields  and  the  peripheral  receiving assistance under IDA Petroleum



-8-
areas ip the Eastern Zone to Exploration Promotion Project. Seismic
define moreI accurately the size  and' exploration drilling are also being
of recoverable gas reserves.        undertalen  in  Fenchuganj  with  French
asslstazce,   With Saudi assistance  two
exploratory wells are being planned in
Patharia area.
'Maximize  utilization  of gas  in, A number of projects and studies have been
power  generation,  industry  and  completed or are in. progress to promote
commerce.                           gas  utilization  to  the  maximum  extent
possible.     The  East-West  electricity
Interconnector, completed in 1982, is now
bringing gas based electricity to the
West.  The Bakhrabad-Chittagong pipeline,
completed in 1983, will supply natural gas
to the steel, mill, power station, paper
will and othuir industries located in and
around  Chittagooe.   There  are  also  a
number of proje,ts to increase gas
utilization   througn-  exploitation   of
existing fields. These include the Sylhet
Tea Estate Gas Supply Project, and the
Southwest Bangladesh Gas Transmission and
Distribution  Project (in Comilla, Feni,
Laksham,    Chandpur    and    Chittagong
District).         Furthermore,    several
feasibility studies have been completed or
are underway in the following areas: use
of  compressed  natural  gas  in  road
transport, LPG recovery from natural gas
and a gas pipeline to the Western Zone.
Pursue  further  study  of  gas  The Government has a project to identify
export alternatives.                the prospects for direct export of gas
and/or its use as petrochemical feedstock
for potential export projects.   It will
also assess the investment requirements,
evaluate their economic benefits, rank
them according to priority and recommend
an incentive structure for attracting
foreign private capital. This project is
a component of the IDA assisted Energy
E8ficiency and Refinery Rehabilitation
Project.   A  consulting  firm  has  been
selected to carry out the study and work
is expected to begin in the second quarter
of 1984.



-9
Consider    an    East-West    gas  Petrol;angla is giving the East-West Gas
pipeline.                            Pipeline Project top priority in terms of
seeking funds for future investwent. The
total cost of the project is estimated on
the ord4r  of  US$500-700  million.    The
consultancy firm of Rendell.  Palmer and
Tritton has prepared a scudy which finds
the gas pipeline to the West economically
viable (independent of gas exports to
India),   based   on   GOB   gas   demand
projections fbr the Western Zone which
result from planned investment projects in
electric      power     and      fertilizer
production. Howeverr the report does not
address the economic viability of setting
up these projects in the Western Zone. An
in-depth view of the issues unanswered by
the previous study will be undertaken with
assistance provided under IDA's Technical
Assistance Credit.
Refinery Operations
Consider  short  term options  to  The  current  SFYP  includes  studies  to
increase middle distillate output  examine   alternative   uses  of   surplus
and reduce fuel oil and naphtha  products, including vis-breaking.  GOB is
surpluses.    These  include  the  receiving IDA assistance for construction
spiking of crude oil with diese-.  of further LPG production facilities and a
oil  ead   detailed   cost   and  naphtha splitter as well as for conversion
-eagineering    studies    for   a  of the refinery for natural gas use.
construction    of    a   naphtha
splitter for blend.ng the heavy
naphtha  component  with  middle
distillates.
Carry  out  detailed  cost  and  GOB  is  implementing this recommendation
engineering       studies      for  through a component of the IDA assisted
debottlenecking the refinery and  Energy         Efficiency     and     Refinery
long-term  options  to  meet  the  Rehabilitation Project which includes 320
country's     petroleum     demand  man-months of consultant services to carry
profile.                             out a study to debottleneck the refinery
and determine appropriate modifications
over the long run to remove the imbalance
between  the  petroleum  product  demand
profile and refinery yield.  The project
includes  detailed  preparation  of  the
refinery   engineering   package.         A
consulting firm has been selected to carry
out the study which should be completed by



- 10 -
Planning Project will also look at long-
term refinery needs and it is important
that the efforts under these two projects
be fully coordinated.
