Tri Nation Gas Pipeline: Untold Story

http://www.energybangla.com/index.php?mod=article&cat=SomethingtoSay&article=1517

Engr. Khondkar Abdus Saleque*
Sunday, 02.15.2009, 08:16pm (GMT)


Cross border energy trading is a well-practiced phenomenon. Countries of many regions of the world share their national resources – natural gas, oil and power through inter country pipelines or power transmission grid. These are now a days treated as tradable commodity in international trade. Canada–US Alliance pipeline, Mexico-US Pipeline, West European Gas and power grid, Bolivia - Brazil Pipeline. Trans Siberian Natural Gas Pipeline from Russia to western Europe, Transmission Pipeline from Netherlands to Belgium–France–Germany, Malaysia- Singapore Gas and Power lines, Malaysia – Indonesia pipeline. Myanmar- Thailand pipeline are some examples. But very intelligent people of SAARC region could not have any inter country or multination energy grid for variety of reasons ranging from lack of political commitment to lack of mutual trust and respect. People talk about Iran –Pakistan –India pipeline, Turkmenistan –Afghanistan-Pakistan pipeline, Myanmar-Bangladesh-India pipeline. But none of this has taken shape till now.

Let us talk about Myanmar-Bangladesh –India Tri-nation Gas Pipeline.

Background:

The growing energy needs of India prompted it to explore newer sources of supply. It looked at various options


Controversial agreement with USA to setup several nuclear power plants.


Long Distance Gas transmission Pipeline from Iran to India through Pakistan (IPI)


Gas Pipeline from Qatar to India


Gas Pipeline from Turkmenistan- Afghanistan- Pakistan- India


Gas Pipeline from Myanmar to India across Bangladesh

Considering the huge demand of energy to fuel massive GDP growth about 8% for a population of more than billion India requires access to massive and manifold energy resource. Of the above options only the nuclear power initiative partnering USA achieved some milestones. The other options are almost abandoned. It is highly unlikely that any pipeline to India through Pakistan territory will take off in near future. These make the last one the gas pipeline from Myanmar to India across Bangladesh a stronger possibility as Bangladesh also is suffering from serious gas crisis and in the recent past approached Myanmar to explore possibility of pipeline import of gas for Chittagong region. Bangladesh even expressed eagerness to set up a fertilizer plant in Chittagong utilizing Myanmar gas and export fertilizer to Myanmar.



Bangladesh, India and Myanmar are locked in dispute over Maritime boundary disputes and all of them are approaching UN for resolving the disputes. In recent times there had been few rounds of bilateral discussions without any meaningful outcome. Countries are preparing their individual cases to present to UN. In this scenario it is considered pertinent to have a fresh look at the prospect of Tri Nation pipeline. The author was one of the two-member Bangladesh Technical delegations to negotiate the various aspects of pipeline in a meeting held in Yangoon in February 2005.

The tri-nation pipeline project was initiated by a Bangladeshi private company, the Mohona Holdings Limited way back in 1997. The pipeline was to run through Arakan State in Myanmar and the Indian states of Mizoram and Tripura before crossing Bangladesh to reach India's West Bengal capital Kolkata. The governments of India and Myanmar approved the Mohona's proposal for the cross-border pipeline. But Bangladesh did not approve it. The laying of this 900-km tri-nation pipeline was agreed to in principle by the energy ministers of the three countries in Yangon in January 2005. A tri-nation joint declaration (unsigned) was let out to media which had provision to discuss the various techno commercial aspects of the pipeline towards formulation of a draft MOU by a technical committee. It was also decided that two members of each country would meet to discuss, deliberate the issues and prepare draft MOU.

If you read Indian side of the story it will give you impression that it is Bangladesh which created impediment to make this project happen. For the sake of clarity let me quote from an Indian media report.

"In this quest of India, Myanmar has now emerged as an important partner. Huge reserves of oil and gas have been found in that country. Most importantly, India has a stake in these findings and wants to bring these resources home in a cost-effective manner. With this objective, it has been now pursuing a tri-nation pipeline project for nearly a decade. This issue has also become important as all the leading consumers of energy in world are trying to secure their supplies and the struggle to acquire stakes in overseas energy resources is intensifying."

