By M Rijal & Gaurav Aryal
The present contribution of mines and mineral industries to Nepal’s GDP stands at around 2.4 per cent and it may rise to as high as 15 per cent in the next 10 years.
“We are talking about the previously identified mineral resources only,” says Krishna Prasad Kafle, a geologist and mines expert. “Once new mineral resources like petroleum are discovered, the contribution to GDP will far exceed even the present forecast of 15 per cent.”
The future might look bright; the present situation, however, is still bleak. The fact is that Nepal is a net importer of gold, silver, copper, lead, zinc, iron and steel, aluminum, gypsum, salt, petroleum and high grade coal, among other minerals and mine-based products. “We can change the situation,” adds Kafle. “Nepal has tremendous mining prospects – let’s not doubt this fact. The geology of Nepal itself is the evidence to it.”
Petroleum Prospects
Sporadic oil exploration works in Nepal were first recorded in the 1930s. However, the first drilling was done only in 1989 in Radhanagar, near the eastern city of Biratnagar. The place is now Ward No 9 of Bahune VDC in Morang district (see picture). Netherland’s Shell Company was involved in the drilling. The company drilled some 3520 metres beneath, but the “well” was found dry.
“Only if the company had gone little bit deeper, there was a chance to discover the hydrocarbon (petroleum) deposits,” claims a geologist on condition of anonymity. “As fate would have it, India had imposed economic blockade on Nepal at the same time. Drilling machineries had to be imported from India. The total daily operating cost of drilling sky-rocketed to as high as Rs 30 to 35 thousand (not adjusted with inflation). The company ultimately abandoned its plan of going deeper.”
The Petroleum Exploration Promotion Project was set up within the Department of Mines and Geology. It gave momentum to exploration. So far, the Project has performed Airborne Magnetic Survey in 48 thousand sq km, photo-geological study in 60 thousand sq km, Reflection Seismic Survey in some 5 thousand line km, Gravity Survey in the entire Terai region, and Source and Seal Study in entire Nepal. Most significantly, the Department identified 10 probable petroleum deposits blocks in 1985.
“Nepal’s whole Terai and Churia range are the most potential petroleum blocks in Nepal,” says Shyam Bahadur KC, the Acting Project Chief. “This is the region constituting all 10 blocks identified for oil exploration.” Each block is of some 5 thousand sq km in area and is named from the west to the east (see Table 1). The Nepalgunj and Chitwan Blocks (3 and 5, respectively) were leased to Texana Resources, Huston, USA in 1998. But the company postponed exploration works in 2000 citing security reasons. The company is said to have almost completed preparing various maps but has not revealed further as to what would be next. Five Blocks - 1, 2, 4, 6 and 7, respectively, were awarded to UK-based Cairns Energy in 2004. The company postponed works for four years and resumed in December 2009. The company is involved in developing the complete maps first. As for the remaining three Blocks - 8, 9 and 10, the government is preparing to award contracts through a bidding process most probably in the next fiscal year (2011/12).
As for the reasons for so many researches-planned focusing on the Terai and adjoining Churia range, the geologists have firm belief that Nepal’s Terai is similar in geography to the sub-Himalayan plains of Pakistan and India where hydrocarbon deposits were discovered and are extracted on commercial scale. The Potwar Basin of Pakistan and Digboy of Assam in India are mining hubs in the sub-Himalayan region. “From among the 10 Blocks, if we discover even a single medium size oil well, it can transform the economy of Nepal beyond anybody’s imagination,” KC asserts in an optimistic tone.
The evidence of Nepal’s hydrocarbon deposits can be seen as the gas and oil seepages in various parts of Dailekh district in mid-west Nepal. For instance, the oil seeps at Padukasthan represent “biodegraded” light oil with geological source, whereas the gas seeps at Navisthan and Sristhan are of “thermogenic” origin, according to geologists. Further, the proportion of higher “homologs (C2-C5)” in the seepages of Dailekh district suggests gases associated with oil. The threat, however, in terms of capitalizing the potential hidden oil wells is that “hydrocarbon deposits are mobile by nature”. If not tapped in time, the whole petroleum reserves may move from one place to another even crossing the man-made boundary of any country – this is what most of the geologists fear in Nepal.
Cement: On the Way to Abundance
Among all non-metallic minerals, excavation of limestone – the basic element to produce cement, has increased substantially in the recent years. Limestone is in abundance in the country and predictions are that Nepal has a chance to be fully self-dependant on cement by the next seven months (August 2011). Some six new industries are coming to the fore, in addition to the existing 30 cement industries. “We can now be hopeful that the domestic industries may fully sustain the demand for cement,” says Dhruba Thapa, Vice President, Nepal Cement Industries’ Association. The industries, however, still have to import clinker, which is produced from limestone and used for cement production, from India. As of today, some 30 companies have received limestone mining permission from the Department of Mines and Geology, whereas 167 companies have received the limestone prospecting (exploration) license from the Department. And more than 60 companies have received the license to operate a cement industry from the Department of Industry. In Nepal, the volume of limestone deposits (of cement grade) is believed to be over 1.25 billion metric tons, according to the Department sources.
