LNG terminal construction and gas price

Building a terminal for conversion of imported liquefied natural gas (LNG) to natural fuel gas for supply to the national grid is a prioritised project of the present government. Petrobangla initiated this project by inviting international bidders in January 2010 to bid for building the LNG terminal and its re-gasification facilities within 18 months on Build, Own, Operate and Transfer (BOOT) basis. Petrobangla also got response from some companies in this connection. In the initial stage Petrobangla reportedly selected six bidders for furthering the negotiations. They were: Gas de France, Golar LNG Energy Management of Singapore, Teekay Shipping Canada, Vitol Singapore, Samsung C&T Corporation of South Korea, a joint venture of Astra Oil (the Netherlands) and Excelerate (USA), and Hiranandi Electricity Pvt Ltd of India with Hoegth LNG, Norway, and BW Gas Norway.
Subsequently, Petrobangla shortlisted the Excelerate Energy-Astra consortium, as it met nearly all the bidding conditions of Petrobangla. The other bidders submitted incomplete or brief proposals.
Petrobangla in its pre-bid meeting suggested potential bidders not to bid if they were unable to complete the project within the stipulated timeframe. But the interested companies had a different view as arranging the required investment for the project (approximately USD 300 million) would take more time than Petrobangla anticipated. In addition, construction of the LNG terminal with re-gasification facilities was put on offer for potential foreign investment companies at three overseas 'Road Shows' organised by the Ministry of Energy and Mineral Resources in 2009-2010. The ministry was optimistic that the LNG terminal would be constructed within 2013. But in a recent meeting with the Metropolitan Chamber of Commerce and Industry (MCCI), Finance Minister AMA Muhith hinted that construction of the LNG terminal would be completed within next two years. Once the terminal is commissioned, industrial units in Chittagong will primarily benefit from an additional gas supply.
Unfortunately, no significant progress was made in the selection of the company for the project and finalising contracts for construction of the LNG terminal with floating LNG storage and re-gasification facilities. The government could not decide whether to agree on the potential bidder's conditions, including allocation of a longer period of time (approximately 24 to 30 months) for construction of the terminal and other facilities.
In the meantime, the government started searching for potential sources of LNG for import. High-level visits confirmed signing of a memorandum of understanding (MoU) with Qatar in January, 2011 for importing 500 mmcfd LNG on mutually-agreed terms on commissioning the terminal, connecting pipeline and other facilities. As the necessary infrastructure is yet to be constructed, Bangladesh has extended the MoU with Qatar until June 2015.
The government acquired land at Maheshkhali for the LNG terminal project. The Gas Transmission Company Ltd (GTCL) has started taking necessary preparation for installing a 91-km long and 30-inch-diameter pipeline connecting Maheshkhali of Cox's Bazar with Anwara of Chittagong. The cost for installing the pipeline was initially estimated at Tk 10,250 million as reported in February last. The report also said that the Planning Commission raised questions about justification of estimating the cost without a proper feasibility study and in the absence of environmental clearance from the Department of Environment. The Planning Commission advised the Energy and Mineral Resources Division to resubmit the project for its approval after doing the necessary study and obtaining the environmental clearance as required by the existing regulations. Now Petrobangla expects to further negotiations with the joint venture between Astra Oil (Netherlands) and Excelerate (USA) for implementing the project.
The Excelerate Energy-Astra consortium offered in its proposal to invest for the project and sought to realise the investment cost in 15 years by charging $ 0.39 for processing every million cubic feet of gas and agreed in principle to transfer it without any further charge. The proposal also included construction of the terminal along with berthing and mooring facilities for LNG vessels having a capacity of 138,000-260,000 cubic metres each.
Petrobangla intends to negotiate the investment terms and finalise contract with the Astra-Excelerate joint venture in early April next.
As LNG import has become very much necessary for balancing the primary fuel mix in the country, Bangladesh needs to prepare for the high costs of such imports. According to concerned quarters, it is projected that  import of 500 mmcfd LNG at the rate of $ 15/million cubic feet will cost $ 2.75 billion annually. Therefore, Petrobangla considers the option of blending the imported LNG (re-gasified and supplied to the gas grid) with locally-available 'cheaper' natural gas. But Petrobangla is already under serious pressure to increase the gas price. Last year Petrobangla tried to get the price adjusted for recouping at least the production cost of gas from the producing fields and for reducing the amount of subsidy. Petrobangla proposed raising the domestic gas price by 100 per cent and the price of gas for other consumers 30-40 per cent. But finally the initiative was stalled. Now, when the Bangladesh Energy Regulatory Commission is holding public hearing on power tariff adjustment based on proposals from the Bangladesh Power Development Board and its subsidiaries, Petrobangla is  trying to take a move to get the government's nod for raising gas prices as it is becoming inevitable.
The author is a mining engineer.               He writes on energy and                         environment issue. mushfiq41@yahoo.com