Before we discuss the chronological development of technical committee negotiation let us try to see what the project is.

The Shwe Project

In August 2000, Daewoo International signed a production sharing contract with the Myanmar Oil and Gas Enterprise (MOGE), a wholly owned subsidiary of the Burmese military government.

In early 2004, Daewoo announced that they had struck a "world class commercial scale gas deposit" in the A-1 block. A month later, Daewoo acquired the neighbouring A-3 block and since then a series of well have proven reserves large enough to develop.

The blocks were evaluated by a US firm, which determined the available reserves at 5.4 - 9.1 trillion cubic feet (tcf). Daewoo International has since stated that "4.5 - 7.7 tfc of gas may be commercialized from the reserves."(4)

Using the estimated sales price of US$ 4.41 per million BTU, the sale of 9.1 tfc would be worth US$ 40.1 billion.

Corporate stake holders in the Shwe fields:

Particular
Block A-1 and A-3

Daewoo International, South Korea
51%

Oil and Natural Gas Corporation, ONGC Videsh, India
17.5%

Myanman Oil and Gas Enterprise, Burma
15%

Korean Gas Corporation, KOGAS, South Korea
8.5%

Gas Authority of India Limited, GAIL, India
8.5%


Corporations deal with The Myanmar Oil and Gas Enterprise (MOGE) which is 100% owned and run by the military regime. Details of oil and gas contracts in military ruled Burma are well-guarded secrets.

Daewoo International purchased exploration rights through a Production Sharing Contract (PSC) with the military MOGE. In addition to the PSC fees, a standard signing bonus of undisclosed was also provided

In June 2008, the China National Petroleum Corporation (CNPC) signed an MOU with the Burma regime to purchase the gas and build a 1,800 Km pipeline from Kyauk Phyu in Arakan to Kunming, China. An estimated 990-Km of this pipeline would traverse Burmese soil. CNPC's subsidiary Petro China has gained the distribution rights of the gas in Yunnan province of China.

The Experience of the Author in Cross Border Energy Trading:

The author represented a high level Bangladesh delegation to USA and Canada in 2003 on a USAID sponsored trip to learn about Cross Border Energy Trading, Energy Regulation, and Large Gas Infrastructure project financing modalities. The team was led by the then Chairman Petrobangla Syed Sajedul Karim, DG Finance Ministry Dr. Saleh Ahmed and Joint Secretary, Ministry of Law & Parliamentary Affairs Mr.Shahidul Huq were other members of the team. Mr.Bruce McMullen, Senior Energy Specialist USAID Dhaka mission also accompanied us. During this trip we have extensive interactions with BERC, USDOE, USAID, World Bank, USEXIM Bank, IFC, Duke Energy, Williams Gas transmission Company one leading law a firm and one energy Accountant firm in Washington DC.USA. We also had meeting with NEB, Bank of Canada, CERI, Nova Gas and Alberta Energy Minstry in Calgary. We also visited Compressor stations and SCADA Control centre at Washington as well as Calgary. Later in several instalments the author of this wrote about the lessons learnt in the Energy & Power magazine as Bangladesh Government at that time appeared not at all interested to utilize our knowledge.

Tri Nation Pipeline Negotiation:

However possibly my earlier experience prompted Government of Khaleda Zia to nominate me to represent Bangladesh in the technical committee meeting. Originally present Director (PSC) Petrobangla Major (Retd) Muktadir Ali and MD GTCL Engr. Manjur Morshed Talukdar were nominated as Bangladesh representatives. I was asked to prepare a position paper for Bangladesh which was meticulously done within the shortest possible time. But at the very last minute composition of Bangladesh team was changed. Chairman Petrobangla S.R. Osmany and myself were nominated. I was not much willing to go as I started sensing at that time that a vested energy mafia group who always considered me as a stumbling block on their way for fee scale looting and grabbing in Gas sector was conspiring with Mr.Khondkar Shaidul Alam, Secretary to PM and Hawa bhaban to knock me out of the sector. Still call of the nation made me take up the challenge of confronting a hostile Indian delegation in the meeting. Believe me no official guidance was given to us either by minister or the secretary .So Bangladesh strategy was virtually unknown to us when we landed in Yangon via Bangkok. Mr. KB Ahmed and Major General (Rtd) Ruhul Alam Chowdhury of Mohona Holdings also travelled to Yangon in the same flight and were put up in the same hotel. The author from own knowledge prepared a Bangladesh position paper after getting some project details from KB Ahmed.