Consider further recovery of LPG  The SFYP includes a proposal to expand LPG
from  crude  oil  and  finalize  recovery in the refinery by an additional
studies  and  install  facilities  1S,000 tons (current production is about
for  increased  LPG  recovery and  6,000 tons) in order to promote more LPG
storage.                             substitution for kerosene.  It is expected
that additional storage sweetening plant
cylinders, etc. will be financed through
French assistance.   Also,  the Canadian
International   Development   Agenc7   is
financing a study of LPG recovery from
natural gas.
Improve  safety,  maintenance and  This recommndation is being implemented
reliability      of       refinery  with  IDA  assistance  under  the  Energy
operations.                          Efficiency  and  Refinery  Rehabilitation
Project which provides a component for the
provision of equipment, materials and
engineering services to carry out repair,
replacement and maintenance of tanks,
furnace, columns, etc., to restore the
mechanical integrity and increase capacity
utilization of the refinery by 15Z.
Energy Efficiency                                                       a
Carry out a study and execute a  The power outage study, as outlined in the
program to reduce power outages.    Energy  Assessment  has  not  been  under-
taken.    According  to BPDB,  studies on
tariff levels and reduction of power
losses  are  a  higher  priority  at  the
present time.   BPDB indicated that the
outage  situation  should  improve  with
completion   of   additional   generation
capacity and added that it would perhaps
be more appropriate to address the problem
further after preparation of the Power
Development Master Plan and completion of
stidies on tariffs and losses.
Carry  out  a  program  to reduce  To this end, BPDB has submitted a project
power lonsses, including improved  proforma  to  GOB  for  a  System  Loss
metering,: accounting, supervision  Reduction  Scheme  which  identifies  the
and physical protection.             areas  of  loss  and  proposes  an  action
program to reduce both technical and



- 11 -
non-technical   losses.       Its   overall
objective is to reduce system losses to
18% by 1985 through the replacement of
defective meters and the installation of
capacitor banks.  The project has not yet
received  full  COB  approval.    BPDB has
requested    external    assistance    in
evaluating the design of the project as
well as the results of some of the
preliminary loss reduction work already
completed.
Carry  out  a detailed  study  to  Efforts to determine the high consumption
improve the physical reliability  rates in the Titas system are described
of the Dhaka gas transmission and  below.  The gas technical assistance study
distribution system.  This study  for the Titas system and a project for a
should   include   the   following  new pipeline from Titas to Dhaka parallel
components:    (a)  identification  to the present one, both assisted by ADS,
of the cause of high consumption  should   address   the   remaining   three
rates  in the Titas system,  (b)  components of the recommended study.
identification of measures and
itvestment    to    improve    its
physical     reliability,       (c)
recomuAendation of measures to
deal with the severe pressure
losses   and   (d)   analysis   of
storage options for peak sharing.
Carry out a study to identify and  GOB has initiated a program to investigate
correct the causes of gas losses  these losses.  It has installed about 700
in domestic sector.                  meters in representative sample households
to  pinpoint  the  causes  of  seemingly
excessive consumption.    The  next  steps
will be to estimate the costs of these
losses and compare them to the costs of
installing,   operating  and  maintaining
meters in around one million households.
,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Institute an energy conservation  GOB  has  initiated  a  sizeable  energy
program,    including    detailed  conservation   program   under   the   IDA
audits of major energy-intensive  assisted  Energy  Efficiency and Refinery
industries   and   power   plants,  Rehabilitation   Project.        The  energy
preparation and execution of gas  efficiency component of this project has
substitution   projects   and   an  four  parts:       (a)  110  man-months  of
energy,   management      training  consultant  services to assist  the newly
program.                             created Energy Management Unit (EMU) carry
out  a  long  term  energy  conservation
program, including energy audits of 40



- 12 -
medibm to large energy using enterprises;
(b) eight mobile units with energy mea-
suring equipment for EMU staff; (c) an
overseas training program for EMU staff,
and (d) a library of relevant energy con-
servation literature. About 85 of the 110
man-months are intended for the energy
audit work.   The Government  intends to
package the results of the audits into an
industrial energy conservation project and
seek donor assistance to carry it out.
The audits are expected to begin in 1984
and will require about twelvc-. months to
complete.
Energy Pricing
The gas pricing study which the  Bids  for  the  gas  pricing  study,  were
Government  agreed to do in the  Teviewed by both COB and IDA in November,
Bakhrabad   Credit   should   be  1983 and a consulting firm was selected to
undertaken urgently.                 carry  out  the  work.    The  study  will
address the issue of the appropriate
tariff levels and structure.
