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Govt plans PSC for coal sector

Like the gas sector, the government is now planning to formulate a production sharing contract (PSC) for coal sector to boost up the coal extraction through joint venture initiative with the foreign companies.

The Energy and Mineral Resources Division (EMRD) have already asked its Hydrocarbon Unit to prepare a draft for the PSC for the coal extraction.

Md Harun-ur-Rashid, Director General of Hydrocarbon Unit told energynewsbd.com that they have recently organised a seminar to find out how the production sharing contract will be prepared.

He informed that EMRD Additional Secretary Muhammad Ahsanul Jabbar and experts at the seminar express their views about the PSC.

An expert opined that Petrobangla with its long experiences can go for ‘coal exploration and development’ through the PSC modality.

In this modality, the investor shall take the responsibility for technical and investment risk in the development of coal fields as his liability and enter into contract with the client to produce a defined amount of coal per year, he said.

The coal that will be produced will be shared between the client and the investor or contractor, added the expert.

The client will offer coal to the contractor as return on the contractor’s investment. The client will get his share of coal free and the contractor’s share of coal will be paid by the client, the expert said.

An official of Hydrocarbon Unit opined that under this arrangement, the contractor takes all the risks while the client gets the benefits of foreign investment at an upfront agreed terms and conditions. The contractor shall be given due return on his investment for exploration during mining operation.

The official said that a model coal PSC could be an attractive option for extracting coal and the contractor should be selected through competitive international bidding process.

He said that if Bangladesh could extract its coal with its own resources then that would have been better but as the resources for doing so is limited, that can’t be a feasible solution under the current circumstances.

This PSC is defined as a contract between a host government and petroleum company for the exploration and production of petroleum resources where the company`s costs are recovered from a percentage share of production and the balance is shared between the government and the company, he said.

Petrobangla through its companies is carrying out the exploration and development of gas, oil, coal and other minerals to meet the growing energy demand of the country along with the absolute control of Production Sharing Contract (PSC) with the IOCs on behalf of the government, he said.

In 2006, Petrobangla was given with the license to develop Dighipara coal field for development.

Coal mining is a high risk capital intensive industry. Considering the risk involved, Government may provide budgetary support in the form of equity or share capital to a public sector enterprise, experts said adding that the possibilities of getting financial assistance from multilateral funding agencies could also be explored.

M Tamim, a Professor of Petroleum and Mineral Resources Engineering of BUET told energynewsbd.com that PSC is rare in coal sector in other countries.

“But we can do that. We have to consider some facts though that the companies will be interested only if they get rational share”, he said.

“The rational share depends on royalty and tax which should be done in proper way,” he added.

 

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