Petrobangla signs deal with US consortium

State-owned Peterobangla has finally inked Thursday an initial deal with the US consortium of Astra Oil and Excelerate Energy, four years after the bidding, to build the country's first liquefied natural gas (LNG) terminal at Moheshkhali island.
The US consortium will build the floating storage and re-gasification unit (FSRU) based terminal at its own cost, while Petrobangla will provide toll for using it, Prime Minister's Energy Adviser Dr Tawfiq-e-Elahi Chowdhury said.
Petrobangla successfully completed negotiation with the visiting delegation of a US consortium Wednesday after a series of negotiations over the past several years.
Petrobangla will provide fees to the US consortium on the basis of take or pay basis.
As per the initial agreement, Petrobangla woul provide $0.41 per mmbtu (1.0 million British thermal unit) as a processing fee to cover installation costs of the LNG terminal.
It would stand at $0.474 per mmbtu including other services which include fixed component of toll worth US$1,59,186 per day, operating component, $45,814 per day and other service component of $32,000 per day.
Gross annual payment to be made to the US consortium would be $90.16 million.
The LNG terminal project would be tax-free.
The US consortium would carry out Met-ocean study of the project.
Petrobangla would ink a 15-year 'terminal use agreement' deal with the consortium after legal vetting and subsequent approval from the cabinet committee on government purchase.
The consortium would carry out geo-technical study and complete detailed engineering design as per the initial agreement.
The consortium would build the terminal within 16 months of signing the final deal.
The consortium would be required to invest around $500 million to build the facility, said Petrobangla Chairman Dr Hussain Monsur.
Speaking on the occasion, the energy adviser spelled out the Prime Minister's strategic vision to exploit onshore and offshore hydrocarbon resources, import necessary fuel and ensure it as cost-effective.
Building the LNG terminal would be the first step to import natural gas, he said.
State Minister for Power, Energy and Mineral Resources Nasrul Hamid said the domestic price of natural gas would be hiked in future to cope with the mounting costs.
Supplying high-cost natural gas to households would not be cost-effective, he said.
Senior Secretary of Energy and Mineral Resources Division, Md Mozammel Haque Khan, said that this is a necessary step to ensure the country's future natural gas demand considering the fast depletion of domestic reserve.
Director, Project Origination of Excelerate Energy Sampo Suvisaari said the US consortium is looking forward to build the terminal in Bangladesh, which is an important user of natural gas.
"Our firm is young one but the pioneer in building floating LNG terminal," he said.
The US consortium would build a two to three kilometers subsea pipeline from the proposed floating LNG terminal to facilitate delivery of re-gasified natural gas to the user ends, said the official.
The US consortium has agreed to pay a US$2.0 million bid bond and a penalty if it fails to provide the required services and to furnish a $20 million performance guarantee. Petrobangla has agreed to provide maintenance fees to the US consortium to keep the proposed LNG terminal operative until LNG import starts.
The fee would cover the cost of maintaining a completed terminal in the event there was a delay in the start of LNG imports, the official said.
Petrobangla initially floated tender to build the terminal in 2010.
The floating LNG import terminal would have the capacity to handle 5.0 million tonnes per year of LNG and a regasification capacity of at least 500 million cubic feet per day (mmcfd) at Moheshkhali Island in the Bay of Bengal.
It will have berthing and mooring facilities for LNG vessels with a capacity of 138,000-260,000 cubic meters. The contractor will implement the project on a build-own-operate-transfer basis for 15 years.
International Finance Corporation (IFC) would invest in this project.