Bangladesh is reportedly set to strike a long-term deal with Qatar to import (LNG) to meet the rising domestic demand.
According to official sources at Energy Division and Petrobangla, the negotiation was completed last week during the visit of a high-powered Qatari delegation to Dhaka which agreed on a sales and purchase agreement (SPA).
"We hope, we can sign the deal with Qatar within this month," Md Quamruzzaman, managing director of Rupantarita Prakritik Gas Company Limited (RPGCL), told the news agencies.
RPGCL, a subsidiary of the state-owned Petrobangla, has been entrusted with the responsibility to import and supply of LNG, LPG and CNG in the country.
Qatar`s second largest LNG producer RasGas Company will supply LNG to Bangladesh. The RasGas manages and operates seven LNG trains, two sales gas production facilities, two helium plants as well as a long-term charter fleet of 27 LNG tankers.
According to the sources, Bangladesh will sign a 15-year contract with Qatar to import LNG on a floating price liked with the oil price in international market.
The core basis of the deal is that the LNG price will go up and down with the fluctuation of prices petroleum oil on the international market. "The price will be fixed under formula agreed by both sides during the negotiation," RPGCL chief noted.
Officials said the imported LNG will cost about Tk 13 per cubic metre on average at the consumer level after meeting re-gasification and other charges and duties. Currently, the government is distributing gas to various consumers at different prices.
Of this, the price for CNG station is the highest Tk 40 per cubic metre (cm), and lowest Tk 3.16 per cm, while household consumers are getting gas at Tk 11.20 per cm, commercial consumers at Tk 17.04 per cm and industry at Tk 7.76 per cm.
Earlier, Bangladesh signed a memorandum of understanding (MoU) with Qatar about seven years ago to import LNG. But the business deal was not signed so far for lack of re-gasifacation facilities.
After a long exercise of negotiation process over the last six years, the government finally awarded a contract to a private operator to set up an LNG terminal with floating storage re-gasification unit (FSRU) at Moheshkhali Island of Cox`s Bazar. Excelerate Energy, a US-based firm that won the project, is now developing the LNG terminal with FSRU and scheduled to start its commercial operation by April next year.
As per the current plan, the RPGCL, as a state entity, will import LNG and re-gasify the imported liquid gas through Exelerate Energy`s FSRU. The US company will charge the RPGCL for providing the FSRU service.
RPGCL managing director Quamruzzaman said the Excelerate Energy has been scheduled to set up its FSRU facilities and commence service by April next year. "Targeting this deadline, the government is moving ahead to sign the final contract with Qatar and import LNG," he said.
State Minister for Power and Energy Nasrul Hamid recently asked the Excelerate Energy to expedite its project works as much as possible. As soon as the LNG import starts, the country will be able to generate 3000 MW additional extra electricity, while 5,000 industries will get energy support.
Prime Minister`s Energy Adviser Dr Tawfiq-e-Elahi Chowdhury said the government has been working on diversifying gas import sources as it does not want to depend on a single source. There will be no problem in signing LNG import deal with Qatar although there is diplomatic crisis in the Middle-East between Saudi Arabia-led alliance and Qatar, he said.
Currently, Bangladesh is producing about 2,900 mmcfd gas against its demand for 3,400 mmcfd keeping a shortfall of 500 mmcfd.
The LNG terminal will have a 138,000 cubic metres capacity floating storage and re-gasification unit (FSRU). The terminal will supply 500 million cubic feet (mmcf) gas per day by regasification of imported LNG to the national gas network.
Bangladesh will have to pay a total of $ 90 million as terminal charges excluding tax, VAT and insurance fee to the LNG terminal operator to use its facilities. In that case, Petrobangla will have to pay about $159,186 per day as fixed component of fees, $45,814 as operating component fees and $32,000 to the terminal operator.
Calculating the total fees, Petrobangla officials said the terminal company will charge 0.49 US cents per unit of gas on average for regasification and processing the imported LNG.
Beyond this cost, the government will have to spend about of $1.56 billion annually to import 182.5 billion cubic feet of LNG from abroad at an estimated cost of $8 per MMBTU gas. And that means Bangladesh will have to spend about $2.5 billion annually to supply 500 mmcfd imported gas, according to the officials.
Energy experts believe per unit gas will cost over $9 against the present production cost of below $2 per unit (1000 cubic feet) once the LNG terminal starts operation with imported gas.