Annex 4.pdf

8 1

Bangladesh Industrial Energy Efficiency

Opportunities Assessment

Task 1: Industry Opportunities and Profile

Report

March 25, 2012

Bangladesh Industrial Energy Efficiency Opportunities Assessment

Deliverable 1: Industry Opportunities and Profile Report

March 2012

This document was prepared for the United States Agency for International Development

(USAID) by ICF International under Cooperative Agreement No. AID-OAA-L-11-00003000.

The contents are not the responsibility of USAID and do not necessarily reflect the views of the

United States Government.

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TABLE OF CONTENTS

1.0 Introduction

Background Objectives Project Status Industry Profiles – Sector Selection Process

2.0 Energy Overview in Bangladesh

Energy Deficit

3.0 Industrial Energy Consumption

Consumption of Natural Gas Consumption of Electricity Consumption of Petroleum Products Consumption of Coal Consumption Summary Initiatives on Energy Efficiency

4.0 Review of Bangladesh Industries

Ministry of Commerce Data Export Promotion Bureau, Bangladesh – Export Data Bangladesh Bank – Exports during April to September 2011 Various Sources- Industry Sectors Eight Selected Sectors and Selection Criteria

5.0 Sector Profiles

Textile Sector Frozen Foods Sector Steel Re-Rolling Sector Fertilizer Sector Tea Processing Industry Leather and Leather Goods Sector Ceramics Manufacturing Industry

6.0 Criteria and Selection of Four Industry Sectors

7.0 Industrial Sectors and their Associations

8.0 Summary and Next Steps

Annex 1 – List of Contacts

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1.0 Introduction

This report is prepared as part of USAID’s “Industrial Energy Efficiency Opportunities

Assessments in Bangladesh” project, implemented under ICF International’s Leader with

Associates (LWA) Cooperative Agreement entitled “Energy Efficiency for Clean Development

Program (EECDP), No. AID-OAA-L-11-00003-00. The report summarizes the project team’s findings from its initial screening and early assessment efforts for export-oriented, high energy-consuming industrial sectors that have opportunities for energy savings. It provides a snapshot of energy production in Bangladesh, selected industry data, energy consumption profiles for eight of the top energy consuming industries, and early analysis of industry opportunities. Four of these industry sectors were selected for further detailed analysis, where the team will propose specific interventions to improve energy efficiency during the remainder of the project.

Background

Bangladesh currently faces energy shortages that can be attributed to its rapid economic and industrial growth over the past ten years. While the demand for natural gas, which is the primary domestic energy resource, has increased to sustain growth, actions to increase its generating capacity have lagged behind. The situation is exacerbated by demand from the power sector, which uses natural gas to generate electricity. In addition, the current low price of natural gas creates an environment conducive to rapid and usually inefficient consumption across all sectors, further diminishing its supply. With declining natural gas resources and the inability for generation to meet demand, industries and power utilities, which are the primary consumers, have begun to experience more frequent shortages.

Reduced availability of gas for power generation leads to frequent power outages across the country, which become prolonged during the peak summer months. Among its many impacts, this adversely affects the agriculture sector which requires power for irrigation, as well as small and medium industries that do not have an alternate power supply. To address the frequent power shortages on the grid, various consumer sectors have resorted to back-up or captive power generation in the form of gas engines. This has further exacerbated the problem of insufficient gas availability, where the textile sector alone has 1,200 MW of aggregate captive power generation capacity to meet its energy requirements. Acute shortages of natural gas have occurred since 2009. As the Government of Bangladesh (GoB) and industries look for ways to resolve the situation, efficient energy end-use emerges as a viable option to sustain the growing demand.

Objectives

The many industry sectors in Bangladesh collectively represent one of the largest consumers of natural gas and electric energy in Bangladesh. This project therefore focuses on industrial contributions to energy consumption and seeks to achieve the following objectives:

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Identify, analyze, and prioritize opportunities for energy efficiency (EE) improvements in private industrial sectors

Determine the industrial sectors with the greatest opportunities for EE

Identify the key interventions within the selected sectors to advance improvement in EE

Identify options and strategies for donor assistance and existing credit facilities to help industries implement these interventions and realize EE potential.

The project comprises six key Tasks to achieve the above objectives. This Industry Opportunities and Profile Report represents the completion of Task 1 and includes activities underway as part of Task 2:

Task 1 - Profile of Industrial Sectors: High-level profiling of all privately owned, export-oriented industrial sectors and detailed profiling of four industrial sectors.

Task 2 - Industry Engagement: Outreach and communication with industrial associations and plants in the four selected sectors to participate in data collection efforts.

Task 3 – Energy Consumption Analysis and Energy Performance Benchmarking:

Remote and on-site assessments to collect data on energy consumption of representative plants in the four selected sectors.

Task 4 – Energy Savings Potential Analysis: Developing energy efficiency improvement opportunities and analyzing the energy savings potential of technically feasible opportunities.

Task 5 - Analysis of Costs and Benefits of Opportunities: Conducting cost-benefit analysis for the top opportunities, and assessment of implementation barriers, technical feasibility and impact.

Task 6 - Framework and Strategies for Financing and Potential Donor Interventions:

Design of effective intervention frameworks and strategies barriers which may impede adoption and implementation of cost-effective EE measures

Project Status

Since the project’s start-up in January 2012, the project team has conducted the following activities:

Developed a profile template for industry

Conducted early research on broad industrial sectors

Compiled information on eight key sectors

Developed early profiles of eight sectors and selected four sectors for further analysis

Conducted consultations with key stakeholders in Bangladesh, including government entities, energy companies, industry associations, multi-lateral and bi-lateral agencies, and academic institutions.