In the evening of the night preceding the commencement of the meeting concerned Myanmar General met us in the hotel and we informally discussed about some salient objectives of the meeting. Next morning after reaching the meeting we found India had brought a large team of 9 members – two senior Government officials, one lady from Indian High Commission, several senior executives of GAIL & ONGC. Our team leader logically objected as this was a clear violation of the agreement reached in the mistrial meeting of three countries which was the basis of the subject meeting. After some arguments it was decided that basically two official members would participate in the discussion. However representatives of Indian and Bangladesh High Commission may also form part of the delegation for future constitution of agreement reached and follow up actions. To tell you frankly the author was ready to take on entire Indian delegation as we were confident as far as technical matters of cross border Transmission pipeline issues were concerned we were better equipped to handle any situation.

Myanmar Delegation Chief who was also in the Chair opened discussion giving background of the project and informing the status of discussion and development. Then our team leader Chairman PB made his opening remarks. He then introduced me and asked me to present Bangladesh paper. The author made a multimedia presentation of the proposed pipeline. The concept of the pipeline its objective was discussed in brief. Then from extensive field experience of constructing cross county high pressure Pipelines in the region the author clearly sated that constructing such an important pipeline traversing through clay hills of Naga land, Mizoram, Tripura will not be feasible in the context of technical and safety issues. Clay hills once disturbed can not be properly reinstated or retaliated optimally and the pipeline becomes exposed after rain causing maintenance nightmare. Moreover the pipeline in the trouble-toned states may become easy target of Indian and Myanmar rebels. Initially Indian delegates did not agree, But the author presented personal experience of operational problems of Chittagong ring main and North –South Pipeline. Then author made an alternate proposal of routing the pipeline from Shwe gas field to Tekhnaf then proceed to Chittagong, follow Bakhrabad Chittagong and Ashuhanj- Bakhrabad, Brahmaputra Basin Pipeline, Cross Jamuna and Padma River and traverse to Kolkata entering through Darshana or Beanpole. A spur line from Tripura Gas fields could meet the pipeline at Ashuganj. A comparative analyses of costs was also produced. Indian delegation readily accepted the concept. The author then proposed that the pipeline should be open access nature with provision for injection and siphoning of gas by Bangladesh and India at designated intake and off take points along the line. These were well taken by the Indian delegation.

Indian delegation then made its presentation. General Manager (Operation) GAIL presented their case. They talked about funding for detail feasibility study, negotiation of tariff, toll, construction of the pipeline, custody transfer of gas. Indian team suggested that GAIL or ONGC might provide the initial fund. But we objected. We thought that an international consortium with representation of third party countries and financial institution should be owner and operator of the pipeline and the Bangladesh section will be operated by GTCL on behalf of the owner for a given wheeling charge. We also said that Bangladesh will be charging transit fee for every MMCFD of gas transported across to the owner of the pipeline who will but y gas from Myanmar based producer and sale to end user. Bangladesh and India will also provide wheeling charge to the owner of the pipeline for their gas to be transported for their own use. All our points were accepted after through discussions.

With technical issues discussed and agreed the post lunch session was marked for discussing other issues. In the morning while making country presentation the author briefly touched upon few issues which we considered to be resolved along side of developing the project.

These were:


India to allow Bangladesh a corridor to import Hydro electricity from Nepal and Bhutan.


India must ensure unhindered access of Nepalese and Bhutanese merchandise to travel through chicken neck to Bangladesh.


