Excelerate Energy set to win second FSRU contract

    Originally published in The Financial Express on 17 July 2023

    The government is set to award US firm Excelerate Energy a contract to build a new floating LNG terminal and lay necessary pipelines near Payra sea port in southern Bangladesh, said sources.

    If awarded, it will be the company’s second floating storage and re-gasification unit (FSRU) in Bangladesh that would have a liquefied natural gas (LNG) re-gasification capacity of around 1,000 million cubic feet per day (mmcfd).

    “We are in a negotiation with Excelerate Energy on the new FSRU and pipelines project,” Petrobangla chairman Zanendra Nath Sarker told the FE on Sunday. “A term sheet will be inked soon.”

    Mr Sarker would not disclose the financial terms, but said the project would be implemented based on build, own and operate (BOO) modality.

    Excelerate officials were not available for comment.

    With the new one, the US firm’s total LNG re-gasification capacity would increase to around 1,500 mmcfd from the existing 500 mmcfd capacity FSRU built at Moheshkhali island in the Bay of Bengal.

    The government last month also approved awarding Summit Oil and Shipping Co. Ltd (SOSCL) a new contract to build the company’s second FSRU, also at Moheshkhali. The final agreement to this effect is expected to be signed soon, said a Petrobangla top brass.

    Summit’s new FSRU will have the re-gasification capacity of around 600 mmcfd, more than doubling its total capacity to around 1,100 mmcfd from existing 500 mmcfd.

    Bangladesh is making efforts to develop RLNG capacity to meet its growing demand for energy amid fast depleting natural gas reserves of the country.

    Energy experts, however, expressed concern over the excessive reliance on the two private companies due to possibilities of falling into the trap of a ‘captive market’.

    Apart from building the new FSRU, sources said, Excelerate Energy is supposed to lay a 70-kilometre (km) subsea pipeline to carry the RLNG from the offshore FSRU to the onshore gas station, and another 150km pipeline to carry the gas from Payra to Khulna.

    The demand for gas in the south-western region, including Khulna, is expected to grow for feeding the developing industries in addition to the under-construction 800 megawatt (MW) gas-fired combined cycle power plant.

    Initially, the government had a plan to import RLNG from India’s H-Energy, GAIL or Adani through a cross-border pipeline to run the 800 MW power plant at Rupsha in Khulna, said sources. However, the plan was shelved after several rounds of negotiation.

    Excelerate Energy’s FSRU – Excellence – is the first FSRU of Bangladesh, which initiated commercial operation on 19 August 2018. Local Summit Group is the owner of the other operational FSRU of the country, which is also located at Moheshkhali.

    Excelerate Energy has offered to supply LNG following JKM (Japan, Korea, Marker) index–meaning the price will reflect the spot market value of LNG cargoes delivered into Japan, South Korea, China and Taiwan.

    Excelerate has proposed to supply LNG at around 11.70 per cent of the three-month average price of Brent crude oil plus US$ 0.35 constant per million British thermal unit (MMBTU).

    Summit has quoted LNG price at around US$20 per MMBTU based on the Henry Hub index, which is similar to that on volatile spot-market rates.

    Energy experts and rights groups fear establishing a monopolistic situation in LNG re-gasification and supply by the private sector if both the private firms are awarded these new FSRUs and LNG supply deals without competitive bidding again.

    “It will ensure syndicated business for a certain quarter,” says energy adviser of the Consumers Association of Bangladesh (CAB) Prof M Shamsul Alam. It is pre-planned and an outcome of intentional non-exploration of local energy resources, he told the FE.

    The special law has given shield to this ‘misdeed’ to create a monopolistic situation in the energy sector, Dr Alam deplored.

    It contradicts the creation of Bangladesh Competition Commission and Bangladesh Energy Regulatory Commission (BERC), the CAB leader opines.

    In future, he added, Petrobangla should build FSRUs or such type of infrastructures of its own.

    It should select engineering, procurement and construction (EPC) contractors instead of awarding private sectors to build more FSRUs bypassing tenders, Mr Alam suggests.

    The government will become hostage to these two private firms if it awards them the FRSUs and further LNG-supply deals, energy expert Professor Badrul Imam also expressed the fears.

    “The whole country will become captive to them as a consequence,” said Mr Imam, a professor of Geology at Dhaka University.

    “It will be risky if the government continues to rely on only two private firms for future FSRUs,” says another energy expert Prof Ijaz Hossain.

    Time has come to enact a new law to limit operations of any private firm in the energy-sector business to avoid monopoly, Mr Hossain of Bangladesh University of Engineering and Technology (BUET) suggested as a measure to avert getting trapped into a ‘captive market.’