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One of the primary reasons for the failure of the 2005 pipeline negotiations between India and Bangladesh was the lack of convergence in the energy policies of the two countries – India’s energy policies then pointed naturally towards the pipeline while Bangladesh’s policies did not feature it

The Myanmar-Bangladesh-India (MBI) pipeline project : A regrettable case of lack of convergence in national energy policies

Varigonda Kesava Chandra
The Myanmar-Bangladesh-India (MBI) pipeline project : A regrettable case of  lack of convergence in national energy policies
Myanmar-Bangladesh-India Pipeline Route

The lack of convergence in the energy security policies of India and Bangladesh has impacted the outcome of the Myanmar-Bangladesh-India (MBI) pipeline project. This project, envisaged as an important aspect of the energy security policy of India, has in the past failed to accommodate the needs of Bangladesh; this has resulted in an indefinite delay in project implementation.
However, recent changes in the energy scenario of Bangladesh have enabled greater convergence in the energy policies of both countries leading once again to prospects of a revival of the project.  Project implementation has also been stalled by the construction of the Myanmar-China pipeline project which consists of dual oil and gas pipelines originate at Kyaukryu port on the west coast of Myanmar and enter China at Yunnan's border city of Ruili. Competition between the two projects stems from uncertainty regarding just how much gas Myanmar actually has for export.
  The respective national energy security policies of India and Bangladesh constitute the main determinants of the success or failure of this project. The extent to which these policies have been able to accommodate each other and the effect this has had on the Myanmar-Bangladesh-India pipeline project is the crux of the following analysis.
Interestingly changes in the importance of natural gas and of natural gas pipelines to both countries are important drivers in the evolution of the energy security policies of both countries.  To be sure this is not a new project but trails back through current history to an initial lack of convergence in the energy security policies of both countries which led to a breakdown in negotiations in 2005; however changes in Bangladesh’s energy policies since then have enabled the establishment of some common ground in the energy security policies of both states leading to prospects of renewed collaboration over the last 24 months.
The initial lack of convergence between the energy policies of India and Bangladesh also contributed to enabling  China to successfully implement a Myanmar-China gas (and oil) pipeline project. The natural gas reserves in Myanmar are limited – and at this stage Myanmar is not in a position to accommodate the needs of both China and the Indo-Bangladesh partnership. Therefore the Myanmar-China pipeline project has prevented renewed Indo-Bangladesh energy security collaboration from bearing fruit, so that project implementation  of the Myanmar-Bangladesh-India pipeline project has failed to date.  
As of 2008, around 50% of Bangladesh’s population and 42% of India’s population remained below the international poverty line. The percentage of the populations with access to electricity in India and Bangladesh – electricity being an essential aspect of energy security - are 55.5% and 32% respectively, as of 2005. A constant supply of energy resources is necessary to continue  the  rapid industrialization that is taking place in India and Bangladesh as well as to provide basic electricity access to the citizens of both countries. The Myanmar-Bangladesh-India pipeline project was envisaged as a means of importing natural gas – a major energy source for power supply in both countries.  
In 1997 a Bangladeshi private firm called Mohona Holdings first proposed the construction of a pipeline that could transport natural gas from the gas fields of Myanmar into India traversing through Bangladesh. By early 2000s, with major Indian oil and gas companies such as GAIL, ONGC Videsh and Essar having invested considerably in the Myanmar hydrocarbons sector, the country began to actively pursue the feasibility of such a project. Following negotiations with Bangladesh and Myanmar in early 2005, an agreement between all three countries for constructing the pipeline was reached. The expected cost of US $1 billion was to be mostly borne by India and private sector partners, whereas Bangladesh would receive US $125 million in annual transit fees. While gas would mostly be fed to the Indian market, Bangladesh would also be able to make use of gas imports from the pipeline should its own indigenous sources become scarce.
Indo-Bangladesh bilateral negotiations fell through in 2005 however as additional conditions laid down by Bangladesh were unacceptable to India. At the same time, Myanmar also entered into negotiations with China regarding another bilateral pipeline project. By mid-2005, the pipeline project looked to be shelved indefinitely. Khondkar Saleque, one of Bangladesh’s government-appointed pipeline negotiators stated that “gas from Myanmar can be available to India and Bangladesh only if the political governments of India and Bangladesh can resolve any other bilateral issues.”
