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Gas supply to soar by 500 mmcfd from Apr

Price spike feared despite tax waiver

February 03, 2018 00:00:00

The country's gas supply is likely to increase by 500 million cubic feet a day (mmcfd) from April this year amid an apprehension that there might be a substantial rise in price for consumers.

Currently, the gas supply is about 2,550 mmcfd against a demand for over 3,000 mmcfd, reports UNB.

The 500 mmcfd gas will be added to the national gas supply network through import from Qatar and some other countries as Bangladesh's first FSRU (floating storage and regasification unit) is set to go into operation in April next.

A second FSRU will be coming into operation in October to double the supply of imported LNG to 1,000 mmcfd, officials at the Energy Division and state-owned Petrobangla said.

According to the officials, the average gas supply now costs per cubic metre and is being calculated at Tk 7.21 per cubic meter. Once the costly imported LNG (liquefied natural gas) is blended with the local gas, the supply cost will go up to Tk 18-19 per cubic meter.

"So, it'll be indispensable to adjust the price at the consumer level," said Md Quamruzzaman, managing director of the Rupantarita Prakritik Gas Company Limited (RPGCL).

The state-owned RPGCL, which is responsible for importing LNG and supply it to the national grid, has so far taken a large number of projects.

Among its projects, the installation of the first FSRU of 500 mmcfd LNG regasification capacity at Moheshkhali Island is now nearing completion and scheduled to be commissioned in April next as per the deal signed with its operator, US-based Excelarate Energy.

The second FSRU is being set up by Summit Group in the same area with a schedule for coming into operation from October this year. Its regasification capacity is also 500 mmcfd.

Quamruzzaman said RPGCL was hopeful about timely commissioning of the two FSRUs to increase the supply by 1,000 mmcfd by the year-end.

He said the government had already signed a contract with Qatar's RasGas to get 60 per cent of first phase import of 500 mmcfd LNG, while the remaining 40 per cent will be coming from international LNG spot market through quotation.

Besides, the final deals are being ready for signing with another three companies-Pertamina of Indonesia, OTI of Oman and AOT of Switzerland, to annually import another 3.25 million tonnes of LNG to regasify at the second FSRU to increase the supply by another 500 mmcfd.

"We hope, we'll be able to sign the final deals with the last three companies within the first half of the current year so that they can supply LNG from the beginning of the second FSRU commission," he told the news agency.

When such good news is waiting for the gas-starved industries, the household and other consumers have to be ready to pay for an increased price of gas anytime in the near future as import LNG will push up the overall supply cost.

Officials said the cost of local gas was about $3.0 per mmcfd while the imported variety would cost over $9.0 per mmcfd.

According to the officials, the imported LNG will be re-gasified through FSRU and supplied it to the consumers through blending with the local gas, which ultimately pushes up the overall cost.

After the blending, the current average cost of gas will be Tk 18-19 per cubic metre at the consumer level against the current average cost of Tk 7.21 despite tax waiver of LNG import, said a top official at Petrobangla.

The government has already decided to give tax waiver for gas import to keep the cost low from the calculated cost with tax.

An Energy Division official said that Petrobangla is examining the matter to determine the exact gas cost after the LNG import.

Being directed by the Energy Division, the state-owned gas distribution companies like Titas, Jalalabad and Bakhrabad have already submitted their proposals to Bangladesh Energy Regulatory Commission (BERC) to raise the gas price.

But a top official at the BERC said the regulator ws yet to respond to their proposals. "Possibly, BERC might take steps to adjust gas price after the start of LNG import to see its impact on the local price," he said preferring anonymity.

Finance Minister AMA Muhith and State Minister for Energy Nasrul Hamid on various occasions also dropped broad hints that the government would require to raise gas price after the start of LNG import.

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