The project team gathered early data through desktop research and by conducting outreach to key stakeholders in Bangladesh, shortlisting eight industry sectors to profile that are export-oriented and privately-owned, two criteria established as part of the scope of this project. To document energy use patterns in production/manufacturing and develop profiles for these eight sectors, the project team conducted a literature review of publicly-available reports and other

Bangladesh Industrial Energy Efficiency Opportunities Assessment – Industry Opportunities and Profile

3 | P a g e sources, which included reports published by international agencies (e.g. World Bank, Asian

Development Bank (ADB), the International Energy Agency (IEA), United Nations, GIZ, and others). Detailed profiles developed for these eight industrial sectors include the following information:

General operating statistics – number of plants, capacity, productive output, etc.

Demography of plants – geographical location, member of industrial association etc.

Total exports, GDP contribution, and related economic indicators.

Following this initial research, the team traveled to Bangladesh in February and March 2012 to meet with key stakeholders, collect additional data and verify early information from the desktop review. This stakeholder outreach included visits to industry associations such as the

Bangladesh Textile Mills Association, Bangladesh Jute Mills Association, Bangladesh Fertilizer

Associations, Bangladesh Fisheries Development Corporation, Bangladesh Steel Mill Owners

Associations, and Bangladesh Frozen Food Exporters Association. In addition, the team held meetings with the Titas Gas Transmission and Distribution Company Limited (Titas Gas) and donor organizations such as GIZ, IFC and USAID. The team also met with the Center for

Energy Studies at the Bangladesh University for Engineering and Technology (BUET). Follow-up visits to Bangladesh are planned in April 2012 to support development of detailed energy consumption assessments for the four targeted sectors.

Industry Profiles – Sector Selection Process

The first of six key tasks for this project is to develop broad profiles for the top energy-consuming industrial sectors within Bangladesh, from which four sectors are to be selected for more detailed analysis on energy-saving opportunities. The completed industry sector profiles are presented in this report in terms of productive output, percent of GDP, number of facilities, number of employees, ownership, presence of industrial associations, and geographic location of facilities. The sectors are ranked in the order of their contribution to export, as well as energy consumption. This report also presents the project team’s selection process for the export-oriented industry sectors that this assessment will target over the next few months.

The report is organized as follows:

Section 2.0 provides summary information on the current energy supply situation and challenges in Bangladesh.

Section 3.0 discusses the consumption of energy in different sectors in Bangladesh, with emphasis on total energy consumption by industrial sectors.

Section 4.0 presents the findings from the initial research on the export-oriented sectors of

Bangladesh and explains the basis for shortlisting eight sectors for further detailed profiling.

Section 5.0 profiles the eight selected industrial sectors.

Section 6.0 presents the rationale for selecting four sectors for detailed energy assessments to estimate their energy savings potential.

Section 7.0 contains a list of industrial associations of the eight sectors.

Section 8.0 contains the summary and next steps of the project.

Annex I lists of contact persons consulted during the initial assessment visits to Bangladesh.

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2.0 Energy Overview in Bangladesh

Bangladesh has large natural gas reserves but potentially small reserves of coal. Industrial energy consumption is predominantly natural gas, which was about 73% of the total energy consumed in Bangladesh during 2008-09. The remaining energy demand from all sectors was met by petroleum products such as diesel and furnace oil, hydro-power, and coal. The overall energy mix of Bangladesh is illustrated in Exhibit 1 below.

Natural Gas is the main source of energy in Bangladesh driving its economy. The total gas supply for the country comes from domestic gas fields. The consumption of natural gas has increased at a compounded annual growth rate of 7.3% during the past 10 years. Petrobangla is the apex organization under the Ministry of Power, Energy, and Mineral Resources (MoPEMR) responsible for gas supply and distribution in the country. Petrobangla and its subsidiary companies play a pivotal role in supplying natural gas to all categories of consumers. Availability of natural gas as a low-cost energy resource has helped to establish a competitive edge for

Bangladeshi products internationally. However, the increased consumption of natural gas has resulted in a growing mismatch between its supply and demand. According to Petrobangla sources, 23 gas fields have been discovered in the country to date. The proven recoverable reserve has been estimated at 15.04 trillion cubic feet (TCF). As of June 2010, 8.55 TCF gas has been consumed, leaving only 6.49 TCF of recoverable gas. Therefore, the continued availability of gas for future use has become a serious concern for the GoB and for gas utilities. Currently, the country’s gas supplies come from 17 fields with 100 active gas wells. Due to the combined efforts of the GoB and the gas companies, the production growth rate of gas has risen from

6.8% to 8.9% between 2006 and 2010, although this is still short of demand levels.

Exhibit 1: Energy mix in Bangladesh in 2008-09 (Source GIZ)

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Electric Power also faces a demand-supply mismatch, with demand far greater than the supply due to insufficient capacity. Bangladesh Power Development Board (BPDB), established in 1972, is the authority for planning, construction and operation of power generation and transmission facilities throughout Bangladesh. According to BPDB, the total installed generation capacity in

Bangladesh as of June 2011 was 6,727 Mega-Watt (MW), of which 53% is owned by public sector and the remaining 47% is owned by the private sector. The highest recorded level of generated electricity was 4,890 MW (BPDB, June 2011) – a capacity utilization of 73%.