The time schedules already agreed  Terms of reference for the power tariff
to by the Government for the bulk  study  to  determine  appropriate  tariff
and retail tariff studies of the  levels have been drawn up by BPDB and are.
BPDB and PBS systems, as well as  'awaiting   approval   by   the   External
the    implementation    of    the  Resources Division (ERD).   The original
recommended  tariffs  need  to  be  timetable  calls  for  the  study  to  be
adhered to.                          completed  by  December  1984.    It  will
recommend appropriate tariff targets to be
implemented by July 1985.
Raise   ex-refinery   prices   of  Petroleum product prices have been raised
diesel oil and kerosene by about  twice since September 1981 and now all
15-20% relative to September 1981  products  are  priced at  or above  their
levels to remove subsidies.   In  opportunity cost.  The highest increase is
the  case  of  LPG,  increase  the  in the ex-refinery price of LPG, which, as
price by about 200% at the ex-  recommended by the energy assessment, is
refinery  level  to  reflect  full  about 200% above the comparable September
opportunity   cost.      Also   an  1981 price.   In addition, the "automatic
automatic   "trigger   mechanism"  trigger   mechanism"   proposed   by   the
should  be  established  to  pass  assessment  has  been  implemented  with a
along to consumers any increases  limitation:  the Ministry of  Energy and
in crude oil and product import  Natural Resources now has the authority to
costs*                               direct BPC to increase prices in response
to  increasing  costs   by  up  to  10%
automatically.



- 13 -
Renewable Energy Development
Institute reforestation  programs  The   Government   has   several   ongoing
and prepare projects.                projects  to  improve  knowledge  of  the
forestry   resource   base  and   increase
afforestation, with assistance from ADB,
j                                                 IDA, UNDP/FAO, and the United Kingdom.
Study   and    carry   out   the  Studies   subsequent   to   the   Energy
development       of      charcoal  Assessment   did   not   find   charcoal
production.                          development  very  promising  due  to  the
distance   of   production   areas   from
consumption centers and competition from
imported coal use in certain industries
targeted as potential charcoal users.
Obtain  technical  assistan;e  for  The Government plans to develop a local
improvement  of  renewable  energy  rural/renewable energy planning capability
planning.                            with assistance  from IDA and the Dutch
Covernment, but the program has not yet
begun. Rural/renewable energy demand pro-
jections and long-term planning require-
ments will be covered under the ADB/UNDP
Energy Planning Project.
Prepare  projects  on  woodstove  Pilot activities in the following areas
improvement,   and   testing  and  are to be carried out with assistance from
demonstration   of   solar   and  IDA and  the Dutch Government:  improved
biomass technologies.                chulas, solar driers, solar water heating
and air pre-heating, solar pumping, a
solar/wind energy resource assessment and
feasibility studies for biodigesters and
improved  non-residential   wood  burning
devices such as brick kilns. The project
has not yet begun. There are also several
ongoing research and development projects
in universities, government laboratoriqi,
and institutes, mostly focused on biogas
and solar thermal applications, and the
Directorate of Forestry is monitoring
plantation of new fast growing trees.
Develop      hydro      potentiAll,  A study of small hydro in Bangladesh was
especially  in  the  context  uf  completed  in November,  1981 with  USAID
isolated local power systems.        assistance.   The study found that small
hydroelectric projects should be pursued
for electrification of isolated rural
areas, power supply for irrigation pumps
and the creation of small, decentralized



14 -
industries in the countryside, generating
needed  employment  opportunities.        It
recommended that prefeasibility studies be
undertaken in the areas of Chittagong,
Sylhet, Jamalpur, Dinajpur and Rangpur.
So far, these studies have not been
carried out.



