Excelerate, Petrobangla ink deal to set up first LNG terminal

Excelerate Energy and Petrobangla yesterday signed a non-binding term sheet to set up the country's first liquefied natural gas import terminal near Moheshkhali island.

Shafiqur Rahman, secretary of state-run oil company Petrobangla, and Sheampoo Suvasssari, director of Excelerate Energy, signed the deal at the Petro Centre in Dhaka, according to a statement from Petrobangla.

A term sheet is a non-binding agreement setting forth the basic terms and conditions under which an investment will be made. It serves as a template to develop more detailed legal documents.

Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement that conforms to the term sheet details is then drawn up.

Located offshore near Moheshkhali island in the Bay of Bengal, the terminal based on floating storage and a re-gasification unit (FSRU) will provide much needed natural gas to Chittagong.

Texas-based Excelerate Energy will now conduct a study. Based on the results of the study, Petrobangla will sign a terminal use agreement with Excelerate Energy for 15 years, subject to approval from the cabinet purchase committee.

The FSRU will have 138,000 cubic metres of LNG storage capacity and a base re-gasification capacity of 500 million cubic feet of gas a day (mmcfd). The gas supply is due to start in 2017.

International Finance Corporation, the private sector financing arm of the World Bank Group, will have equity participation in the terminal company, according to the statement.

According to the energy ministry's estimate, the government will have to spend around $2.7 billion annually to import 500 mmcfd LNG and to use the floating terminal.

For the last decade, the country faced a shortfall of around 500 mmcfd of gas. As per the forecast, this would persist even if the country adds new gas to the national grid from its own resources in the coming years.

Nasrul Hamid, state minister for power, energy and mineral resources, said there is a gap of 500 mmcfd of gas between demand and supply and it would widen to 1,000 mmcfd as the demand increases gradually.

Tawfiq-e-Elahi Chowdhury, energy adviser to the prime minister; Istiaque Ahmad, chairman of Petrobangla; and Kyle Kelhofer, country manager of IFC, were also present.