The energy ministry has sought the government's approval to build an LNG terminal, and import gas for $17.1 per million cubic feet (mmcf), 10 times the national gas sales price. Though very costly, the import of Liquefied Natural Gas (LNG) would ensure the country's energy security in the long run. If LNG is mixed with local gas, the average cost of gas will rise to $4.39 per mmcfd from $1.7 now,
implying that the government will have to hike gas prices in future. The ministry last week sent a proposal to the Cabinet Committee on Economic Affairs for approving an unsolicited deal with American-Singaporean consortium of Astra and Excelerate (AEC) under the government's special act for quick supply of power and energy, 2010. Once the committee approves the ministry's proposal, Petrobangla will sign an agreement with the AEC for setting up the terminal. The AEC would install the terminal in Maheshkhali to facilitate LNG import from Qatar with which Bangladesh signed a memorandum of understanding in 2011. The government would have to spend around $2.7 billion annually for importing 500 million cubic feet per day (mmcfd) LNG and using the floating terminal. Advertisement For the last one decade, the country faced a shortfall of around 500 mmcfd gas. As per the forecast, this would persist even if the country adds new gas to the national grid from its own resources in the coming years. The AEC and two other companies -- Hiranandani Electricity Private Ltd, India and Samsung C&T Corporation, South Korea -- submitted proposals to Petrobangla through an open tender more than three years ago for building the terminal. However, Petrobangla's tender evaluation committee found all the proposals “non-responsive”, said energy ministry officials. Though the LNG terminal is among the government's top priority projects, Petrobangla couldn't make any headway with it. Finally, it picked the AEC's offer as the other two missed many details. Petrobangla was so ill-equipped to handle the LNG terminal project that earlier this year it realised it didn't have a model agreement to negotiate with the AEC. It then asked the company to provide one. When the company did so, Petrobangla sent it to its legal panel for checking its compliance with Bangladesh laws. The AEC proposed building the terminal for around $300 million and operating it for 15 years before handing it over to the government. According to the AEC proposal, if four million tonnes of LNG is imported from Qatar a year, the price of per mmcfd LNG would be $14, including delivery and shipping costs. With duty, tax and other expenses added, the cost would be $17.10 per mmcfd at the delivery point. The AEC sought a service charge of $56 cents per mmcfd gas for utilising the LNG terminal and ship services. The consortium also proposed it be given a service charge for sitting idle in case the government doesn't import LNG after the terminal's construction. The energy ministry analysed the AEC proposal and explained the cost implication. In its proposal to the cabinet committee, the ministry noted that the estimated diesel import price was Tk 74 a litre; and when a combined cycle power plant used it, the cost of electricity stood at Tk 16.13 per unit. If diesel is replaced by LNG in producing electricity, the price would be Tk 9.4 per unit. And if LNG is mixed with local gas, electricity price would be Tk 4.37 per unit. For awarding the contract to the AEC, the government would have to give the company a Sovereign Guarantee to help it get credit from international financiers, the energy ministry pointed out. If everything goes smoothly, it would be possible to supply gas from the floating LNG terminal by mid-2016. The ministry proposal said the country may face a severe gas crisis as gas reserve will decrease in the coming years. It identified imported LNG as a major alternative source of gas. Qatar tops the list of countries supplying LNG. Japan, South Korea and India have been importing LNG from Qatar under 15-20 year agreements, it said. The ministry also noted that the government had already decided to set up a transmission line from the LNG terminal at Maheshkhali to Anwara for supplying gas to Chittagong. The project is now in process.
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