- 15 -
rV. ONGOINC TECENICAL ASSISTANCE TO THE ENERGY SECTOR
Multilateral
4.1       Asian Development Bank (ADB).   Complementing the medium-term
(to 1984/851 FYDP/World Bank Energy Assessment and the subsequent PIPE
program is the preparation of a long-term energy plan over a horizon of
20 years within which successive five year plans may be better
formulated.  An energy planning project (EPP), financed by ADB and UNDP,
is now in progress with the existing Energy Planning Cell as the focus of
its technical assistance.  The project's terms of reference include the
following:*
(a) review of growth tr4snds of the Bangladesh economy;
(b)  analysis of energy consumption trends, future energy needs and
demand manangement  pportunities;
(c) development of macroeconomic and energy use models to assist in
projections, policy analysis and energy sector planning;
(d) assessment of relevant energy supply options;
(e) identification of the main issues and problems of ensuring
energy supplies to rural areas and formulation of action
proposals;
(f) development of a relevant framework for formulating and
evaluating energy pricing policies;
(g) formulation of recommended sector development plans for the
period 1982-2000 together with associated investment programs
and policies; and
(h) training of Bangladeshi professionals in the use of analytical
tools and techniques of energy planning.
4.2       The project is being carried out by a consortium of British,
Swiss, and Bangladeshi consulting firms.   An inception report will be
issued early in 1984 which will give the major orientation of the
project.   The interim results of the project will be discussed at a
seminar in June 1984, to which the major donors will be invited, and an
interim report will be issued shortly thereafter.  In addition to EDP,
the ADB is involved in technical assistance for natural gas development
in the Titas area and the preparation of a Power Sector Master Plan
Study. Both of these subsector studies are expected to be completed in
time for their findings to be included in the interim report of EPP.
4.3       World Bank.  Following the Energy Assessment, both UNDP and the
Bank  provided  technical  assistance  to GOB  in  1983  in establishing
investment priorities for energy sector projects in the SFYP. Currently,
the Bank has several ongoing investment projects with technical



- 16 -
assistance components:   Energy Efficiency and Refinery Rehabilitation,
Petroleum Exploration Promotion, Bakhrabad Gas Development and Ashuganj
Thermal Power.   Also IDA Technical Assistance Credit No. 5 includes a
rural and renewable energy component which is receiving financing from
the Dutch Government.    Table 4.1  outlines  the technical  assistance
components contained in these projects, as well as those areas under
study  by ADB.    From  this  Table  it appears that there are several
important areas covered by both institutions and coordination is needed
to clearly delineate the scope and phasing of the work program to best
utilize available resources.
4.4       FAO/UNDP:   Other multilateral agencies involved in technical
assistance to the energy sector include FAO and UNDP. Both organizations
are involved in a village forest inventory study and an inventory survey
of selected forest resources in the Chittagong Hill Tracts. In addition,
UNDP is co-sponsor of EPP and is supporting the development of the
Bangladesh Petroleum Institute (BPI) and the establishment of an energy
planning and implementation cell within the Ministry of Energy.
Bilateral
4.5       Most of the major energy sector studies and other forms of
technical assistance, such as training programs, are being undertaken by
the multilateral agencies mentioned above.  Bilateral agencies are more
involved in energy investment projects, though there is some technical
assistance which is summarized briefly in the following paragraphs.
4.6       Canada.   The Canadian International Development Agency (CIDA)
is funding a feasibility study for LPG recovery from natural gas.
Results are expected early in 1984.   CIDA is also in the process of
identifying further technical assistance projects.
4.7       Federal  Republic  of  Germany  (FRG).    The  FRG  is  funding
exploration seismic surveys in the Hinge Zone of Western Bangladesh and
is also providing other technical assistance to Petrobangla.
4.8       Sweden.     The  Swedish  Government  is  funding  a  forestry
development and training center at Kaptai.
4.9       United Kingdom (UK).  The British Overseas Development Agency
(ODA) is financing exploration seismic surveys in the Hinge Zone of the
West.   In addition, ODA is giving technical assistance to the forestry
sector, through the financing of an inventory survey of wood resources of
the Sunderbans Forest.
4.10      United States.  USAID is assisting Petrobangla in establishing
and operating a hydrocarbon data bank.  Alo,o USAID is financing a study
of the tectonic structure of Bangladesh with assistance from the Kansas
Geological Survey. Both of these projects should improve the information
base for the GOB's hydrocarbon exploration promotion program.



