East India, Inc.

The Americans want to mix oil and water.

American business is eyeing gas reserves of Bangladesh and the Indian Northeast, but have they studied the history of East South Asia?

It was a big gathering. Politicians from Bangladesh, Nepal and the northeastern states of India had converged in Calcutta along with senior executives of more than 130 US companies to attend what was called the “US Investor Summit: Emerging East”. (Bhutan, though invited, chose to stay away.) The conference ended on 11 December with a call to “highlight the possibility of a new kind of trade – trading in energy, fuel and power”.

“To enable this trade to happen, markets have to be developed in India that will be the anchor for the development of these pipelines to move gas from where it is plentiful to areas where it is in demand,” said the press note of the Indo-US Joint Business Council, the organisers of the conference. Within hours, however, the American “vision” for the eastern sub-re-gion of South Asia came under attack from Bangladesh and the northeast states.

Gas renaissance
Bangladesh has a proven natural gas reserve of 23 trillion cubic feet, but estimates place the actual reserve at more than twice that. The northeast Indian states like Assam and Tripura have natural gas reserves estimated at half that quantum. Of the five memoranda of understanding (MOUs) signed during the conference, two concerned exploratory studies into the possibility of bringing natural gas from Bangladesh and northeast India across to industrial centres like Calcutta for developing power and fertiliser plants. While the MOU between power giant Enron and the Calcutta-based RPG group called for a “joint study of gas requirements in eastern India”, the one signed by UNOCAL and the Indian company Paharpur Cooling Towers was described grandly by both sides as “Project Energy Renaissance”. A UNOCAL press release on Project Energy Renaissance said the project aims at creating pipelines to transport up to one billion cubic feet of “competitively priced clean burning natural gas to industrial centres in West Bengal and beyond.” Obviously there is a market in mainland India for gas from Bangladesh and the Northeast, but given the deep-seated misgivings that these regions harbour against the Indian heartland, there was bound to be a reaction. The MOUs involving UNOCAL and Enron and the Calcutta-based companies provoked an immediate and fierce outburst. “These US companies are planning to take our gas to India but we want our gas to speed up our industrialisation, not India´s,” remonstrated Bangladesh´s Industries Minister Tofail Ahmed. Minister Ahmed told Himal that the Awami League government´s topmost priority was the speedy industrialisation of the country by using its natural gas reserve. This is why it is keen to secure foreign investment in the country´s energy sector, but it was not clear in Calcutta how Dhaka hoped to attract foreign investment by blocking out the very market in West Bengal where the American investors saw some prospects. Bangladesh has recently offered a number of potential hydrocarbon ´blocks´ (areas) to foreign prospectors, tying them up in production-sharing contracts.

Exploration has started in more than 20 blocks, including some in the Chittagong Hill Tracts, where the government recently signed an agreement with rebel tribesmen to bring back peace, a primary requirement for foreign investment (see Briefs). The Bangladesh min-ister´s sentiments were also shared by the leaders present from Assam and Tripura. “We want to create industries and jobs in our own state by using our gas, we do not want this to be taken away to West Bengal or any other Indian state,” said Tripura´s Industry Minister Tapan Chakrabarty. Tripura has a 75 percent Bengali population and is ruled, ironically, by the Communist Party of India (Marxist), which is the same party that governs West Bengal and which acted magnanimous host to the Americans. “We have our own vital considerations, as all states in India are a bit on their own now,” said Chakrabarty. Assam´s Industries Minister Gunin Hazarika supported Chakrabarty. “We cannot allow the Barauni syndrome to be repeated,” said Hazarika, referring to the oil refinery deep in the state of Bihar. Practically all of Barauni´s supply of crude travels from Assam through a 1400 km-long pipeline, a symbol in Assam of Delhi´s long neglect of their state. In November, separatist rebels from Assam blew up the pipeline in three places.

American history
“The question is much larger than those raised at the Calcutta investors´ conference,” said Assamese economist Shantikam Hazarika. He said that Bangladesh and the Northeast had always remained suppliers of raw material to the industrialised states like West Bengal, which had to change now. “The Americans are not bothered by history because theirs is not a long one, but we are uncomfortable with the long history of just being a hinterland to West Bengal. We now want our own industries with the gas we´ve got.” This argument finds ready takers in Bangladesh and neighbouring northeast Indian states. Their officials and business leaders want to use their massive natural gas reserve to set up gas cracker, fertiliser and power plants in their own region. If the US delegation, led by Commerce Secretary William Daley, had expected unquestioned acceptance of their grand vision for an “Emerging East” investor summit, they were predictably shocked at the criticism. “If such attitudes persist, how can regional cooperation, or sub-regional cooperation succeed? Leaders need to look beyond their nations now,” said US ambassador to India Richard Celeste.

The Americans, however, have cause for hope. While gas-rich countries and states have said “no” to pipelines, those with hydel power potential have welcomed US investment and offered to sell cheap power to mainland India, where a huge deficit is expected within the next few years. Nepal´s Foreign Minister Kamal Thapa told the investors´ conference that his country had a hydel power potential of 83,000 MW against a projected local demand of 750 MW by the year 2000. “But we are keen to generate cheap hydel power for sale to India´s northern grid, which is expected to face a power deficit of around 20,000 MW by the turn of the century,” Thapa said. In the meantime, India´s northeastern state of Arunachal Pradesh, on the border with China and with a hydel power potential similar to that of Nepal, was rolling out the red carpet for Enron. “They are sending a team to our state soon. We promise them cheap hydel power without human displacement because our density of population is the lowest in India and all our proposed schemes are run-of-the-river types,” said Arunachal Pradesh´s Power Secretary Bhaskar Kulbhe. “I am indeed excited by the prospects this state has to offer,” said Enron´s chief executive Rebecca Marks. To ensure that their grand ´vision´ for the northeastern quadrant of South Asia takes off, Marks and her cohorts may have to make marginal compromises and pick up some lessons early on: promote some industries locally, and don´t off all the resources for some fancy growth zones.