The government is at 'capacity payment' risk from the day one of starting commercial operation of the country's first LNG import terminal as necessary transmission pipeline to evacuate re-gasified LNG is yet to be constructed.
Officials concerned apprehend the pipeline is unlikely to get ready before starting operation of the FSRU (floating, storage and re-gasification unit), expected next month (April).
It will be possible to evacuate only half of the re-gasified liquefied national gas (LNG) capacity from the day one with the existing gas pipeline in the region.
As a result, they said, the government will have to pay the penalty to the terminal contractor as per the agreement.
Petrobangla must pay around US$ 245,000 per day to the contractor, no matter what it takes -- less re-gasified LNG or full capacity, a senior Petrobangla official said.
US-based Excelerate Energy Bangladesh Ltd is now at final stage of constructing the FSRU-based LNG terminal, having a capacity to re-gasify 500 million cubic feet per day (mmcfd) equivalent of LNG.
On the other hand, the government could not yet complete necessary infrastructure to evacuate the entire quantity of re-gasified LNG to be produced at the terminal, industry insiders told the FE.
The delay in construction of a 30-kilometre 42-inch diameter Anwara-Fouzdarhat gas transmission pipeline is the key, they said.
They said the Karnaphuli Gas Distribution Company Ltd (KGDCL), the state-run distribution company for Chittagong region, could be able to consume only around 250 mmcfd or half of the terminal's capacity with its existing pipeline.
State-owned Petrobangla inked 'terminal use agreement' and 'implementation agreement' with the US company on the LNG terminal project, 'Moheshkhali Floating LNG Terminal,' on July 18, 2016.
Excelerate is building the FSRU on build, own-operate and transfer (BOOT) basis, he said. It would charge US$ 0.49 per mcf (1,000 cubic feet) against its service from the day one of starting the commercial operation of the terminal.
Re-gasified LNG from the terminal will be sold to Petrobangla on take-or-pay basis, said the official.
Currently, the government is paying a huge amount of money as 'capacity payment' to owners of oil-fired power plants as penalty for not consuming required quantity of electricity.
When contacted, a senior KGDCL official said Chittagong could consume maximum around 250 mmcfd of re-gasified LNG as the port city does not have significant number of new industries or extensions over the past one decade due to natural gas crisis.
Gas consumption by industries remains minimum as the country does not have significantly heavy industries with high natural gas consumption. Some 100 new industries can consume as much as 25 mmcfd of gas, he said.
Several big gas-fired power plants in Chittagong region, including those of Rawzan and Shikalbaha, are not also in good state to consume natural gas consistently, he added.
The KGDCL is responsible for supplying piped natural gas to consumers in Chittagong, Rangamati, Khagrachori, Bandarban and Cox's Bazar districts of Bangladesh.
If constructed, the Anwara-Fouzdarhat pipeline could supply the additional re-gasified LNG to consumers beyond the Chittagong region, he said. When contacted, a senior official of state-run Gas Transmission Company Limited (GTCL) said that necessary land for laying down the pipeline is yet to be acquired.
Prime Minister's energy adviser Dr Tawfiq-e-Elahi Chowdhury visited Chittagong for a couple of days to drum up construction of the pipeline. He held meetings with the Mayor of Chittagong City Corporation, members of parliament and local administration to facilitate installation of the pipeline as quickly as possible.
A senior official at Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) said the delay in constructing the pipeline might risk 'capacity payment' to local Summit Group too, which is building the country's second FSRU at the same location of Moheshkhali Island in the Bay of Bengal.
When contacted, energy adviser of Consumers Association of Bangladesh (CAB) Dr M Shamsul Alam strongly criticised the government's wholesale decision of awarding private sector with the contracts to build the LNG terminals.
"It was done to ensure business of private sector at the cost of public money," he said. Their activities are similar to the hatred East India Company, Alam added.