- 17 -
Table 4.1: Suwry of Inergy Sector Studtes Under
Preoratlon by ADS and tDA
Overall nrg  LUMani                                                                      WOLDR  DK
Eane    Demnd O orets                       Ieb  P      1aiM  Projec
Lang T1= &er  fan and Inrveste
Insettet tou  byt
BMrW efleeecy                                           *                            1U r    enery audIt end cOSarvatiIn
program under tUD E&erg Effictency and
Reftnay  ehBabItattea
Project ..
overal tAvie
= e Tartiffs                                            '                        Ge pticing std wynder the bakhbad Gas
beelopunt Poject.
Electric Poer iT.tffs a                      Ie    Pl.        Project            Femr taiff study rec_annded wnr chs
Agj Iveal PFe   Poec
boom           /pal   and                    Ibaa      P2atng PrejGct asd        A hydraum  baitat study bt tactue  in
Ge 1htcal Aeiat4an    Peoject       the tfts: Psbrolul S          seratta ad Patcti
aete. Ses1tc surves an ale peM of
ce poec.
Ca Deman foeatib                             aeg PlaUIng Projeit
GIs ftlzatiaq Otions                         BeW flamng Proect and ea               study an compresed  nual as (Ca)
-_eial Aesince Itojec               undet the sdftabW C(s l Oe el_nt
Proje3t. Studio on Ps bI  esporte and
1anel research and developme  are
incl      r  tb e    Eer  Iffidtncy ed
lfiney RiblUaetlo Project.
fetrlem imorca/       s
9_ Analysis and Projet                       Enerum  PFlaMi  Ptjeg
Refinery Prodction Planning                                                      A study an refie eptione to balane
petrole. ptrduct de   bm been includ In
t*  -argy Edfficiency  d R   yefey
teUltiecti  P"ojct.
,PMP
buket Sao                                    Pte Sectr 1an Pln
-    Studies
Other 1ets  Soures
coal ad Peat Debelopam                       BMW         q alm    Psoject
Km MorUffusbl.Eerg OwVOptlama                           *                          er1Ibe  ne
lechatcal Aaaieamne Oraeit
Naming                             -
GeogI  'ad                                              -
-,  Sto
Eectic P?nr Sector                           Ene    Plani   Project anA Ptat
Sector Ieter Pano
SwraAknomMaEnerg Seto                               -leaftemMebl Ener  TecnicaL Aihlsanc
01dt.e
* Propsed.



- 18 -
V. PRIORITIES FOR FURTHER TECHNICAL ASSISTANCE
Overview
5.1       The' broad-based ADB/UNDP  Energy Planning Project  (EPP) and
several ongoing technical assistance projects in the major energy
subsectors are covering most aspects of energy sector development in
Bangladesh.   The findings of these studies should help the Government
prepare an energy planning framework for the Third Five-Year Plan (to
1990) and to determine overall priorities for technical assistance to the
energy sector.   However, there are two important areas where technical
assistance need not await the outcome of ongoing studies: (a) improving
the efficiency of operation and financial condition of the Bangladesh
Power Development Board through a power loss reduction program and a
study on the appropriate   level and structure of power tariffs (b)
identifying the market potential for small scale users of natural gas.
Also iA *terms of all ongoing and future technical assistance to the
energy sqctor, there is a need for COB and the international donor
agencies to improve the coordination of external -financial resources
available.
Electric Power Loss Reduction Program
5.2       Electric power syscem losses are &bout 38% of gross electricity
generation in Bangladesh. BPDP already has prepared a project proforma,
which estimates, that 60% of these losses are due to technical problems in
the distribution system and 40Z due to non-technical problems, such as
inadequate billing procedures, insufficient supply of meters, meter
tampering and power theft, etc.   The program proposes to reduce the
combined technical and non-technical losses to 15X of generation by
1990.   The plan to reduce technical losses includes the detection of
inefficient connectors and the installation of new ones where needed and
the installation of capacitors to correct the low power factor due to
high line current and energy losses. in the conductors. __The program to
reduce non-technical losses includes the installation of meters where
connectors are presently unmetered and improvements to administrative
procedures such as meter reading and checking, billing and revenue
collection.   The cost of the entire program is on the order of TK 13                    i
million (US$528,000) 9f which TK 8 million (US$325,000) would be in
foreign exchange.
5.3       While the mission was in Dhaka, the Planning Department of BPDB
expressed interest in a brief evaluation of this program by an outside
consultant who would review the design of the program, the results of its
preliminary work and the types of equipment required and the cost
estimates. The mission estimates that such a review would require about
two to three staff months at a cost of about US$30,000-50,000. Such an
evaluation could be financed under the Joint UNDP/World Bank Energy
Sector Management Program Assistance (ESMAP).