India must remove tariff and non-tariff barriers on Bangladeshi export commodities in efforts to reduce huge trade deficits.
Indian delegation reacted very sharply. Especially Monica Jain, the lady from Indian High Commission in Yangoon very strongly protested discussion of bilateral issues in a trilateral meeting. In the post lunch session our team leader tried to pacify the situation stating that Bangladesh will carry out feasibility of power import from Nepal and Bhutan. India will be obviously in the picture as the present Hydro power Generation in both the Countries are funded by India and they have long term power purchase agreement. So in the good spirit India should accept the importance of Bangladeshi point.

Regarding trade with Nepal and Bhutan our position was the Present trade route does not permit any Nepalese or Bhutanese or Bangladeshi trucks to travel through chicken neck. The commodities need to transship several times. These add costs, time and agony. Allowing trucks of Nepal, Bhutan and Bangladesh through Indian Territory will cost nothing to India.

Indian goods enter Bangladesh through formal and informal routes but export of Bangladeshi commodities loose competitive edge as various non-tariffs and tariff barriers are imposed. India is huge economy. Removal of tariff barriers will only help 7 sisters around Bangladesh to get more and more Bangladeshi goods at cheaper price. This will help reduce trade deficit.

Indians made their own interpretations and strongly opposed all Bangladeshi points. The meeting prorogued at this stage on the first day for continuation on the following day, which was incidentally Friday.

In the evening we got back to hotel and tried desperately to reach Bangladesh State Minster of Energy & Mineral Resources Mr A.K.M Mushrraf Hussein. It is extremely difficult to reach outside world from Junta dominated Myanmar. After great difficulty we reached the minister. We gave him a run down of day’s progress. He categorically advised not to agree on anything short of what we put across. Chairman PB asked me to prepare draft minutes, which I did.

Meeting Day Two:

The second day was incidentally Friday our Jumma prayer day. Chairman of the Meeting initiated discussion expecting that Bangladesh and India would try to bridge their difference of opinion facilitating meeting of minds of all parties by the end of the day on an agreed draft MOU. Bangladesh team leader again reiterated Bangladesh position. Getting permission from the team leader the author sated

The proposed pipeline will help Myanmar monitor its gas or in other worlds Korean, Indian and Myanmar companies will sell Gas to India. Part of India’s Gas requirement will be fulfilled. Bangladeshi farmers will have to sacrifice their land to comfort India and Myanmar. The issues Bangladesh put across to be considered concurrently will not any additional burden to India. The present attitude to India may not allow Bangladesh to proceed with this project at this stage unfortunately. Allowing corridor for a pipeline to India can not be a tri lateral issue .It is definitely a bilateral matter. On the other hand allowing unhindered trade route for Nepal and Bhutan through Indian Chicken neck is also not bilateral. If India do not consider Bangladeshi points raised as valid then the pipeline may never find route through Bangladesh.

This appeared to melt the ice. Ms Monica Jain Indian Lady from Indian High Commission then asked how these points could be articulated. Our draft MOU was ready. We proposed to read out which Myanmar Minister allowed. Our issues was articulated this way

The pipeline project to proceed will require the following bilateral; issues between India and Bangladesh to resolve through mutual discussion within an agreed timeframe.


Bangladesh will explore the possibility to import Hydroelectricity from Nepal and Bhutan through Indian Territory.


India will allow unhindered trading among Nepal, Bhutan and Bangladesh through Indian Territory.


India will take appropriate action to reduce trade gap between India and Bangladesh.
About an hour was lost disputing the word-agreed time frame. We had to leave the meeting for attending Jumma prayer keeping the draft MOU pending. We knew that Indian delegation was due to fly back late afternoon. So the ball was pushed on their court. After lunch team leader of three countries signed the draft MOU.

On return to Bangladesh the author wrote extensive report of the visit which Chairman Petrobangla submitted to EMRD along with the draft MOU. The complacent Bangladeshi short sighted energy management at that time did not realise why the author planned to route the pipeline through Technaf, Coxsbazar, and Chittagong. As Director (Operation) GTCL the author knew that Shangu was showing ominous sign of depletion .The Tri-nation pipeline may become a d source of gas security to Chittagong region.