The net energy generated during FY 2010 by public and private sector power plants combined was 29,247 GWh. Out of this, 89.2% was gas-based, 4.8% came from furnace oil and diesel combined, approximately 4% from coal, and 2% from hydro, as depicted in Exhibit 2. In addition, there are about 2,200 MW of captive power plants in the country, most of which use gas as a fuel.

Exhibit 2: Fuel Mix for Power Generation in FY 2010 (Source: BPDB)

Petroleum products constitute about 23 percent of the commercial energy used in the country; the next largest fuel source behind natural gas. About 35% of the requirement for petroleum products in the country is met by a refinery located near Chittagong. The remaining demand for petroleum products is met through imports. Bangladesh Petroleum Corporation

(BPC), a statutory organization of the GoB under the MoPEMR, is engaged to supervise, coordinate and control all the activities relating to import, storage, marketing, and distribution of petroleum products in the country. According to BPC reports, Bangladesh imported about

1.41 million metric tons (MMT) of crude and 2.73 million tons of refined petroleum products in

2010-11. Total imports of petroleum products, including lubricants, were 4.2 MMT in 2010-11.

The imports primarily meet the energy demand of industries, transportation, and agriculture sectors.

Coal consumption in Bangladesh is limited to electricity generation and use by the brick-making industry. In recent years, the government has been considering increasing the use of coal for

Natural Gas 89%

Furnace Oil 3%

Diesel 2%

Coal 4% Hydro

2%

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6 | P a g e electricity generation and as a fuel for industry in order to reduce dependency on natural gas.

Petrobangla reports that five coal fields have been discovered in the Northwest region of the country with estimated coal reserves of 3.3 billion tons. However, the coal resources have remained underutilized due to various domestic reasons. At present, about 4,000 metric tons of coal are being extracted per day to be used in a 250 MW (2 x 125 MW) coal-fired power plant (Petrobangla 2010).

Energy Deficit

There has been a growing reliance on natural gas for many important end uses, including for power generation. The country is currently facing natural gas supply shortages, which have started to impact the growth of various industrial sectors. It is understood that the economic growth witnessed in past years cannot be sustained without significant new domestic production, diversification of energy mix, or access to imported fuels. As reported by

Petrobangla, the current average daily production of gas is about 2,000 million metric cubic feet

(MMcf) while the actual demand is 2,500 MMcf – a deficit of around 500 MMcf per day. The potentially more serious gas production shortfall will emerge in the medium term when there will be a need to begin importing gas, or products such as fertilizer which are produced using natural gas as a feedstock. Against this backdrop, Petrobangla has developed programs to enhance gas production by 2015. Considering the prevailing shortages of gas particularly in the

Chittagong region, steps have been taken to add about 500 MMcf per day through liquefied natural gas imports.

Bangladesh also faces a power crisis as a result of insufficient efforts to build energy capacity in recent years, aggravated by gas supply shortages. Inadequate generation capacity means demand cannot be met. The maximum demand served in FY 2010 was 4,606 MW while the forecasted demand was 6,454 MW (BPDB 2010); a deficit of 30%.

3.0 Industrial Energy Consumption

This section presents the overall energy usage pattern of various sectors in Bangladesh that contribute to the country’s gross domestic product (GDP). During the past two years, the

Bangladesh economy grew by about 6% per year. The main factors contributing to steady growth were the increase in industrial production to meet export demand and increased domestic consumption driven by remittances from overseas.

The principal industries in Bangladesh are readymade garments, textiles, chemical fertilizers, pharmaceuticals, tea processing, paper & newsprint, cement, light engineering, sugar, leather, and ceramic. The main use of energy in these industries is for meeting electrical power requirements, heating purposes, and for processing, such as chemical production. Textile mills are the leading energy consumers in the industrial sector.

The other large gas-consuming industries are steel re-rolling mills, ceramic and glass industries, and paper mills. The use of different energy sources in industries is described in the following sections.

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Consumption of Natural Gas

Overall demand for natural gas to generate power rose sharply from 2007-08 onwards.

Demand for gas in the fertilizer sector rose until the middle of 1990s and then leveled off as no new capacity building took place. All other sectors exhibited rising trends in gas consumption with the fastest growth in demand for natural gas coming from other industry sectors, with an annual increase of about 13%. Exhibit 3 below shows consumption of natural gas by sector in

Bangladesh for 2009-10.

Exhibit 3: Natural Gas use in Bangladesh, 2009-10 (Source: Petrobangla)

In 2009-10, total consumption of natural gas stood at 703 billion cubic feet. The power sector was the biggest consumer at 56% of the total consumption. This figure includes gas consumption for power generation from the grid, as well as from captive power plants. A further break-down of gas consumption by grid-connected power plants and industry-owned captive power plants is not available.

According to a GIZ report, in 2008-09, about 15% of total natural gas consumption was for captive power generation. It follows that of the 56% of gas consumed by the power sector, 41% is utilized for grid power and the remaining 15% is used by the industrial sector for captive power generation. Of the total gas consumption, 17% (118 billion cubic feet) is consumed by industries mainly for meeting process requirements such as heating and feedstock. Since most of the captive power plants are used by industries, total gas usage by the industrial sector in

2009-10 can be estimated at 32% (225 billion cubic feet).