- 19 -
Electric Power Tariff Study
5.4       Althougt BPDB's financial condition has improved recently, from
net financial losse, of TK 257 million in FY81 and TK 390 million in FY82
to a small profit of TK 23 million in FY83, revenues still fall far below
the TK 1 billion needed to meet at least 20% of BPDB's investment program
from internally generated cash resources. To help improve the situation,
a study is needed to determine the appropriate level and structure of
power tariffs, which are significantly below the long run marginal cost
of supply.   Sueh a study was agreed to by GOB under a covenant of the
Ashuganj Thermal Power Project, though no funds were allocated to it.
According to BPDB, terms of reference for the study have been prepared
and are awaiting GOB approval to seek the necessary external funding.
The cost of the study is estimated to be on the order of US$500,000.
According to the agreed time schedule, the consultant study should be
completed by December, 1984 and the recommended tariffs implemented by
July 1985.
Market Potential for Small Scale Users of Natural Gas
5.5       The Government has also been attending to 'the needs of small
industrial, commercial and residential consumers located close to the
producing gas fields or along pipeline routes.  While the economics of
supplying natural gas to these categories of consumers is well
established, the issue now arises of the economic viability of supplying
gas to (a) clusters of small consumers (i.e., in and around small towns)
located further away from existing supply sources and (b) agriculture-
based (and therefore widely spread) users such as irrigation pumps and
crop dryers. The related issue of the economic efficiency of installing
small gas-based power generators as a way to make electricity available
to isolated areas also needs to be addressed.
5.6       A first step towards assessing these issues, which condition
future plans for wider gas distribution systems, would be to review the
available data and the research projects already completed with a
view to suggesting  a  cogent  technical  assistance  program.    It  is
estimated that such a preliminary step would require three staff months
at a cost of about US$50,000.
Better Coordination of External Resources
5.7       As stated earlier in this report, Bangladesh receives a large
amount of multilateral and bilateral 'aid in the energy sector.   The
mission met with representatives of several major donor agencies working
in  Bangladesh,  all  of whom  expressed  the  need  for  more  effective
coordination from both GOB and the donor community. Although meetings of
the local Consultative Group (LCG) of donors have been helpful in
maintaining a dialogue on activities in the energy sector, it was the
general concensus that these meetings need to be supplemented by another
mechanism with a "clearing house"' function such as a periodic digest of
priorities and related donor activ%ties, highlighting areas where further
technical assistance is needed. Other suggestions include more frequent



- 20 -
donor meetings and the establishment of a common information base
(including energy balances, prices, projections, etc.) to be updated
periodically and used in project preparation.



- 21
jale 1 
Co=erccial Energy Consumtion Trends, 1975176 to  1982/83
Issue.  .  1W15P6   15?6fl9  1p9/6U  1980/as  1901/12      _Ima   Af-et. @toth btat    V.'ntat of
.luft   *              s/76  two/" l9"9@W          t9swas  1941182  tla3   t1911167 to    4978179 to       CoiwPtiou
t  '         .                                                  NtYJ~~~~~~~~~~~~~~~~9161  (I    1982/83 (1)  19U/J83
223      u21 m               1n       un       VI        4..4                            5
V'S1-SSUSk        1,221     1,41 " 1.369    19,54,   16Gt6    1*334           44           -2     -         42.0
Iblerul t      64a              621    t.oo"      1,10    1,453    1,605         4.6 *.3                       50.
10M Le.            10       48        41                 so 5    .5         64             4.4             too
-               -      -          -                                 _    _
WAL                *,61 2   4.5,4    2*,So      2,955    3,304    3.,14        LS            5.4            100.o
La co -a ea  ?aot I ton * 43.3?tI  of na"twal g.-                                 -
- 6.922 bog ton. of ptwoIetm  ptoduto
.it5 y      of. tost.
V iOW two of *leettutto.                             *
O*t fw 1§w9181 _t v*  *e  <*sttzd tl>
imemm   8aogl"ad.'  t01 Ot"  Cae Ctpctgttoo.
