Petrobangla, the state-run oil, gas and mineral corporation, signed a “Term sheet for terminal use agreement” with Excelerate Energy Limited Partnership, a Singapore-based US company, at Petrobangla auditorium in the city on Wednesday to install the country’s first floating LNG terminal in Cox’s Bazar.
The LNG stands for liquefied natural gas.
The government needs to spend about $2.7 billion excluding $2.58 billion for LNG import and around $90.16 million for usage of the Floating Storage and Re-gasification Unit (FSRU) on a BOOT (build-own-operate-transfer) basis.
Under the agreement the company will complete a metocean(meteorological and oceanographic) study, supported by the IFC, a sister concern of the World Bank, within next six months and submit its report to Petrobangla.
However, upon scrutiny of the report Petrobangla will sign the final agreement with the company for next 15 years under which the latter will complete a Geo-Technical Study and Detail Engineering Design and establish the much-awaited floating LNG terminal at Maheshkhali under Cox’s Bazar district within next 16 months.
“It is beginning of the beginning. We need to do a metocean study first ?..the cost of metocean study would be borne by the company and upon examination of other issues we would ink the final deal,” Energy Adviser Dr. Tawfiq-e-Elahi Chowdhury told The Daily Observer following the signing of the agreement. State Minister for Power, Energy and Mineral Resources was also present at the signing ceremony.
If Petrobangla signs the final deal with the company then the overall cost of per unit (million cubic feet – mmcfd in short) of gas would be $4.39, up from earlier estimation of $1.60 per mmcfd, considering import of LNG during the year.
The new rate has been calculated considering the daily cost on import of 500 mmcfd of LNG and production cost of 2500 mmcfd of gas from local fields.
The Cabinet Committee on Government Purchase (CCGP) approved the energy ministry’s proposal on January 14 where it said that the import cost of per unit of LNG would be $14 and an amount of $0.39 would be added as bottling charge.
Besides, advance income tax (AIT) and value added tax (VAT) would total to $2.61, which will push per unit cost up to $17.10 as per estimation of the Energy and Mineral Resources Division on impact on LNG import in 2017.
The average gas production cost is estimated at $1.60 per unit which would be $4.39 after mixture of LNG.
“We do not have enough gas to help fulfill the vision for achieving a middle income status for the country. So we need to go for energy mix and LNG import is one of that, the adviser said.
The government has planned to mix this gas with local one and make rationality in the gas pricing. In that case, energy experts said the overall gas supply price will go up to $4.37 per unit which is about double of the present price. However, the government will buy the gas from the terminal on a “Take or Pay” basis.
Taking part in the discussion the State Minister said that the proposed terminal will be a landmark in Bangladesh’s energy sector as it will help us address growing demand at home.
Officials said the draft deal was inked between Petrobangla and the US firm — Astra Oil & Excelerate Energy Consortium — on June 26, 2014 to set up the FSRU based LNG terminal by 2016 at a location, 5-10 km off Maheshkhali Island in Cox’s Bazar.
After a long negotiation process, the sources said, both parties initialed a ‘term sheet’ for the project. Prior to moving for the project, the government, however, signed a memorandum of understanding (MoU) with Qatar four years ago to import LNG.
At the draft deal signing ceremony, the State Minister said the LNG terminal will be operational by June 2017 if everything goes well.
Once the project is implemented, Bangladesh will import LNG from Qatar and finally the imported LNG at the transmission end will cost US$17.10, equivalent to Tk 1333, per unit (each thousand cubic feet or MCF), said a proposal placed by the Energy Division to the Cabinet body meeting.
Of this cost, Bangladesh will need to import 4 million cubic feet of LNG from the Gulf country at an estimated price of US$ 14 per thousand cubic feet (mcf) or per unit price as delivery ex-ship value, the proposal said.
“The LNG terminal operator will charge $0.49 per mcf for re-gasification. After paying AIT and VAT, the price of per unit gas will be US$ 17.10,” said the proposal of the Energy Division.
The Astra Oil & Excelerate Energy Consortium will operate the project for 15 years and it will charge $ 0.41 per mmbtu (British thermal unit) gas for re-gasification of the imported LNG. With other charges, the cost will, however, go up to $ 0.47 per mmbtu. But earlier it asked $0.39 for per mmbtu
The FSRU terminal will have a storage capacity of 138,000-square metre LNG. The project will supply 500 mmcfd of gas to the national gas transmission network.
At present, the country’s average gas production and supply cost is $1.6 per unit after purchase of gas from the international oil companies (IOCs). The government supplies gas at $1.0 per unit to state-owned power plants. The gas price is $2.2 per unit for private sector plants, particularly to independent power producer (IPP) plants.
The government is currently buying gas from IOCs at $2.6 per unit. After mixing its own gas with the purchased one, the average production cost of natural gas stands at $1.6 per unit.
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