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Cablegate: Simultaneous Water, Power and Gas Shortages Plague

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 DHAKA 001355

SIPDIS

E.O. 12958: N/A
TAGS: ECON SENV ENRG BTIO BG
SUBJECT: SIMULTANEOUS WATER, POWER AND GAS SHORTAGES PLAGUE
BANGLADESH


1. Summary: Inadequate utilities - gas, water and electricity
- routintely plague Bangladesh, but new shortages and
delivery problems have made the problem particularly acute
now. While the shortages should ease in the coming months,
solutions to the chronic problems have been slow to develop
and in some cases may bring additional problems. Failure to
address these and other infrastructure needs undermines
growth and development. End Summary

2. In recent weeks, Bangladesh has experienced a shortage of
gas, water, and electricity. An unusually dry March has
reduced water supplies. Field maintenance and weaknesses in
the distribution system have reduced gas supplies and, more
importantly, gas distribution pressures. Maintenance
problems have also prevented many power plants from operating
at full capacity. In a situation reminiscent of the
children's nursery rhyme, for want of adequate gas, the power
generators can't operate; for want of the power generators,
the water pumps can't pump. In short, these critical
utilities are interdependent such that problems with any one
utility resonate throughout the system, causing shortages in
rural and urban areas throughout the country.

3. These shortages are having an immediate impact on
agriculture and commerce. Farmers have difficulty irrigating
the winter rice crop without adequate water and electricity
to operate the distribution pumps, which is expected to
adversely affect yields. Rice prices are rising. "Load
shedding" (the local term for planned blackouts) has
literally left students in the dark as they prepare for
exams, and disrupts smaller manufacturers without dedicated
power generation facilities. To address acute needs, the BDG
has ordered controversial power diversions from major markets
and large office and retail complexes during peak hours,
insisting they use their own captive generators. Faced with
rising fuel prices for their generators, operators of Dhaka's
shopping malls are fighting this order, while offering
alternative proposals like shutting off half their lights to
curtail demand or shutting down their shops for one or two
hours at a time.

4. While acute shortages are creating real hardship, they
should dissipate in coming months. Occasional rains are
occurring more often and the rainy season is expected to
begin in May. Unocal has just brought a new gas field on
line and maintenance work on other fields should be completed
shortly. The additional gas will enable power plants to run
closer to their rated capacities.

5. The government, however, has done little to address the
chronic weakness of its utility infrastructure. Faced with a
generating shortfall of more than 15% of electricity demand,
the BDG has been slow to authorize new plants despite foreign
investors ready, willing and able to construct and operate
new capacity. The current BDG has yet to add a single new MW
of generating capacity during its three years in office. The
BDG has also reduced its power purchases from independent
operators due to rising fuel prices, which operators may
incorporate into the takeoff price paid by the BDG.

6. Economic growth is also putting pressure on gas supplies,
despite record output in recent days as a result of the new
Unocal field at Moulavi Bazaar. Officials at Petrobangla
estimate a shortfall of 150 million cubic feet per day
(mmcfd) of gas needed for electric power generation.
Concerns over gas supplies may also be behind government
hesitation to authorize new plants, including the planned
investment by India's Tata group. BDG officials are
reportedly very concerned with the ability of Bangladesh to
meet 20-year supply contracts out of current proven reserves.
One BDG official conceded to EconOff that a major overhaul
of the gas sector would be needed in the next year and a half
in order to meet demand, although he said little was being
done.

7. Bangladesh's major cities - Chittagong, Khulna, and Dhaka
- have suffered from inadequate water supplies and sewage
treatment for years. Chittagong's government water supply
system only meets 30% of the daily demand. Although the
Chittagong Water and Sewer Authority (WASA) branch was
established 43 years ago, there is still no sewer system.
Khulna suffers from major salinity problems due to seawater
contamination of surface and ground water. Dhaka's surface
water sources are large enough to meet current demand but are
so polluted that they cannot be used and the cost of
treatment and decontamination is prohibitive. Instead,
Dhaka's water demand is supplied from the local aquifer, but
exceeds the aquifer's recharge capacity.

8. The Dhaka WASA recently announced plans to develop a
system of 1000-meter deep tube wells to replace the existing
450-meter deep wells, many of which have run dry. While
meeting the intermediate needs of Dhaka's population, this
solution will only defer the long-term problem. Moreover,
overtaxing the underground aquifer renders Dhaka far more
vulnerable to major damage in the event of a large
earthquake. Seismic disaster experts predict a major
earthquake along the Himalayan fault line, which runs through
Bangladesh, sometime in the next ten years.

9. There does not appear to be a grassroots response to these
shortages among average Bangladeshis. The opposition Awami
League party has responded to the shortfalls with organized
protests demanding adequate supplies of water, power, and
gas, but the protests have failed to draw support outside of
party activists. Businesses and manufacturers have largely
taken the problems in stride, developing their own solutions
to chronic problems. Bangladesh is one of Caterpillar's best
markets for generators, while larger manufacturing facilities
often install captive 10-15 MW gas turbine generators to meet
their own needs. While solving the immediate problem, these
ad hoc solutions undermine political pressure for long-term
solutions to Bangladesh's critical infrastructure needs. As
the issue of gas supply for new power plants illustrates,
however, these chronic problems, if not addressed, will
adversely affect Bangladesh's medium and long-term growth
prospects.
THOMAS

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