Consumption of Electricity

Total consumption of grid-supplied electricity in 2010-11 was 26,578 GWh; a breakdown of use is shown below in Exhibit 4. Consumption by industrial consumers was 7,712 million KWh, Bangladesh Industrial Energy Efficiency Opportunities Assessment – Industry Opportunities and Profile

8 | P a g e which is 29% of the total electricity consumption (BPDB, 2010-11). In addition, a large number of industries use gas to generate the electricity required in their facility, therefore, mostly small and medium industries contribute to electricity demand from the grid. These small and medium industries largely rely on back-up generation that mostly runs on diesel.

Exhibit 4: Electricity use in Bangladesh, 2010-11 (Source: BPDB)

Consumption of Petroleum Products

Total consumption of diesel in 2010-11 was 3.22 million tons. Diesel consumption is predominantly by the transportation sector with a 46.8% share (0.13 million ton), followed by agriculture sector with a 31% share of the total. Consumption by industries is low at only 4%, as shown in Exhibit 5.

Exhibit 5: Diesel use in Bangladesh, 2010-11 (Source: BPC)

Total consumption of furnace oil in 2010-11 was 0.55 million tons. Furnace oil is mainly consumed by the power sector, followed by industries as the second largest group of consumers. Sector-wise consumption of furnace oil is shown in Exhibit 6.

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Exhibit 6: Furnace Oil use in Bangladesh, 2010-11 (Source: BPC)

Consumption of Coal

The power sector uses 80% of the domestic coal produced. At present, 4,000 – 5,000 metric tons of coal is extracted per day for use in a 2 x 125 MW coal-based power plant. The remaining coal is mostly used by brick kilns which are also dependent on imported coal. Apart from these instances, there is no other usage of coal in the industrial sector. A summary of total energy consumed by the industrial sector is presented below. This analysis demonstrates that major energy usage in industries is in the form of natural gas and grid-supplied electricity.

Consumption Summary

The following table provides an overview of fuel consumption in industries in Bangladesh over the past few years.

Fuel Type Annual Fuel Usage in Industries

Natural Gas 225 Billion cubic feet estimated in 2009-2010

Electricity 7,712 GWh in 2010-2011

Diesel 0.13 million ton in 2010-2011

Furnace oil 0.12 million ton in 2010-2011

Coal Negligible

Initiatives on Energy Efficiency

In view of the growing energy deficit due to the inability to keep up with the rapid demand, the

GoB has created a Task Force to assess and evaluate energy efficiency opportunities at the national level. The Power Division in the MoPEMR has been designated as a focal entity within the Ministry to promote energy efficiency-related activities in the country. The Ministry has also proposed to establish a Sustainable and Renewable Energy Development Authority (SREDA)

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10 | P a g e and has taken the required steps to present the Energy Conservation Act in the upcoming sessions. SREDA aims to promote and develop renewable energy and energy efficiency programs. Bangladesh’s Cabinet Division recently approved in principle the SREDA Act, which is expected to come into effect soon.

Over recent years, the Ministry has received a variety of technical assistance support from GIZ on energy efficiency, including assistance in drafting the Energy Conservation Act. Other multi-lateral donors supporting energy efficiency in Bangladesh in various capacities include the

World Bank, International Finance Corporation (IFC), Asian Development Bank (ADB) and

UNDP. GIZ and IFC have carried out studies on energy efficiency and demand side management across a number of industrial sectors and have also conducted pilot demonstrations of energy conservation technologies in textile and steel sectors.

Additionally, there have been initiatives undertaken by local public and private organizations to sensitize consumers to energy efficiency and further promote its benefits. In July 2011, Titas

Gas, which is the country’s largest gas transmission and distribution companies, created an

Energy Efficiency Cell within its “Vigilance Department” with 14 full-time technical staff members. This energy efficiency team within Titas Gas has a mandate to provide training and help implement industrial energy audits. with an aim to reduce wasteful use of natural gas in industrial sectors.

4.0 Review of Bangladesh Industries

This section presents industry sector data compiled from a variety of government and other sources, including the Bangladesh Bureau of Statistics within the Ministry of Commerce, the

Bangladesh Bank, the Export Promotion Bureau and others. This data was used by the team as part of the criteria for selection of the four focal sectors for further assessment.

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Ministry of Commerce Data. The following table provides information on major export-oriented sectors (2009-2010 data), arranged by contribution to exports from

Bangladesh.

SL

No.

Exports of selected principal commodities Exports in

Million BDT

(2009-2010)

Exports in

Million USD*

1 Readymade Garments (RMG) 790,042 11,368

2 Jute Goods (except carpet) 41,440 596

3 Fish 26,514 381

4 Footwear 16,366 235

5 Raw Hides, Skins & Leather 15,665 225

6 Naphtha & Furnace Oil 13,891 200

7 Raw Jute 12,760 184

8 Terry Towels 10,527 151

9 Pharmaceutical Products 2,761 40

10 Fertilizer 2,667 38

11 Vegetables, fresh/chilled 2,492 36

12 Hats and other Headgear 2,329 34

13 China/Ceramic Table Ware 1,961 28

14 Tea 391 6

Total 939,806

13,522

* 1 USD = 69.5 BDT (Average Exchange rate for 2009-10, South Asian Microfinance Network)

Export Promotion Bureau, Bangladesh – Export Data

SL No. Export of Principal Commodities Value in USD (2010-2011)

1 Knitwear Garments 9,482,061

2 Woven Garments 8,432,397

3 Other Sectors 2,530,211

4 Jute Goods 757,650

5 Frozen Foods 625,041

6 Raw Jute 357,284

7 Agri-Products 333,943

8 Leather 297,832

9 Chemical Products 104,760

10 Tea 3,201

Total 22,924,380

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Bangladesh Bank – Exports during April to September 2011

SL

No.