As for other non-metallic mineral resources except cement, there are possibilities for unearthing dolomite, phosphorite, magnesite, talc, mica, ceramic clay / red clay, silica sand, salt, barites, calcite deposit and diatomite, etc, from various parts of the country. There are also possibilities for mining precious and semi-precious gemstones such as tourmaline, beryl / aquamarine, garnets, kyanites, rubies / sapphire and quartz crystals. Decorative stones such as marble, granites, quartzites and slate can also be mined. Construction materials such as boulders, cobbles and pebbles are also in plenty while fuel mineral like coal too has commercial prospect. As for the operating mines, there are a few in the country. For instance, mining of marble is being done from Godavari (Lalitpur) and Anekot (Kavre); pebbles are mined from almost every riverside and low-hills and are even exported to India’s booming construction industry.
The Metallic Minerals
In Nepal, the iron ore prospects and deposits are reported in 85 locations and the copper in 107 locations, zinc and lead in 49 locations, cobalt at least in 4 locations and nickel in at least 5 locations. At present, a Chinese company is involved in the mining of iron in Thoshe, Ramechhap. As for gold, there is no mine in operation as of today, but it is frequently winnowed out from the gravel and sediments of around a dozen rivers like Mahakali, Bheri, Rapti, Kaligandaki and Sunkoshi. Primary gold occurrences have been reported from Lungri Khola area in Rolpa; Banga Bagar, Gorang and Jamari Gad in Baitadi; and Bamangau in Dadeldhura. These areas are, however, yet to be explored extensively. The Department of Mines and Geology thinks that once the mining licenses are issued, the mines will automatically get the status of “operating mines”. As the Department has no mechanism to cross-check the facts going to the field, there is a compulsion to assume that the license holder mines are really operating. Same is the case for gold and other minerals. Two licenses have been issued to mine gold and are taken as the operating mines in the Department’s list without further evidence.
As for Uranium, which is radioactive and so, a highly valued mineral, is also reported to have some deposits in Nepal. The sites are Jagati in Bhaktapur and Shiva Puri area in Kathmandu; Tin Bhangaley, Chandi Khola and Chiruwa Khola in Makwanpur; Buka Khola in Sindhuli; Janmari Gad, Banga Bagar and Gorang in Baitadi; and some traces in Chameliya river in Darchula. “Among the potential uranium sites, Tin Bhangaley (Makwanpur) and Gorang (Baitadi) prospects appear attractive, but economic evaluation of these sites are yet to be performed,” says geologist Kafle.
Methane Gas and Other Minerals
Kathmandu valley that incorporates three districts of Kathmandu, Lalitpur and Bhaktapur is rich in methane gas deposits. The Department of Mines and Geology explored this gas in 26 sq km area in the valley and it was proved that 316 million cubic metre of methane gas deposit is available for commercial purpose. But it still remains unexploited.
Nepal is also affluent in other miscellaneous mineral resources. For instance, there are some 23 geothermal hot springs in Nepal. They are found in the vicinities of rivers like Mahakali, Marshyangdi, Trishuli, Kodari and Surai Khola, among others. The temperature of the hot spring water remains generally in between 40°C to 115°C. The hot springs can be utilized for tourism purpose, as people enjoy taking a bath into it. It is also believed that the hot springs have the healing power in illnesses like backache and arthritis. Thermal electricity can also be produced from the hot springs with the help of technologies.
The Challenges
Nepal’s mineral resources themselves have become the curse, says geologist Kafle. “From mountain to Terai, minerals are scattered all over the country. But we have failed to cash in them. Otherwise, we would have made remarkable economic progresses,” adds he. “Mineral exploration, mine development and establishment of a mineral based industry normally require large investment, sound technical know-how and long gestation period. We lack these all.”
It’s a fact, in a money-crunch country like ours, Foreign Direct Investment is a must to explore and utilize petroleum and other mineral resources, says another geologist KC. “The government of Nepal is not able to sufficiently finance the research and exploration of the mines and minerals. Usually the government provides the Department with Rs 3 to 3.5 million annually. This amount is not enough for us,” adds he. “ On the other hand, it is a global practice that the government rather than doing the exploration works by itself, invites companies for the exploration and investment. Even the powerful countries like USA, Norway, Saudi Arabia, etc invite the companies for the investment.”
Further, there are high risk, uncertainty and long return period involved in mineral exploration and mining. And if the private sector is to invest in it, the government must develop infrastructures like road, electricity and telecom in the mineral deposit sites.
Yet another biggest problem is that the three laws of Nepal - Mines and Minerals Act, Forestry Act and Local Self Governance Act contradict with each other. For instance, the forest authorities impose tax on everything inside a forest, while the mining authorities say it is different and come under the mining rules and regulations. And the local government bodies such as District Development Committees (DDCs), Village Development Committees (VDCs) and municipalities claim the same taxation rights over the same resources. It is imperative that, to clear ambiguities, the government must make one window policy of tax mobilization vis-à-vis mines and minerals.
The Way Ahead
Capable technicians at the Department of Mines and Geology are frequently leaving the country in absence of career prospects and there is no significant entry of new technical manpower at the Department. Such a situation may cause severe hindrance to mining activities in the country. Further, the haphazard pebble and gravel mining activities, such as those in Nallu, Lele and Chapagaun villages of southern Lalitpur may lead to environmental degradation. Development should always be healthy, balanced and eco-friendly.
For public scrutiny, it is extremely difficult to extract information from the Department and to some extent, from the Department of Industry. Mines and mineral related information should not be stored but disseminated and exposed through publications and media campaign on a regular basis. Mining potentials must be publicised so as to lure the potential investors and create awareness among the policymakers. This very thing is lacking in Nepal.
At least for the moment, only if the petroleum exploration works in the 7 leased blocks could enter the phase of drilling; it could be a silver lining to all those who wish to see the works moving ahead on a fast track
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