Delay in LNG supply to nat’l grid irks govt

FT ONLINE

Resolving energy crisis has become challenging for the government because of repeated failures of the company concerned to supply LNG (liquefied natural gas) into the national grid. In a letter to Excelerate Energy Bangladesh Ltd, Petrobangla has expressed its concern in this regard and demanded late demurrage (LD) as per the contract. Excelerate is currently building the country’s first LNG terminal, also called floating storage and regasification units (FSRU) at the southern island of Maheshkhali. Sources said after several deferrals, the last date to make the FSRU operational was July 9 this year. After that, Excelerate will have to pay huge demurrage to the government, they claimed.

“We've already sent two letters to the US giant because it keeps missing deadlines. But we're ready to come into production as early as possible. Excelerate has damaged its reputation in Bangladesh,” said an energy division official.  As per the contract, Excelerate will pay twice the gasification charge based on total daily capacity (5,00MMscf) of the FSRU as demurrage. The US company was supposed to start the FSRU in the first week of May, but managed to obtain an extension of two months.

Excelerate, however, said its countdown for the 16-month project started from the closing of the financial agreement instead of from the date of signing of the deal with the government. The deal was signed with Petrobangla on July 18, 2016. But the financial agreement was closed in 2017. At that time, the company had announced that the project would start in Moheshkhali in the Bay of Bengal at a project cost of USD 179.5 million.

But there was no scope in the contract for such delay, claimed Petrobangla sources. In a letter issued by Petrobangla to the US company recently, the state-owned oil and gas corporation stated that the imported LNG was facing evaporation losses. This is frustrating business houses and has become a matter of concern for the government. So, Excelerate should try to supply gas into the grid line, the letter reads.

On July 14, Petrobangla called an emergency meeting with Excelerate officials and verbally conveyed their concerns to them.

When asked, a government official told The Independent: “The US giant is facing a chain of problems with the FSRU facility. Only a few days back, it was repairing the holes in the under-sea pipes connected to the FSRU at the mooring point. Now, it is repairing the mooring point hookup.”

“We don’t know what will happen eventually as new problems are cropping up every day,” said a Petrobangla official. No Excelerate official wished to comment on the issue. To meet the local demand for gas, the government imported a consignment of LNG worth USD 27 million on April 28. As per the government’s announcement, the LNG was supposed to be injected into the grid line in May and then in the first week of June and July. But recently, Excelerate has informed Petrobangla that it would start supplying LNG in the first week of August.

The country’s first FSRU is being established on the build-own-operate-and-transfer (BOOT) basis and the operator will also be exempt from tax payments on the income from the project. The company to set up the FSRU, however, will have to maintain its accounts properly and submit returns regularly, said the National Board of Revenue (NBR) in a notification on October 30.

Under the contract, Excelerate Energy will hand over the terminal to Petrobangla after 15 years of operations.

An FSRU is a special type of ship used to store and de-gasify LNG and supply it onshore.

The FSRU in Bangladesh has the capacity to hold 138,000 cubic metres of LNG and can re-gasify and distribute up to 500 million cubic feet per day, officials said.

According to Petrobangla, between 2,650-2750 mcf of gas is being supplied to the grid against a daily demand of around 3,700mcf. The government had to limit supplies despite a growing demand for gas in factories and households because of the lack of extraction from gas fields.

The Awami League (AL) initiated the LNG terminal project in Maheshkhali when it returned to power in 2009. It could not implement the project on account of different complexities in the first term.