Commodity group

Amount in

Million BDT

Amount in million USD % of total export

1 Readymade garments 616,926 8,428 79.1%

1.1 Knitwear 378,086 5,156 48.5%

1.2 Woven garments 238,840 3,263 30.6%

2 Jute manufactures 23,708 324 3.0%

3 Fish, shrimps and prawns 22,190 303 2.8%

3.1 Fish 5,536 76 0.7%

3.2 Shrimp and prawns 16,654 228 2.1%

4 Leather and leather manufactures 20,069 274 2.6%

4.1 Leather 12,243 167 1.6%

4.2 Leather manufactures 7,826 107 1.0%

5 Home Textile 19,876 272 2.5%

6 Raw jute 10,095 138 1.3%

7 Petroleum & petroleum products 5,635 77 0.7%

8 Terry Towel 4,026 55 0.5%

9 Bicycle 1,697 23 0.2%

10 Pharmaceutical products 1,589 22 0.2%

11 Handicraft 195 2.7 0.0%

12 Tea 102 1.4 0.0%

13 Fertilizer 621 8.5 0.1%

14 Others 52,971 724 6.8%

A. Sub-total 779,700 10,652 100%

B. Exports from Export Processing

Zones 130,317 1,780

Total 910,017 12,432

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Various Sources- Industry Sectors. The table below provides information compiled from various sources and serves as the initial pool from which eight industry sectors were short-listed.

SL No. Bangladesh Bureau of Statistics

Export

Promotion

Bureau

Bangladesh Bank

Main sectors from different reports

List of thrust1 (priority) manufacturing sectors in

Sixth five year plan

(2011-2015)

1 Readymade garments (RMG) Knitwear Garments Readymade garments Textiles, RMG Agro-based and agro-processing industry

2 Jute goods (except carpet) Woven Garments Jute manufactures Footwear Ship building

3 Fish Others Fish, shrimps and prawns

Glass Basic chemicals/dye and chemicals

4 Footwear Jute Goods Leather and leather manufactures

Ceramics Readymade garments industry

5 Raw hides, skins & leather Frozen Foods Home textile Food products Pharmaceuticals

6 Naphtha & furnace oil Raw Jute Raw jute Pulp and paper Polymer industry

7 Raw Jute Agri-Products Petroleum and petroleum products

Sugar Jute and jute products

8 Terry towels Leather Terry towels Fertilizer Leather and leather products

9 Pharmaceutical products Chemical Products Bicycles Plastic forming and recycling

Light engineering industry

(LEI)

10 Fertilizer Tea Pharmaceutical products

Paper and board Plastic

11 Vegetables, fresh/chilled Handicraft Foundry Frozen fish

12 Hats and other headgear Tea Raw jute and Jute goods

Tea

13 China/Ceramic Table ware Fertilizer Tea Home Textiles

14 Tea Others Frozen foods Ceramics

1 Thrust Sectors –mentioned here and elsewhere in the report – is the term used in the local government reports and refers to priority or focus sectors

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Eight Selected Sectors and Selection Criteria

Sectors highlighted below have been selected for detailed profiling.

SL

No.

Sectors Export Oriented Ownership Rationale for Short listing / Rejection

Textile (textiles, RMG, home textiles) Yes Mainly Private

Highest contribution in exports (about 79% of total export).

Major consumer of natural gas among industrial sectors.

Jute (raw jute and jute products) Yes Mainly Private

Ranks second in exports after textiles (about 3% of total export). Process similar to textile (spinning, weaving, etc.) and assumed to be energy consuming. Power shortage is a major problem for attaining desired level of production

Frozen Foods (primarily fish and shrimp) Yes Mainly Private

Features 3rd in exports after textile and jute sectors, with 2.8% of total annual exports. Fish processing plants, ice plants and cold storage are energy intensive. Different reports suggest inefficiency in existing ice plants. “Thrust Sector” for development under sixth 5- Year Plan for Development (2011-

15). Lack of electricity leads to poor refrigeration and quality.

4 Steel Re-Rolling Mills

No. Supports domestic construction and

Light Engineering

Industry (LEI)

Private

Steel re-rolling mills are highly energy intensive. They support machinery and light engineering industries which are identified as

“thrust sector” under sixth Five Year Plan.

5 Fertilizer

No. Overall net importer. One plant is export oriented.

Mainly

Government.

Two plants are private held

Major consumer of gas after power sector. Gas reserves are declining and need to be addressed. Plants are of old vintage.

Three plants are temporarily shut down due to gas shortage.

Leather and Leather

Goods Yes Private

1.4% contribution to exports; identified as a “thrust sector” under the sixth Five Year Plan, which would be given priority for growth, incentives, and others.

7 Tea Industry Yes Mainly Private Small contribution to exports but many industries consume natural gas. Some processes are inherently energy intensive.

8 Ceramics Yes Mainly Private Inherently energy intensive. Gas supply is becoming a concern.

Thrust area for export under sixth Five Year Plan.