M. K. Dhar, a former Indian intelligence officer, blamed the Islamist ideology of the Bangladesh government and the prevalence of strong anti-India perceptions for blocking any policies beneficial to India. By mid-2007 however, the Bangladesh government performed an about-face in expressing its intent to negotiate with India over the pipeline project, and in 2010, the project received approval from the government but as of today the project has yet to be implemented.  India’s energy security policies have often been criticized for their incoherence and lack of planning; however the Integrated Energy Policy (IEP) released by the Indian government in 2006 highlights two underlying principles in India’s energy policies: diversification of energy imports, and climate change mitigation.
While energy independence remains a long-term aim, import and diversification of supply sources is emphasized in the IEP. Considering the limited energy resources in the country, there seems to be a tacit recognition in India regarding the impracticability of energy self-sufficiency. Since the oil crisis of the mid-1970s, India has sought to avoid an over-reliance on oil from the volatile Middle East by increasingly pursuing active diversification in obtaining energy sources such as oil, gas and even hydroelectricity from diverse regions.
However, the underdevelopment of indigenous reserves and growing demand by mid-2000s forced India to seriously consider importing gas. Indeed, its reserve: production ratio as of 2006 was calculated at 38, meaning that gas reserves in India are expected to effectively be depleted in 38 years, thereby increasing the importance of other sustainable sources of gas supply.
The option of developing natural gas pipelines goes back as far as the late 1980s but only in the mid-2000s did India consider pipelines seriously as endogenous gas supply failed to meet demand as previously noted.  The policy of gas imports led India to actively explore the option of several multilateral gas pipelines by 2005 including the Iran-Pakistan-India (IPI) pipeline, Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline as well as the Myanmar-Bangladesh-India pipeline.
Like India, Bangladesh does not have a tradition of concrete energy security policies. The government released a National Energy Policy (NEP) in 1995 and again in the 2004. Its three main policy aims may be discerned as exploitation of indigenous energy sources, diversification in energy type and tapping into the lowest cost fuels available  
The 2004 NEP draft emphasizes what it calls “optimal development of all indigenous energy sources.” A significant issue for Bangladesh is its untapped and underdeveloped coal, oil and natural gas reserves.  On the power side it seeks to augment the limited number of power plants in operation due primarily to a lack of finance and technical expertise. Bangladesh has therefore, since 1990s, collaborated with international oil corporations for oil and gas explorations and extraction. As late as 2010, exploitation of its indigenous resources still remains a primary goal for the Bangladesh government. In addition the importance of cheap power generation for Bangladesh cannot be understated; most of the indigenous resources have been left untouched due to the relatively high cost of extraction.  Collaboration with international oil corporations and Indian private enterprise in oil and gas exploration, coal extraction, and construction of power plants is driven primarily by economic considerations.
As of 2005, Bangladesh’s commercial energy sources were comprised of approximately 64% natural gas, 26% oil and 10% coal as a result natural gas is the overwhelmingly largest fuel  source for commercial power generation in Bangladesh.
However, from 2005 onwards Bangladesh has consistently suffered from a shortage of gas, mainly because its available reserves have not been tapped to its full potential, and fewer additional reserves have been discovered due to a severe lack of funds and investment. Only by the late-2000s has this precarious situation of depleting gas reserves gained recognition in Bangladeshi policy circles. Wood Mackenzie reported in 2006 that Bangladesh’s available domestic gas reserves could be depleted as early as 2020. More researchers and state officials began to openly advocate gas imports through pipelines. In 2010, the Bangladesh government had finally given its approval of a potential Myanmar-Bangladesh-India pipeline.
One of the primary reasons for the failure of the 2005 pipeline negotiations between India and Bangladesh was the lack of convergence in the energy policies of the two countries – India’s energy policies then pointed naturally towards the pipeline while Bangladesh’s policies did not feature it. This was because while India was able to recognize the importance of gas imports to meet domestic demand, Bangladesh did not realize an impending crisis in its regional energy security in the form of depletion of gas reserves.
Both Bangladesh and India traditionally emphasized a socialist-inspired policy of energy autarky. By early 2000s however, it was clear that indigenous sources – including gas sources, could not keep up with the high demand of a rapidly growing Indian economy. In addition, the pressure of using climate change-mitigating energy sources precluded excess usage of India’s coal reserves. This led to India seriously considering the possibility of importing gas through pipelines, whether originating from Iran, Turkme­nistan or Myanmar; India would enter into negotiations on all three projects in 2005. Throughout the early-2000s Bangla­desh’s energy policies emphasized new investment into its domestic energy complex while considerations of substantial gas imports remained a fringe issue.  
