The Petrobangla and Singapore-based Astra Oil and Excelerate Energy consortium (AE) initialled on June 26, 2014 an agreement for setting up of a floating storage and re-gasification (FSRU) unit (or liquefied natural gas terminal) at Moheshkhali, Cox's Bazar. The final agreement is expected to be signed after the government's approval.
As per the deal, the consortium (AE) will install the LNG terminal and other associated facilities within 16 months' period. The Petrobangla expects the LNG terminal to import from international market approximately 500 mmcfd equivalent natural gas to feed the domestic market. The Petrobangla Chairman hoped that from June 2015, his organisation will be in a position to start importing LNG (liquefied natural gas) and thus can reduce the rapidly growing demand and supply gaps for natural gas in the country.
As per the present estimate, per unit of gas can be delivered through the LNG terminal at a cost of US$16-18 (presently the natural gas supplied from domestic sources including the IOC share of gas) against the average cost for domestically-produced gas at approximately US$2 per unit.
As per published reports, the Petrobangla will be required to pay 0.474 US cents per mmbtu (million metric British thermal units) for FSRU under a build-own-operate-transfer basis for 15 years. The LNG storage capacity of FSRU is estimated to be 1,38,000 cubic meters.
In addition, media reports said that the Petrobangla agreed to pay the port service charges and tax on behalf of AE during the operation period of the LNG terminal. Separately, state-owned Gas Transmission Company Limited (GTCL) moved to lay a 91km long Moheshkhali-Anowara gas transmission pipeline to carry re-gasified LNG from the terminal to the shore. Although the Petrobangla intended to start LNG import from 2013, for various reasons, such an initiative could not be implemented so far.
Import of LNG is no way desirable but is a compelling requirement for the government as gas supply security can no more be provided to the consumers depending on local production alone. The energy sector has been enjoying peak production of gas resources now and within the next couple of years, gas production has been heading to decline gradually.
Our consumers may pray for large-size gas field discovery in the country but such discoveries automatically will not occur. The government policymakers are unwilling to open oil and gas exploration initiatives to foreign investment companies. As of now, IOCs (international oil companies) are allowed to invest in the offshore oil and gas blocks for exploration and if successful, for production within the PSC (production sharing contract) framework.
International oil companies feel less attracted to offshore exploration as Bangladesh can provide no attractive geological data nor is it ready to offer attractive investment incentives for IOCs willing to invest in deep offshore oil and gas exploration business. Some speculative information published in the media suggests that one of the IOCs (Conocophilips) working in the deep sea oil and gas blocks within the scope of the PSC has urged the Petrobangla to revise further the PSC terms and conditions including increasing gas price in favour of the investment company. The IOCs are required to take risk and invest significant capital for successfully discovering and for production and supply of gas to the Bangladesh market from deep sea prospective locations.
Unless large investment and taking risks are balanced with attractive returns and good incentives, there will be less enthusiasm for investment and mobilisation for advanced technology. The state-owned Bangladesh Petroleum Exploration Company (BAPEX) so far could not mobilise resources to invest risk capitals for systematic exploration works in the Chittagong Hill Tracts area. Exploration efforts there indicate that the success ratio for discovering oil and gas in the hilly region is not very attractive.
If the general expectation for success in exploration drilling for oil and gas in the onshore areas stands somewhere 3:1, in the Chittagong Hill Tracts the ratio stands at 12:1. That is one of the reasons for the BAPEX for not getting enough capital from the government exchequer as the decision-makers are less interested in allocating capital for the BAPEX for risky exploration businesses. As a result, the vast Chittagong Hill Tracts area remains less explored so far. There is little initiative from the government for encouraging massive exploration activities there. On the other hand, the government is unwilling so far to allow IOC investment in the Chittagong hill districts as the area belongs to onshore category. At the same time, the Chittagong Hill Tracts area remains significantly less but potentially attractive locations for searching oil and gas deposits.
Chittagong has been suffering from chronic supply shortage of gas and gradually the surplus gas will become scarce in the producing fields to divert them to the area. The existing gas pipelines have their limitations to carry more gas to Chittagong area. But huge infrastructural investment for developing pipelines to carry more gas from the producing gas fields to the gas-hungry consumer areas is needed. If local gas cannot sustainably be supplied to Chittagong particularly and for the country in general, for long term the LNG import becomes a dire necessity. At the same time, the huge price gap between the local gas and imported LNG will lead to increased government subsidy and to price hike of primary and secondary energy sources.
It is now for the consumers to make a choice whether they will agree to pay significantly increased gas price or allow the government to allocate more and more subsidy for energy products. The policy planners will also have to calculate how much increased subsidy loads can be absorbed by the country not challenging the budget discipline.
The writer, a mining engineer,
focuses on energy and
environment issues.
musfiq41@yahoo.com
LNG import: A difficult choice
Mushfiqur Rahman | Published: July 01, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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