9 Pulp and Paper No Public and Private There are few plants in Bangladesh. No contribution to exports.

10 Sugar No Public and Private Already targeted for energy efficiency under GIZ program.

11 Ship Building No Public and Private Priority in future for export.

12 Pharmaceuticals Yes Private 0.2% contribution to exports; not energy intensive.

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5.0 Sector Profiles

For the eight sectors selected for broad profiling – textile, jute, frozen foods, steel re-rolling mills, fertilizer, leather and leather goods, tea, and ceramics – the project team gathered early data through desktop research to prepare general sector profiles. The early research relied on publicly available documentation, including internet and published information. The following reports were among those reviewed and analyzed while preparing the profiles:

Reports published by international agencies such as World Bank, Asian Development

Bank (ADB), the International Energy Agency (IEA), United Nations.

Reports by the Bangladesh Government, such as the Planning Commission; MoPEMR, Ministry of Environment and Forests, Bangladesh Bureau of Statistics.

Annual reports of gas and power companies such as Petrobangla, BPDB, BPC.

Annual reports of industry associations of the shortlisted sectors.

Following the initial research, the team made visits to Bangladesh in early 2012 to meet key stakeholders, collect additional data, and verify information collected during the desktop review to further develop the profiles. During the visist, the following information was collected:

Recent energy consumption data with break-down by different industry categories

Feedback on the selected industries to understand energy use patterns in production/manufacturing

Feedback on the selection of four sectors for detailed assessment

Detailed information about the four selected sectors through engagement of their industry associations

Detailed profiles for eight short-listed sectors are presented below. The profiles include information such as:

Number of plants, capacity, productive output

Demography of plants – geographical location, member of industrial association

Total exports, GDP contribution, and related economic indicators

Textile Sector

The textile sector has emerged as the prime mover of the Bangladesh economy by earning foreign exchange and generating employment opportunities for millions of local people. The sector has significantly contributed towards the government’s poverty alleviation program and to the social empowerment of women. The textile sector can be categorized in two segments:

Primary textile sector consisting of spinning, weaving and textile processing activities

Ready-made garments sector consisting of knitwear and woven garments manufacturing

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As a fast growing sector, the future employment opportunity of textiles is expected to increase rapidly to cater to growing domestic and export demands. Although data was collected and reviewed for various segments of the industry, the team will focus on textile dyeing and processing activities, which represented the higher energy consuming processes within the industry. Details of the textile sector are presented in the table below.

Type of Products Produced

(segmentation of the sector)

Yarn, fabric, knitwear garments, woven garments

Main Export Oriented Product Knitwear garments (jacket, sweater, t-shirt), woven garments

(shirt, trouser), textile clothing

Economic Impact (including production output in terms of volume and value, and percent of GDP)

Contribution to GDP – 12% (Source BTMA)

Export Market Characteristics

(including export as portion of total industrial export)

Total ready-made garments (RMG) export in 2010-11:

17.91 billion USD (US Dollars)

Ready-made garments – 79.1% of total export from Bangladesh in

2010-11 (41.4% knitwear, 36.8% woven)

Ownership (including local versus international ratio)

Local: 95%, International 5%

Geographic Location of Facilities

(including description of clusters)

Dhaka, Chittagong, Narayanganj

Employment Characteristics

(including number of employees and male to female ratio)

Source: BTMA director’s report

Textile spinning – 400,000 employees

Textile weaving – 80,000 employees

Knitting knit dyeing – 324,000 employees

Dyeing and finishing – 33,000 export oriented ready-made garments (RMG) – 2 million employees

80% female

Sector Demographics (including number of facilities, and ratio of large versus medium/small plants)

Source: BTMA

Yarn Manufacturing (textile spinning) – 385 facilities (production capacity 1,932 million kg p.a.)

Fabric Manufacturing (textile weaving) – 743 facilities (2,327 million meter p.a., 5,772 million kg)

Textile Processing – 238 facilities (1521 million meter woven, 596 million kg knit, 361 million kg yarn)

Energy Use (in terms of volume, portion of total industry energy use, and profile of energy use by source)

According to different reports, there is high gas use in this sector.

The garments, dyeing, knitting, spinning and textile mills together comprise the leading consumer of gas within the industrial sector.

The textile processing units are energy intensive and offer several energy savings opportunities; therefore, this sector is targeted for energy efficiency assessment under the project.

Energy consumption is in the form of electricity and steam, and

Bangladesh Industrial Energy Efficiency Opportunities Assessment – Industry Opportunities and Profile

17 | P a g e natural gas is primarily used for captive power generation and for raising steam in the boilers. Almost 98% of units are generating captive power based on natural gas.

According to the BTMA, the textile sector alone accounts for about 10% of the total natural gas consumption in the country.

The industry has 985 gas-based generators with installed capacity of 879 MW and 242 diesel generators with installed capacity of

422 MW.

The textile industry is estimated to suffer from a production loss of about 35-40% due to energy shortages.

Environmental Impact (including contribution to GHG emissions, water use, and wastewater and waste generation)

Major environment issues – effluent discharge pollution.

Expected Future Growth of

Sector (short, medium and long term, and drivers/challenges)

Growth – 13.1% average annual growth projection from FY 2010 to FY 2015 (Source: Planning Commission)

Challenges – competition from neighboring countries, cotton price volatility.

