Gas tariff mechanism being devised to cover imported LNG

The government is working to devise a mechanism for bringing under the country's existing natural gas tariff structure  the import of expensive liquefied natural gas (LNG) for use by consumers in the country, said officials.
"We have started the work as we have a target to import LNG for its commercial use within the next two years," Petrobangla chairman Istiaque Ahmad told the FE Thursday.
He said the government is now reviewing two options of integrating the expensive LNG into existing gas tariff. These are to blend expensive LNG with  available cheap natural gas in the existing national gas grid and then sort out an average - or to dedicate LNG for use in special sectors like selective industries, export processing zones and economic zones.
"We are yet to finalise it," said Mr Ahmad.
The government has set a target to initiate supply of natural gas to consumers from imported re-gasified LNG by 2017 to meet mounting demand in industries, power plants and fertiliser factories. It has been working to build several terminals to import LNG for use.
State-run Petrobangla in January this year inked a term sheet for terminal-use agreement with US Excelerate Energy Ltd Partnership to initiate the process of building the country's first floating LNG terminal at Moheshkhali island aiming to import around 500 million cubic feet per day (mmcfd) of re-gasified LNG.
Separately, Bangladesh's state-run Power Cell has been working to build an onshore LNG terminal at Matarbari on Moheshkhali Island in the Bay of Bengal.
State-run North West Power Generation Company Ltd is also in talks with Indian H Energy and GAIL to import re-gasified LNG to run a 750-megawatt (MW) LNG-based combined cycle power project (CCPP) in Khulna.
India's Reliance Power Ltd inked a memorandum of understanding (MoU) with Bangladesh in June this year to develop a 3,000 MW LNG-based CCPP along with a LNG terminal to supply re-gasified LNG to the power project.
Officials said Petrobangla estimated probable impact over natural gas tariff after import of only 500 mmcfd natural gas through the proposed Excelerate Energy operated LNG terminal at Moheshkhali.
The government will have to spend an estimated $2.7 billion (Tk 211 billion) per year to foot the bill for importing around 500 mmcfd equivalent of re-gasified LNG, the estimation revealed.
Of the total, $2.58 billion will be required to import LNG and $90.16 million to meet LNG terminal charges.
This will almost triple the country's weighted average natural gas price for consumers to $4.39 per Mcf (1,000 cubic feet) from the current $1.60 per Mcf.
The import cost of the LNG has been estimated at $17.10 per Mcf at the transmission end with import cost of $14 per Mcf.
Operation fee for providing storage and re-gasification service would be $ 0.49 per Mcf, it estimated.
Bangladesh currently produces around 2, 700 mmcfd of natural gas, but has to buy around 52 per cent of it from the international oil companies (IOCs) operated fields, at an average price of around $2.62 per Mcf.
 It gets the rest from local gas field operators paying a nominal 10 cents per Mcf and also some supply free of cost under contract terms, the official said.
     The government then supplies this gas to state-owned gas-fired power plants and fertiliser factories at a subsidised rate of $1.0 per Mcf and to private power plants and factories at $2.2 per Mcf.
The existing average price of gas at the user end will also almost triple to $4.39 per Mcf from $1.60 as a consequence, it stated.
At the consumer level, the average electricity tariff would go up to around Tk 10 per unit (1 kilowatt-hour) from existing Tk 6.40 per unit.
The 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 from the existing Tk 2.20 per unit if the planned quantity of imported LNG is used for power production, they added.
mazizur.rahman@outlook.com