ACTIVITY DATA SHEET

PROGRAM: Bangladesh
TITLE AND NUMBER: Improved Performance of the Energy Sector, 388-007
STATUS: Continuing
PLANNED FY 2001 OBLIGATION AND FUNDING SOURCE: $2,500, 000 DA
PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: $1,500,000 DA; $1,500,000 ESF
INITIAL OBLIGATION: FY 1996    ESTIMATED COMPLETION DATE: FY 2006

Summary: While the Bangladesh Government continues to pursue a number of significant reforms in the energy sector, encompassing both power and gas, implementation has been slower than hoped. The goals, however, of open market policies and increased private sector investment remain unchanged. Within this context, the focus for USAID program activities continues to be the efficient use of energy and a decrease in system loss, both of which can be achieved by enhancing institutional capacity and encouraging policies that promote competition and the use of natural gas. Attention is also being given to encouraging cooperation and eventual trade in clean energy between Bangladesh and other south Asian nations.

This objective aims to improve the performance and efficiency of the energy sector, thus enabling and promoting overall economic development. An important aspect of this work is the development and usage of a clean energy source (natural gas), thereby reducing overall greenhouse gas (GHG) emissions. USAID is working to increase the usage of clean fuel in commercial energy mix to meet overall energy supply need; increase per capita consumption of clean energy; and increase the number of rural population with access to electricity.

Key Results: The "unbundling" of the power sector is continuing; the FY 2000 target for transmission line transfer to the Power Grid Company of Bangladesh (PGCB) has been met. Similarly, the target for total rural electric connections, which is vital to economic growth in these areas, was slightly surpassed. Three 10 MW plants were constructed and will be commissioned and operating during FY 2001. This is significant in that it is strictly a commercial venture, with USAID playing a facilitating role only, and is indicative of Bangladesh's increasing openess to private investment in the power sector.

Bangladesh has been slow in reaching consensus on how its natural gas resources can best be used to benefit the country. These delays have discouraged further new investment in the natural gas and power sectors. To provide an objective analysis of the natural gas resources base, USAID promoted and funded a substantial joint Petrobangla/U.S. Geological Survey (USGS) study to assess Bangladesh's natural gas potential and funded or supported a variety of other seminars/ workshops focusing on the experience of other countries in developing and maximizing the use of their natural gas resources. USAID also financed a study analyzing the financial and technical feasibly of natural gas-generated power export to India and provided technical advice regarding proposed natural gas reform legislation through a Participating Agency Service Agreement (PASA) with the U.S. Department of Energy (DOE).

Performance and Prospects: In FY 2000, work continued in the rural power sector, which USAID has supported since 1977, and effectively began in the gas sector with the negotiation of a strategic objective agreement and the initiation of a range of studies and training activities in the power and gas sectors.

Also, activities continued to strengthen the capacity of the Rural Electrification Board (REB) and the rural power cooperatives to provide more reliable energy and better services to their rural customers through improved systems management and operation. USAID's efforts in building capacity to provide rural power through greater connections and increased power generation will stimulate economic activity in the rural areas.

With the discovery of significant gas fields, Bangladesh has the opportunity to use this resource to strengthen and expand its energy sector and to spur economic growth and development. Bangladesh currently produces about 270 billion cubic feet (BCF) of natural gas per year. A recently completed assessment study carried out jointly by USGS and Petrobangla estimates a mean of 32 trillion cubic feet (TCF) of undiscovered, technically recoverable gas resources. This study provides Bangladesh with further assurance that it can significantly expand gas-sector development and seriously consider gas export to spur economic growth and development. In FY 2001 USAID will begin implementing multi-year technical assistance and training programs for GOB natural gas and electric power entities. This policy-oriented assistance will improve GOB capacity to undertake and implement sound energy sector policy reform, including restructuring, unbundling and regulatory reform.

In 2001, activities will continue in educating the public and the media about energy issues and development implications. Key activities will include establishing a transparent energy information system; support for studies regarding the country's energy resources; economic analysis of the potential downstream use of energy resources; and seminars and workshops to disseminate the results of these studies to the GOB, press, labor force, and the private sector. USAID also plans to negotiate a new funding arrangement with the U.S. Department of Energy (DOE) to provide technical assistance from a variety of specialized USG agencies.

Possible Adjustments to Plans: While the pace of power-sector reform has picked up in the past year, it is unlikely that significant new energy reform will take place in either the power or natural gas sectors until after national elections, which will take place during 2001. It is likely that any new government, early in its term of office, will move ahead in energy sector reform and liberalization, including passage of the Power Sector and Natural Gas Reform Acts. These acts will permit establishment of an independent regulatory authority for the power and gas sector, and should provide investors and the various stakeholders with additional confidence in the GOB's willingness to reform. However, should significant reform efforts remain stalled, adjustments to this activity will be necessary.

Other Donor Programs: For years, multilateral donor agencies and many bilateral donors have funded various energy sector infrastructure projects. However, such capital funding has been shrinking in recent years. Like the U.S. Government, other donors are now focusing more on the capacity building and reform process, with increasing emphasis on the efficient and pragmatic use of the natural and human resources for sustainable economic growth. Donors' efforts are coordinated through periodic meetings of energy-sector donors and GOB officials. The Asian Development Bank (ADB) normally organizes and chairs these meetings.

Presently, the World Bank and the GOB are negotiating a loan of $100 million for rural electrification. ADB recently approved a loan of $300 million to upgrade distribution and transmission of power in Dhaka, conditioned on certain reform measures, and has several smaller assistance projects underway. Fourteen donors are currently funding electrical hardware supplies and other commodities for rural power infrastructure development. These donor activities complement USAID's program to improve the institutional capacity and enabling environment for energy sector reform and, hence, improve the performance of the energy sector.

Principal Contractors, Grantees, or Agencies: The National Rural Electric Cooperatives Association is implementing the Rural Power for Poverty Program. Through a USAID-financed Participating Agency Services Agreement with U.S. Department of Energy, a number of U.S. agencies are providing technical assistance and training to GOB entities.

FY 2002 Performance Table

Bangladesh: 388-007

Performance Measures:

Indicator Information:

U.S. Financing

(In thousands of dollars)

*9/30/99 unliquidated obligation comes from continuing activities folded under this new SO from a completed SO 388-002 and should not be treated as part of this SO's est. total cost.