Industrial Association(s)

(presence and strength)

Bangladesh Textile Mills Association

Bangladesh Garment Manufacturers and Exporters Association

Bangladesh Knitwear Manufacturers and Exporters Association

Bangladesh Textile Dyeing & Printing Industrial Association

Opportunity Summary Important industry – vital to Bangladesh’s export earnings

Recent rapid growth expected to continue

Energy intensive

Large number of facilities leads to significant consumption levels

(10% of all natural gas consumption)

Large number of captive power

Jute Manufacturing Sector

Jute manufacturing is one of the oldest manufacturing sectors in Bangladesh. It accounted for a major share of national income and employment during the 1960s and 1970s and export of jute and jute goods were the two most important sources of foreign exchange. Bangladesh is one of the leading exporters of jute goods in the world. However, the share of jute and jute goods in the Gross Domestic Product (GDP) and exports declined as the preference for synthetic fibers increased. For many decades prior to the emergence of ready-made garment exports, jute and jute goods dominated the export sector making up 70 percent of exports until 1981.The sector accounted for only about 3% of the country’s total export in 2010-11. Due to growing environmental concerns, the jute sector in Bangladesh is on a revival path to meet increasing global demand. Details of the jute sector are presented in the table below.

Type of Products Produced

(segmentation of the sector)

Raw jute, jute goods (hessian, sacking, yarn/twine, carpet backing cloth)

Main Export Oriented Product Raw jute, yarn/twine

Economic Impact ( including Total production in 2010-11 : 729,069 tons

Bangladesh Industrial Energy Efficiency Opportunities Assessment – Industry Opportunities and Profile

18 | P a g e production output in terms of volume and value, and percent of GDP)

Total export in 2010-11: 594,423 tons

Export Market Characteristics

(including export as portion of total industrial export)

Raw Jute – 1.6% of total exports from Bangladesh in 2010-11 worth 0.357 billion USD dollars

Jute Goods – 3.0% of total exports from Bangladesh in 2010-11 worth 0.757 billion USD dollars.

Total export earnings from Jute –in 2010-11 is1.1billion USD.

Ownership (including local versus international ratio)

205 facilities (27 under public sector company Bangladesh Jute

Mills Corporation, 178 under private sector)

Out of 178 mills under private sector, 81 under Bangladesh Jute

Mills Association members and 97 under Bangladesh Jute Spinners

Association members

Geographic Location of Facilities

(including description of clusters)

Dhaka, Khulna, Chittagong

Employment Characteristics

(including number of employees and male to female ratio)

Bangladesh Jute Spinners Association: 55,868 employees

Bangladesh Jute Mills Association: 39,000 employees

Bangladesh Jute Mills Corporation: 61,681 employees

Sector Demographics (including number of facilities, and ratio of large versus medium/small plants)

205 facilities.

175,114 installed spindles in jute spinning mills out of which

147,124 are operated;

Looms in jute mills:

BJMC: 7,320 installed, 5,805 operated

BJMA: 12,861 installed, 4,334 operated

Energy Use (in terms of volume, portion of total industry energy use, and profile of energy use by source)

Energy use figure not available. Through various discussions, it was learned that the jute sector consumes significant energy. Power shortages are a major problem for attaining the desired level of production.

Machinery used in jute mills are of aged; most of the mills were set up in the1960s – 1970s.

As a reference point, jute production in India (the largest jute producer) consumes 3.75 – 8.02 GJ/ton energy.

Environmental Impact (including contribution to GHG emissions, water use, and wastewater and waste generation)

Not available

Expected Future Growth of

Sector (short, medium and long term, and drivers/challenges)

Future Growth – identified as a thrust sector for development

Challenges – Competition from man-made fibers, power shortage

Industrial Association(s)

(presence and strength)

Bangladesh Jute Association, Bangladesh Jute Goods Association

Bangladesh Jute Mills Association(108 members)

Bangladesh Jute Spinners Association

Recent rapid growth expected to continue and increase

Large consumers of natural gas and furnace oil

Efficient and “environmentally friendly” operations are vital to the global competitiveness of the industry

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Frozen Foods Sector

Frozen food, comprised of shrimp and fish, is one of the leading export sectors in Bangladesh.

The availability of natural resources in Bangladesh make this sector promising for investors looking to supply international as well as in domestic markets. Commercial aquaculture of shrimp has increased rapidly in the coastal belt of Bangladesh. During the last ten years, Bangladesh’s seafood industry has earned international recognition by responding to the food-safety and quality requirements of its destinations, mostly, U.S. and the European Union. The frozen food industry has been identified as a focus sector which will give it priority in receiving favorable treatment in regard to taxes, subsidies, credit facilities, land allotments, and foreign exchange allocations. Details of the frozen food sector are presented in the table below.

Shrimp, fish

Main Export Oriented Product Frozen shrimp & prawn, frozen fish, fresh and chilled fish, value-added shrimp and fish products

Economic Impact (including production output in terms of volume and value, and percent of GDP)

Total Production: 2,899,198 M Tons in 2009-10

Export Market Characteristics

(including export as portion of total industrial export)

2.8% of total export; total export earnings in 2010-11 was

611million USD

Shrimp exported in 2010-11 = 144.80 million lbs

Fish exported in 2010-11 = 35.14 million lbs

Export earnings from shrimp in 2010-11 = 477.83 million

USD

Export earnings from fish in 2010-11 = 133.53 million USD

Ownership (including local versus international ratio)

Mostly owned by domestic (local) players

Geographic Location of Facilities

(including description of clusters)

Chittagong, Khulna, Cox’s Bazar, Jessore, Dhaka

Employment Characteristics (including number of employees and male to female ratio)

More than 1 million employees

Sector Demographics (including number of facilities, and ratio of large versus medium/small plants)

- 149 shore-based export oriented fish processing plants most of which are privately owned.