* toavos  UnaSa4  i.s.o Ooolt  Uet4                                    ' 
4~~~~~~~~~~ *
~~~~~~~4.                                     ..   .
.~~~~~~~~~~~ 
p~~~~~~~~~~~~~~



-22-
*Lable 2' 
2Rot.OM P7 IRYCT PRICE'S Ago rmPgRT PARITYf
(US$/bo.rel)      ..               
EX-Depot Pricev   Import Parity PriceD_  Ex-Refinery Price.La
*Chittagon        cOi.f. Chittagong            Chittagong
PFemium Casoline         107.85                 40.77                    98.26
egular Gasonle            95.39                 36.S1                    86.27
Jet Fuel                  59.97                 35.35                    57.35
Roasne                    46.83                 35.35                    43.82
Automotive
Diesel Oil              46.51                 33.55                   42.80
Fuel Oil                  35.04                                          32.42
La Effective from March 1933.
'July 1983 f.o.b. Sigapore prices plus freighLb to Chittagong (US$1.251bbl-
for clean products and lSS1l.50/bbl for dirty prodtects).
notet Exchange rat, July 1983 Tc 24.50 - USU1.00.
I.
.4~ ~~~ ~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~



- 23 _
Table 3
-Paetoleum  Product Price  ,Treds, 1981-83
(i  Taka per' gallou)
Otv,.Goliu  (usia              4.34       54.1       43.5,      09.30      46.1      . 7.
Uet.m C&SOIL. (on)             44.27      5,0.2                  43.50      "4.        A.Ss
in foul (J-1                    04        2          40.31       42.0       40.1?     '42.02
Ruse... (510   21.G9        .03      4013        52.2     3.1 30U     *2.03
Mt...ftf* ive 24     @4 (130   26.9       23.63      50460       3261       3046       52.
hot0-1a (no, ("U1)            .12.                   22.1        S4.s4      slt        2*.54
Iro  a,            ,4                     54.50      50.00el  54.26&        95.00     105.40
-   a  to. syiee (12.5 Xg ow.
^ Wish i(f.os g.. Luluss U, 182, pe* ws t9U,4 ?4 It n IqUn4st.
.sL 3t-  sFae Rte Soplebt 191 r 2r      5 MIS Xts.oo.
liM. a, Ia CuitL.4.q Za-"al   A Chtae  t-Cew.
4  .                            ~  ~  ~~~~~~~~~~~~~~~~~~~~~~~~. .4
S~~~~~~~~~~~~~~~~~~~~~~~~~
!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~



_ 24 -
Table 4
tltural Gas Tariffs. 1981-83
(ntaka),
Ja*  , 1981   Julylt, 1982   Joe 30, 1983
Vith Wofect Iron                       Salk ftboto   Sul  Othocs  bSlk  Osacns
Cost of CSIxc (3x-field)               7.53   15.48   9.50  18.00   10.00  22.65
(IncludiLg excise duty)               ($4.00) 14.00) (9.00) (17.50)  (9.50) (21.65)
tad Isoro PriceItIC?         
