The present government has become more aggressive than its earlier tenure in signing finalizing implementing big projects in energy and power sector, in construction of transport and communication. No discussion in the parliament, no public consultation, no indication to consider consequences, no importance given to criticism or independent expert opinion on these projects, expensive, risky and sometimes clearly against national interest. Who are taking decisions then? How these are being selected? And why such hurry?
John Perkins in his Confessions of an Economic Hit Men (2006), first defined the term economic hit men (EHM). According to him, they “are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the US Agency for International Development (USAID), and other foreign “aid” organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources. Their tools include fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization.”
Therefore, it is no wonder that the global companies spend more on advertisement or PR activities, lobbyists or ‘economic hit men’ than they spend on research and development! EHMs bring more corporate success than research!
In Bangladesh, it would not be very difficult to discover EHMs in ministries and different high level meetings and late night parties with decisive policymakers. A lot of consultancy reports, feasibility studies have been piled up in ministries to justify predetermined projects. Corruption, commission and company men determine the course of actions of many policy makers, made ‘no’ to ‘yes’ and disasters are masked as development. Eventually, those manipulated projects appear as ‘development’ projects in budget document and included in the government’s priority list. Costs of public projects go up to cover the commissions, bribe and PR expenditure.
If these are not the cases, how can one justify the project to destroy Sundarbans, project to kill rivers and wetlands, project to evict millions of women and men, project to increase national indebtedness, project to increase energy vulnerability, project to marginalise or degrade national capabilities, project to make education and health care as expensive commodities?
Compensation of US$ 5 billion from Chevron and Niko still unrelaized
It has been learnt from newspaper reports and other sources that International Oil Companies (IOC) started PR activities to have more onshore blocks for gas exploration in Bangladesh, which had been kept for national agency earlier. It seems that they have received some green signal from the government.
What has been our experience so far, with the old onshore PSC deals? Facts and figures do not match with the propaganda. Some facts are as follows:
- Privatization and bringing in IOCs in energy sector have increased public expenditure instead of ‘reducing drainage of public resources’ as claimed by the World Bank and company men. For example, at least one 500 MW power plant could be built every year by the money spent as subsidy for purchasing gas from the IOCs. It is increasing as their share is growing.
- When Bapex-Petrobangla spends Tk. 1 billion to drill a well, IOCs usually do it by costing 2 to 6 times. This contradicts the argument usually given that the IOCs are more efficient and would reduce the cost of production.
- We now purchase gas from national companies at tk 25 per thousand cft (MMCF); on the other hand we are purchasing the same at the price (in foreign currency) 8 to 10 times more from the IOCs in onshore blocks. Now price is growing further. Recent deals in offshore make this 20 times more.
- Governments have been periodically increasing gas and electricity price to reduce subsidy caused by increasing IOC share. Rising cost of production and cost of living an obvious outcome.
- Bangladesh lost 550 bcf gas due to blow-out in Magurchhara (14 June 1997) and Tengratila (January and June 2005). This amount of gas equals to gas used for power generation for more than 2 years for whole of Bangladesh. These two blow out hit hard on the ‘efficiency of IOC’ myth.
- But compensation due from the US Company Chevron and Canadian company NIKO for these disasters are still unrealized. The import price of the gas lost in Magurchara and Tengratila amounts to more than US$5 billion, which is nearly 8 times of average yearly budget allocation for energy sector. No governments since 1997 have taken any step to realize the compensation. On the contrary, reports reveal their opposite role. It is also worth mentioning that the World Bank, ADB or other IFIs who used to be very vocal about everything, have remained silent for long about this compensation issue.
Therefore all relevant facts show that, by leasing out most of the resource — rich gas onshore blocks to MNCs, Bangladesh becomes a hostage. Cost of production of gas and electricity, therefore, fiscal burden has been increased in a linear rate. Instead of saving public money, drainage and corruption increased manifold. In disguise of development increasing burden piled up over the country and the people!
PSCs for offshore blocks
Deals on offshore blocks are going to multiply the already existing burden. On February 17 2014, two PSCs were signed with Indian public sector oil and gas company ONGC Videsh under revised PSC-2012. ONGC was awarded two shallow water blocks SS-04 and SS-09 in the Bay of Bengal. According to the agreement, the Indian company will spend $103.2 million during the initial exploration of the two blocks in 8 years. These two blocks cover nearly 14,000 square kilometers in the Bangladesh Sea.
Before that Petrobangla signed production sharing contracts with the US Company ConocoPhillips on June 16, 2011, for two deepwater gas blocks — DS-10 and DS-11 — in the Bay of Bengal under PSC-2008. This contract gave ConocoPhillips the right to explore oil and gas from two deep-sea blocks in the Bay of Bengal with investment of US$111 million in 5 years. The two blocks cover an area of 5,158 square kilometers and have a water depth of 1,000-1,500 meters.
There had been strong public protest against the deal around the country, including two general strikes in 2009 and 2011, before and after signing the above contract. But the government continued with this.
ConocoPhillips had expressed later its willingness to expand its gas exploration activities in Bangladesh and ‘requested’ the government to give it preference in the following round of international bidding for offshore gas blocks.
In PSC-2012, export provision of the earlier model was dropped, most likely to prevent further public outrage. But some cunning revision was made to ensure better deal for the companies, and worse for the country. In fact, this was revised in order to fulfill demands forwarded by the foreign oil companies. The revised document (PSC 2012)
- raises the price of gas almost 70 per cent to $6.50 per unit (1,000 cft);
- Provision of yearly increase;
- For cost recovery phase, the company’s share is raised to 70% of oil-gas from 55% in PSC-2008;
- Petrobangla takes the burden to pay 37.5% in corporate tax on behalf of IOCs;
- The IOCs are allowed to sell its share of gas to a third party.
In sum, the latest deal makes gas and oil much costlier for Bangladesh than before. After adding all costs and taxes, it may become costlier than even imported gas. It is true that export option is not kept in PSC 2012, but export prohibition is not there either. Therefore if gas is discovered in more than one block, and if it goes beyond 7 tcf, it will be surplus for the country at the specific time. There will be no choice but to export natural gas/resources. That would certainly bring quick profit for the companies but would make Bangladesh more vulnerable for energy security. Is it the reason why the government has kept the much demanded ‘prohibition of export of mineral resources bill’ in cold storage of the parliament? Is it the reason why the government silently endorsed the export option of gas resources in the national export policy? Who actually takes these decisions?
Things are not limited in oil gas deals; also big power projects like Ruppur nuclear power plant without EIA, coal based power plants by destroying Sundarbans, river, wet land are going to create irreparable damages for the country. When corruption and commission decide the course and nature of the deals, when corporate interests dominate the ‘development’ agenda, when international ‘development’ agencies and ministries turn into centre of corporate lobbyists then the country obviously experiences ‘resource curse phenomenon’. Because of the reign of local-global profiteers and grabbers, ‘development’ becomes disastrous for present and future generation. The government and the company men, in order to show these projects as TINA (there is no alternative), consistently work to block thinking and discussion on real alternatives. CCCs win.
Anu Muhammad is a teacher, economist, researcher and member secretary of Oil Gas Protection Committee.