- Out of 148 plants, 74 plants are approved by the EU to supply frozen seafood to its member states.

- 4 fish processing plants and 12 freezing plants are owned by BFDC (a public sector company).

Energy Use (in terms of volume, portion of total industry energy use, and profile of energy use by source)

Energy is used in chillers/freezing plants/frozen storage.

The primary energy source is electricity in fish processing plants. Plants also have diesel-based generators which are used regularly due to erratic grid power supply.

Environmental Impact (including contribution to GHG emissions, water use, and wastewater)

Solid waste generation, waste water generation, during the production, exhaust emissions from diesel generators

The environment policy of Bangladesh covers the fisheries

Bangladesh Industrial Energy Efficiency Opportunities Assessment – Industry Opportunities and Profile

20 | P a g e sector.

Expected Future Growth of Sector

(short, medium and long term, and drivers/challenges)

Identified as thrust sector for development. BFFEA has set a target of 1.5 billion dollars from export of shrimp and fish by 2015.

Industrial Association(s) (presence and strength)

Bangladesh Frozen Foods Exporters Association (BFFEA)

Recent rapid growth expected to continue

Depends on liquid fuel to generate power

Increased power reliability will increase productivity

Steel Re-Rolling Sector

The steel re-rolling industry has developed during the last few years and this sector is serving as the backbone of the Bangladesh economy. However, it is one of the most energy intensive industries. During the last seven years, a few steel re-rolling mills have been modernized, but the vast majority is still continuing with old processes. Details of the steel re-rolling sector are presented in the table below.

Process steel ingots into rods and bars, etc.

These products are used in construction and also by the light engineering industry to produce machinery/components.

Main Export Oriented Product Auto parts, bicycle, pumps, etc.

Economic Impact (including production output in terms of volume and value, and percent of GDP)

Not available

Export Market Characteristics

(including export as portion of total industrial export)

Not available

Ownership (including local versus international ratio) Not available

Geographic Location of Facilities

(including description of clustering)

Re-rolling mill cluster near Narayanganj, Chittagong

Employment Characteristics (including number of employees and male to female ratio)

Not available

Sector Demographics (including number of facilities, and ratio of large versus medium/small plants)

Re-rolling mills - 250 plants, 2.5 million ton capacity per year

25 plants are modern, 5 are large automatic units, 15 plants are medium size, 150 plants are small

Capacity of big and medium plants ~ 50% of total capacity

Capacity of smaller plants ~ 50% of total capacity

Bangladesh re-rolling mill association has 146 members

Energy Use (in terms of volume, portion of total industry energy use, Energy use data not available

Furnaces and motors in re-rolling are energy intensive.

Bangladesh Industrial Energy Efficiency Opportunities Assessment – Industry Opportunities and Profile

21 | P a g e and profile of energy use by source) Natural gas is primarily used as fuel

All big plants have captive generation

According to GIZ report, specific energy consumption of steel re-rolling mills in cubic-meters of gas per ton of steel are 75-90 for classical mills, 45-60 for mills with recuperators, 30-40 for modern mills.

Environmental Impact (including contribution to GHG emissions, water use, and wastewater and waste generation)

Not Available

Expected Future Growth of Sector

(short, medium and long term, and drivers/challenges)

6.75% annual average manufacturing sector growth projected; light engineering industry is a priority sector for export oriented growth.

Industrial Association(s) (presence and strength)

Bangladesh Re-rolling Mills Association

Bangladesh Steel Mill Owners Association

Opportunity Summary Important industry for Bangladesh’s domestic infrastructure development

Important sector for the growth of light engineering industries

Recent rapid growth expected to continue

Energy intensive

Large number of facilities leads to significant consumption levels

Fertilizer Sector

The major chemical fertilizers used in the agriculture sector are urea, triple super phosphate

(TSP), single super phosphate (SSP), and di-ammonium phosphate (DAP). Consumption of these chemical fertilizers in Bangladesh has steadily increased while domestic production has drastically decreased due to the low availability of gas. Nevertheless, the fertilizer sector is the second largest gas user after the power sector.

The Bangladesh Chemical Industries Corporation (BCIC) is a government-owned company with the vast majority of fertilizer factories, all of which are more than 20 years old. The one privately held factory is an export-oriented urea plant owned by the Karnaphuli Fertilizer

Private Limited. An overview of the fertilizer sector is presented in the table below.

Type of Products Produced

(segmentation of the sector)

Urea, Ammonium sulphate, TSP (triple super phosphate) and

DAP (diammonium phosphate)

MOP (muriate of potash) fertilizer is 100% imported

Main Export Oriented Product Bangladesh is a net importer of fertilizer. Average annual export of fertilizer from 2006-07 to 2009-10 was 0.5% of total export from Bangladesh, but it is not clear which fertilizer type was exported.

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22 | P a g e

Economic Impact ( including production output in terms of volume and value, and percent of GDP)

Urea demand in 2010-11 is…