Bangladeshi Energy Sector Management appeared reluctant. Indian bureaucracy was also complacent. They thought that they could put pressure on Bangladesh with a threat to bypass Bangladesh. The author lost interest and became extremely occupied in operation of National gas grid and policing national condensate Pipeline to protect it from deliberate pilferage of a politically blessed Mafia group. Could feel a conspiracy was being hatched to knock me out. Still kept working with full commitment and assist GTCL project managers in implementing few critical projects on top of assigned responsibilities. In May 2005 was invited to attend an inter ministerial meeting to discuss the Tri Nation Pipeline issues. But that meeting was suspended. After that in August 2005 Government terminated my contract on flimsy ground. Since 2005 till 2009 nothing positive has happened which could progress the tri-nation pipeline?

The typical big brotherly attitude of take all and give nothing can be assessed from the following media report. This report appeared sometime in 2005 .The author did not consider it useful to respond to this earlier as Bangladesh Government at that time was really very reluctant to let India build the pipeline. But in four years things have changed. Bangladesh itself is in deficit. The present government of Bangladesh is also pro active. It is now in better position to bargain with India.

Quote,

"Dhaka now wants India to first address issues like reduction of trade imbalance, providing a corridor for Nepalese goods to Bangladeshi ports and access to hydropower from Bhutan before moving ahead on the pipeline. India has been opposed to making bilateral issues part of a trilateral agreement. It is difficult for India to accept any of these demands, as it would mean seriously compromising with its strategic interests. Allowing Bangladesh a corridor to trade with Nepal is just not possible in present situation, as it would worsen the problem of illegal immigration and insurgency. The vulnerability of the region to foreign agencies like ISI and DGFI would increase. Allowing this facility to Bangladesh would seriously threaten the internal security of India.

Bangladesh claims that its adverse trade balance with India is due to various tariff and non-tariff barriers. But, the truth lies elsewhere. Bangladesh has a negative trade balance with most of its trading partners. This is due to a very small export basket of the country. Moreover, its infrastructure is also underdeveloped. Instead of taking steps to improve its economy, Bangladesh always expects unreasonable concessions from other countries. Recently, it urged the US to allow duty free access to Bangladeshi products. The US has also advised Bangladesh to take steps to improve its economy and infrastructure like facilities at Chittagong port. Bangladesh also wants India to allow it to access hydropower from Bhutan through Indian territory.

India on the other hand thinks that pipeline should be considered as a standalone project, and Bangladesh is adequately compensated by the $125m that will be getting as transit fee. At the same time, Bangladesh would be able to transfer gas supplies from the east to the western region of the country. Besides, Bangladesh will also benefit as the construction of pipeline would create new jobs in the country.

New Delhi is opposed to new conditions, which are completely unrelated to project. Indias Ministry of External Affairs (MEA) has noted that "under no circumstances should India accept any of the (Bangladesh's) conditions... That will encourage Dhaka to tie up unrelated conditionalities in future negotiations on other issues, as it is always prone to do. India will always consider bonafide demands from Bangladesh but they cannot start unfair bargaining."

The new conditions imposed by Bangladesh have made the future of gas pipeline completely uncertain. But a gas pipeline from Myanmar is in India’s economic and strategic interests. The economic cooperation between India and Myanmar has brought both these countries close to each other. India also needs the cooperation of Myanmar to successfully handle the insurgency problem in the northeast. A greater Indian interaction with Myanmar has reduced the influence of other powers in that country. Most importantly, Myanmar could act as a gateway for India to ASEAN countries.

The growing relationship with India is also useful for Myanmar. As the country is facing economic sanction from certain quarters, it needs economic partners. And its most easily available exportable product with great demand is the newfound gas and oil resources. Myanmar quickly wants to monetize this. India's state-run Oil and Natural Gas Corporation has a 20 per cent stake in Myanmar's A-1 and A-3 Blocks, while GAIL has a 10 per cent stake in the two sites. The proposed pipeline was one of several options India has been considering to bring gas reserves from the Shwe Field's Block A-1 site in Myanmar.

India is now at a juncture where it has to take a decision on how it wants to transport the gas purchased from Myanmar. It is possible either through a gas pipeline or through ship in LNG form. The gas pipeline is the most cost-effective way and India has been trying for this. The shortest and convenient route of this gas pipeline passes through Bangladesh. But unfortunately, Bangladesh wants to take unreasonable advantage for allowing the gas pipeline pass through its territory.