(luoasive of exci. 4uty)
1tal Custpmps:*
J...:                               J9.0           10.50          -2.50
lailL:ew                               40    .    10.50             1.50
zu.szAgtt          .a                                        £1.at 00        36.00
euIaI                         ,  .       6s00          31.00           3.0
Notated                                   20.00          27.00           34.00
VitetedU,oths
Cok.w-one buamr                          23500           35.00           45.00
Ceokug-igo bugnure                       .45.00          65.00           80.00
dl4ltolat bugert (each)                   16.00          2.00            34.00
@i  (each)                                30.00          56.00           74.00
Additimol ove (Uch)                       19.00          29.00           37.00
crill (each)                              3.*40          58.00           74.00
Additionl grill (eack)         .          19.00          25.00           37.00
Water beater up to 20
pllts. (each)                           16.00   .     17.00           247.00
Water heoter above 20            I
gtlon. (each)                  |        9.00          144.00          184.00
Ityer (eoah)                             112.00         175.00          220.00
serizeracor (each)                        93.00         117.00          147.00
G light-Sarden/oxteral 
a" Ceach)                               20.00          27.0            34.00
d. litght-uide the
-      toes ace (zeah)                          10.00          14.00           17.00
ltmiu  CbariaselKoas:               i 
Dometic (emeterad)                          20.00          27.00           34.00
Coie Pal                                   2 40.00        15.00           180.00
*   5.tce:  Petrobansla



- 25 -
Table 5:  Bangladesh BPDR Electricity Tariff Structure
(March 1984)
Consumer Group                  Minimum Charxe                    Unit Rates 5/
LOW AND MEDIUM VOLTAGE
K   (A) Donestic S                      -                     (1)  Monthly consumption
- (A)  -     wp to 250 units          60 paisa/Xh
(ii)  Monthly consumption
250 to 400 units         85 paisasI/h
) 9                                     (iii)  Monthly consumption
over 400 units         225 paisa/fth
(8)  Irrigatlun Pumping         Actual CharEes:
Tk   250 per HP/year                                       100 paisa/KWh
Tk 1,000 (single phase)
Tk 3,000 (triple phase)
(C)  Industrial                                        7
(up to 50 Kw)                                            (i)  Without time-of-day
meter                   170 paisa/GIb
(ii) With time-of-day
mater
Off-peak hours        120 paisa/fth
Peak hours           400 paisi/XGh
(D) Ceremonial/Temporary        Tk   200 (single phase)                                    400 paisa/KWb
Purposes                   Tk 1,000 (triple phase)
(B) Coumercial                  Tk 30 to Tk 500 per           (i)  Monthly consumption
month depending on                 up to 100 units         18S paisa/XWh
contracted load              (ii)  Monthly consumption
over 100 units    -   250 paisaaKvh
111GB TENSION BULK
(1)  Consumers above 50 KW      Tk 3,500                      (i)  Without time-of-day
(other than jute mills)                                       meter                   170 paisa/RWh
(il) With time-of-day
meter ,
Off-peak hours        100 palsa/KVAN
Peak hours           325 paisa/KVAH
(a)  Jute Mills above 50 KW     Tk 3,500                                                   145 paisa/Dhb
EXTRA HIGH VOLTAGE
(H)  5 1VA or above (other      Tk 65 per KW                  (1)  Without time-of-day
than REB)                  per month                          meter                  -,1S5 paisa/KVAH
(ii) With time-of-day
meter
Off-peak hours        90 paisa/KVAR
Peak hours           300 paisa/KVAH
(1)   I/Paliibidynt             Tk 50 per 1N
Sanity                     per month                                                   78 paisa/Kth
3/   In addition, Government Electricity Duty of S paisa/RWh applies.
/   for hospitals, educational and charitable institutions, and religious establishments, the unit rate
it  70 paisa/KWh for monthly consumption up to 1,000 units and 200 paisa/KIh for monthly consumption
over 1,000 units, with a minimum charge of Tk 15 for siugle phase and Tk 90 for triple phase.
*100 palsa.  Tk l    ;--
Source:   DPDB.



- 26 -
Table 6:  Second Five-Year Plan - Energy Investment Plan
(in 1980 Tk million)
Electric Power     Oil and Gas    Renewable/Rural Energy
1980-82           4,430.3            2,222.9                   -                        4
1982/83           2*206.2            1,838.5                   -
1983/84           3,574.6            2,926.5                  6.4
1984/85           4,148.9            1,922.1                  8.5
Total            14,360.0            6,145.1                 14.9
Source: Bangladesh, Second Five-Year Plan, 1980-85, Ministry of Finance
and Planning.



Energy Sector Management Assistance Programme
Activities Completed
Date Completed
Energy Assessment Status Report
Papua New Guinea                                         July, 1983
Mauritius                                                October, 1983
Sri Lanka                                                January, 1984
Malawi                                                   January, 1984
Burundi                                                  February, 1984
Project Formulation and Justification
Panama      Power Loss Reduction Study                   June, 1983
Zimbabwe    Power Loss Reduction Study                   June, 1983
Sri Lanka   Power Loss Reduction Study                   July, 1983
Malawi      Technical Assistance to Improve
the Efficiency of Fuelwood
Use in Tobacco Industry                   November, 1983
Kenya       Power Loss Reduction Study                   March, 1984
Institutional and Policy Support
Sudan       Management Assistance to the
Ministry of Energy & Mining               May, 1983
Burundi     fetroleum Supply Management Study            December, 1983