For this reason even though Bangladesh was promised an annual transit fee as well as the option to import some of the gas from the pipeline during the 2005 negotiations, the proposition did not meet Bangladesh’s energy policy requirements. The Bangladesh government was thus not prepared to be part of the project in the absence of additional incentives. It placed additional conditions during these bilateral negotiations – the facilitation of importing hydroelectricity from Bhutan being one of them (which incidentally was in line with the then policy of diversifying energy sources beyond gas) and in addition to the reduction of tariff barriers and its trade deficit as other preconditions.
India refused for two reasons. First, it was strategically unviable for the Indian government to accept Bangladesh’s additional conditions fearing that this would set a precedent in all future bilateral negotiations. Second, India at the time was also exploring other options, including the possibility of a Myanmar-India pipeline bypassing Bangladesh and other pipeline projects such as the Iran-Pakistan-India (IPI) project.
Alternative options for India fell through by 2006 however – the IPI project became mired in complications and a Myanmar-India pipeline bypassing Bangladesh was considered too expensive. Meanwhile in Bangladesh during the 2000s exploration into indigenous gas sources presented bleak results prompting the Bangladesh government to consider pipelines seriously for the first time in late 2000s.
Even after this recognition of the need to rethink energy policy, the Bangladesh government had not automatically pursued energy collaboration with India; instead, in 2008, Bangladesh first considered the feasibility of importing gas through a Myanmar-Bangladesh pipeline alone – excluding India from the picture. The high cost the project would entail however dissuaded the Bangladeshis, and they once again had to consider alternatives –the Myanmar-Bangladesh-India pipeline being one of them. By 2009, elections in Bangladesh had heralded a more India-friendly government.
The new government, lead by the secular and pro-India Awami League party had long-standing ties with the Congress-led government, and this lead to a gradual improvement in Indo-Bangladesh bilateral relations. Such an improvement served to facilitate bilateral energy security collaboration, and thus enabled Bangladesh to seriously consider participating in the Myanmar-Bangladesh-India pipeline project; by 2010 the Bangladesh government finally approved the project.
As of mid-2012 however, the pipeline project has still not been implemented, despite renewed energy policy convergence between India and Bangladesh. The primary reason for the inability in implementing the pipeline project is the competition from China. As early as 2007, Janardhan Reddy of the Ministry of Petroleum and Natural Gas, India stated that “(Myanmar’s) growing closeness with China” had already hampered the Myanmar-Bangladesh-India pipeline project from taking-off.
Myanmar had concomitantly been pursuing bilateral negotiations with China regarding a potential gas pipeline since 2004 – at around the same time as with India and Bangladesh. China’s energy security policies had long been geared towards large-scale imports of energy sources including natural gas, and by 2009, China and Myanmar had reached an agreement on a joint pipeline project. By mid-2010, Myanmar in collaboration with China had commenced construction of the Myanmar-China gas pipeline.
Both Myanmar-China and Myanmar-India-Bangladesh pipeline projects potentially relied on gas reserves from the Shwe Natural Gas Fields in Myanmar. Following the successful implementation of the Myanmar-China gas pipeline deal, the Myanmar government has shown considerable reluctance in going ahead with the Myanmar-Bangladesh-India pipeline not least due to limited gas reserves within the Shwe Gas Fields.
Dr. Badrul Imam, writing in 2009, states that Bangladesh’s interest in the Myanmar-Bangladesh-India pipeline had come too late, so that “Myanmar decided not to waste further time on these partners and signed an agreement with China.” Therefore, the inability of India and Bangladesh to initially find convergence in their energy security policies had contributed to China’s successful pipeline deal with Myanmar. Myanmar’s concerns about the finiteness of its gas reserves have meant that, even after Bangladesh’s agreement to the project in 2010, the Myanmar-Bangladesh-India pipeline could not be effectively implemented.
However, recent convergence in the energy security policies and needs of India and Bangladesh has pushed Bangladesh to seek other accommodations with India including participation in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. The proposal to include Bangladesh within the TAPI project has been under discussion by energy experts in the South Asian Association for Regional Collaboration (SAARC) since mid-2011. At the same time negotiations on the Myanmar-Bangladesh-India pipeline have also continued – this time with India and Bangladesh working with rather than against each other. Perhaps it may require new discoveries of natural gas reserves in Myanmar to once again revive the Myanmar-Bangladesh-India pipeline project.

 The writer is a graduate student in the S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore


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Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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