Energy Directive Halts Bangladesh’s First LNG Terminal Project

Bangladesh's first permanent land-based LNG terminal project has stalled after the Rupantorito Prakritik Gas Company Ltd (RPGCL) canceled the short-listing of bidders due to an interim government directive to halt all energy project negotiations.

Karnaphuli Gas Distribution Company has withheld Tk3,000 crore from gas sales to Kafco over 13 years, defying orders to transfer the funds to its parent, Petrobangla. This accumulated amount comes from charging Kafco a higher gas rate than the state-owned fertiliser companies pay.

The interim government of Bangladesh has approved the purchase of 33,000 tonnes of liquefied natural gas (LNG) from Singapore-based MS Gunvor Singapore Pte for Tk 657 crore, priced at $13.93 per million British thermal unit. This follows two previous LNG consignments purchased earlier this month.

Bangladesh's industries have been facing a severe gas shortage for nearly two years, significantly impacting production and profitability. Despite government assurances of improved gas supply by mid-July after repairs to a floating storage regasification unit (FSRU), the situation remains critical as of October. Major textile mills, including Israq Spinning Mills Limited, report drastic reductions in production capacity due to extremely low gas pressure, with some operating at only 40% of their potential.

Petrobangla has cancelled its contract with Summit Group for the construction of a second Floating Storage and Re-gasification Unit (FSRU) due to non-compliance with key terms. Summit LNG II Terminal Co. Ltd was to build a 4.50 million tonne per year FSRU by 2026 but failed to meet a deadline for a $20 million performance bond.

The interim government plans to issue a new international tender to invite expressions of interest (EoIs) for spot liquefied natural gas (LNG) supplies, with Rupantarita Prakritik Gas Company Ltd (RPGCL), a subsidiary of Petrobangla, overseeing the process. Currently vetting legal requirements, the RPGCL aims to broaden participation beyond the 23 existing LNG suppliers, as only a handful engaged in the last bidding.