It has forced India and Myanmar to rethink about the route of the gas pipeline. It has also forced them to explore other possible alternatives to bring gas to India. To sort out some of these problems India and Myanmar decided to hold a meeting between their energy ministers in New Delhi on July 6. Both sides have now started considering a proposal to redesign the gas pipeline so that it runs entirely through Indian Territory skipping Bangladesh altogether. According to the new plan, the pipeline coming from Myanmar will run through Mizoram and Assam before culminating in West Bengal. Its revised length would be 1400 km. After his meeting with Brigadier General Lun Thi, Minister of Energy, Myanmar, Mani Shankar Aiyar, Minister for Petroleum and Natural Gas, said that the techno-commercial group would examine the possibility of laying the pipeline bypassing Bangladesh and importing natural gas through ships in its liquefied (LNG) or compressed (CNG) form.

If the pipeline is constructed through Bangladesh, its length would be 900 km long and cost around Rs 4,500 crore. On the other hand, if it is laid through the Northeast bypassing Bangladesh, the pipeline will have to cover an additional 500 km. The cost would also go up by about Rs 2,500 crore.

Although laying the pipeline through Bangladesh will be cheaper, bringing it through the Indian territory also has its merit. Part of this additional cost will be offset by the transit fee that Bangladesh will charge for allowing the pipeline to pass through its territory.

If the pipeline enters India directly from Myanmar through the northeastern states, it would be a boon, as the gas produced in these states cannot be evacuated to the more lucrative markets at present. The region as well as oil exploration companies would gain from higher prices, if the gas can be evacuated. A pipeline is like a road, it benefits the entire territory that it passes through.

Since the gas from Myanmar is expected to flow over a period of 15 to 20 years or even more, the security cover of laying the pipeline entirely through the Indian Territory could well be worth the additional cost.

However, if the pipeline is laid through Bangladesh, it will be an example of regional cooperation. The success of this project might encourage the partner countries to contemplate cooperation in other areas. It may also act as a confidence-building measure between India and Bangladesh as their relationship has deteriorated in recent times. But, India should not loose too much time either in bringing Bangladesh onboard. It should make very clear to Bangladesh that it would not entertain bilateral matters when a tri-nation project is being considered for the benefit of all the involved parties.

Bangladeshs dealing with India regarding gas and its transportation through its territory has never been entirely above board. Whenever, India showed its interest to buy gas from Bangladesh, it has not been very keen to sell. In fact, due to reluctance of Bangladesh to export gas many foreign companies left the country, as the domestic market is not fully developed. The export of gas to India would have also allowed the country to tackle the adverse balance of trade."

Unquote

Now the situation as it stands now is China is potential buyer of Myanmar Gas. But many humanitarian groups are also active in Myanmar Thailand border to stop the pipeline going from Myanmar to China. The Chinese economy is also in recessation.It may not be in apposition to buy Gas at higher price. Bangladesh gas situation is also in serious crisis. A very positive Bangladesh government has taken over. The so called largest democracy India should rather try to mend fences with Bangladesh and other SAARC neighbours for peaceful coexistence abandoning its take all and give nothing attitude. If India is worried about ISI and DGFI existence in their territory the countries of the region must be doubly worried about RAW activities. If India wants gas from Myanmar at all it should come with open mind and open negotiation with Bangladesh in good neighbourly attitude respecting its sovereign equality.

The author feels Gas from Myanmar can be available for India and Bangladesh only if the political government of India and Bangladesh can resolve many other bi lateral issues with good neighborly attitude. India has to realize that people of Bangladesh have several reasons to feel sour. They should try to realize why people of Bangladesh could not trust them as reliable friend. People both countries still have high respect for each other but they blame the power hungry politicians. Can head of the government of both countries can have a summit to settle several outstanding issues- Border disputes, maritime boundary disputes, trade imbalance, transit – transshipment issues and above all water sharing issues?

* Ex Director (Operation) GTCL