The cabinet committee on economic affairs is set to approve inking an overvalued LNG terminal deal Tuesday, which will eventually entail huge cost overruns for the import of the fuel, a top official said Saturday.
He said the government will have to spend an estimated $2.7 billion or Tk 211 billion per annum to foot the bill for importing around 500 million-cubic-foot-per-day (mmcfd) equivalent of liquefied natural gas (LNG).
Of the total estimated costs, $2.58 billion will be required to import LNG and $90.16 million to meet the terminal charge, said the official of the Energy and Mineral Resources Division under the ministry of power, energy and mineral resources (MPEMR).
The spending breaks down as: $ 17.10 per mcf (1,000 cubic feet) at transmission end with the import costs of $ 14 per unit (1 mcf), operation fee for providing storage and re-gasification service of $ 0.49 per unit and freight charges (delivery ex-ship).
But the cost of LNG, as estimated, is much higher compared to the current downturn in global prices of the fuel, industry-insiders said
Currently, the United States is selling LNG at around $9.60 per unit for European markets and $11.69 per unit for the markets in the Asia-Pacific region, they pointed out.
There are also signs for further slide of the gas prices on the global market as the current LNG market is oversupplied, analysts said.
Country's average electricity generation costs from gas-fired power plants, which accounts for 66 per cent of the overall generation, will double to Tk 4.37 per unit (1 kilowatt-hour) from the existing Tk 2.20 per unit, if the planned quantity of imported LNG is used for power production, they added.
The existing average price of gas at the user end will also almost triple to $4.30 per unit from $1.60 as a consequence, they said.
Currently the government purchases over half the overall natural gas production from the international oil companies (IOCs) at an average price of around $2.60 per unit. But the price of indigenous output is only around 10 US cents per unit.
When contacted, Professor M Tamim of Bangladesh University of Engineering and Technology (BUET) stressed the need for caution before striking any deal regarding LNG import.
The government should study the prices of LNG on the international market first, he suggested.
The government can go for both inking long-term contract and spot market having different proportions to get the maximum benefit of the sliding prices of LNG, he said.
"Otherwise there will be a serious financial crisis in the country's overall economy as well as in the energy sector," he warned.
Officials said in line with a proposal from the MPEMR the cabinet committee might approve awarding the deal to US consortium of Astra Oil and Excelerate Energy for building the country's first LNG terminal at Moheshkhali island in the Bay of Bengal.
As planned, the terminal will have floating storage and re-gasification unit (FSRU).
The floating LNG-import terminal will have a capacity to handle 5 million tonnes of LNG per year and a re-gasification capacity of at least 500 million cubic feet per day (mmcfd).
It will have berthing and mooring facilities for LNG vessels with a capacity of 138,000-260,000 cubic meters, with the construction contract to be awarded on a build-own-operate-transfer basis for 15 years.
Earlier on June 26, state-owned Petrobangla entered into an initial deal with the US consortium, four years after the initial bidding.
The consortium would carry out geotechnical study and complete detailed engineering design as per the initial agreement. It will also build the terminal within 16 months of signing the final deal.
"The consortium's investment might be around $500 million to build the facility," said a Petrobangla official.
The government also extended a memorandum of understanding with Qatar over the import of 4.0 million tonnes of LNG per year, which expired in March 2013, until June 2015.
azizjst@yahoo.com
