Imported LNG to cost $17.10 per unit pushing up power, gas prices
UNB, Dhaka :
The imported liquefied natural gas (LNG) at the transmission end will cost US$ 17.10, equivalent to Tk 1333, per unit (each thousand cubic feet or MCF).
Officials said once the LNG is imported and given to consumers, the price will escalate further having accommodated distribution expenses.
With the start of LNG import, according to energy experts, the country’s overall energy cost will go up, even to a level of double diminishing the existing business competitiveness if there is no specific plan for utilising the imported gas for any specific sector.
The government is currently buying gas from international oil companies (IOCs) at US$ 2.6 per unit. After mixing its own gas with the purchased one, the average production cost of natural gas stands at US$1.6 per unit.
However, the government’s latest contract with foreign oil companies was signed fixing the gas price at $5.5 per unit for shallow blocks and $ 6.5 per unit for deep sea blocks.
Official sources said the cost of imported LNG at US$ 17.10 per unit was quoted in a proposal submitted by the Energy Division to the Cabinet Economic Affairs Committee seeking its approval to sign the final contract with a Singapore-based American company for setting up LNG terminal and re-gasification system.
As state-owned principal body in the country’s hydrocarbon sector, Petrobangla on June 26 this year initialed a term sheet agreement with the Singapore-based Astra Oil and Excelerate Energy Consortium.
Officials said once Energy Division received the Cabinet body’s approval, Petrobangla will sign the final deal with Astra Oil to set up the proposed LNG terminal with floating storage and re-gasification unit (FSRU) with 500 million cubic feet per day (MMCF) capacity.
As per the proposed agreement, Astra Oil will set up the LNG terminal and operate it for 15 years and then hand it over to the Petrobangla. In this case, Astra Oil will deposit US$ 2 million to Petrobangla as security guarantee.
The American company has to complete the construction work on the terminal by 16 months from the date of final agreement targeting a tentative commission date of the project in mid 2016.
To utilise the LNG terminal, the government has already signed a memorandum of understanding (MoU) with Qatar to annually import 4 million metric tons (mt) of LNG to meet the country’s growing energy needs.
In this case, it is estimated that each unit of LNG will cost US$ 14 per unit (each 1000 cubic feet) after meeting the freight charge (delivery ex-ship). The LNG terminal operator Astra Oil will charge US$ 0.49 per unit of gas for providing storage and re-gasification service.
After paying taxes and duties, each unit of LNG will cost US$ 17.10 at the transmission end. But when it reaches the user end, the cost will go up further.
To import LNG and supply it to public, the government has to spend a total of US$ 2.7 billion per year as the LNG import will cost US$ 2.58 billion while LNG terminal charge will cost US$ 90.16 million.
The proposal reveals that once the government starts LNG, the gas price has to be adjusted with upward value. In that case, when the imported LNG of 500 MMCFD is mixed with locally produced 2,500 MMCFD gas, the overall gas price will go up to US$ 4.39 per unit. When this gas is supplied to a combined cycle power plant, the power generation cost will stand at Tk 4.37 per unit per unit (kilowatt hour).
About the LNG proposal, eminent energy expert and head of BUET’s Petroleum and Mineral Resources Engineering Department Prof Mohammad Tamim said when the imported LNG is supplied to the power plants, the production cost will go up by at least 60 percent. In some cases, it might be double.
At present, he said, the country’s average gas production and supply cost is US$ 1.6 per unit after its purchase of gas from the IOCs. The government supplies the gas at US$ 1 (one) per unit to state-owned power plants. The gas price is US$ 2.2 per unit for private sector plants, particularly to independent power producer (IPP) plants.
“But when the LNG comes, as per government estimation, this will go up to US$ 4.37 per unit which is just double,” Prof Tamim said if the government does not have a very clear and specific plan about the supply of high-cost imported LNG, then the whole economy will face dilemma in competitiveness with such high-value energy.
He also said when the LNG comes into effect at the consumer level, the per unit electricity tariff will go up to Tk 10 per unit from existing average tariff of Tk 6 per unit.
Prof Tamim said both the prices of Oil, LNG and gas is now declining and in the case of long term LNG, the price is about US$ 12 per unit. So, before entering into any deal with Qatar, they should rethink about the matter.
“But for a national like Bangladesh, coal should be the cheaper energy source”, he added.
Defending the government stance on LNG import at US$ 17.10 per unit, Energy Division secretary Abu Bakar Siddique in the proposal said that the country now has a shortfall of 600 MMCFD gas.
“The deficit will further rise against the backdrop of falling gas reserve and also growth in investment in the economy which may lead to a severe gas crisis in the country if there is no alternative arrangement,” he said adding that different countries, including Japan and South Korea, are importing LNG to meet their energy needs.
The imported liquefied natural gas (LNG) at the transmission end will cost US$ 17.10, equivalent to Tk 1333, per unit (each thousand cubic feet or MCF).
Officials said once the LNG is imported and given to consumers, the price will escalate further having accommodated distribution expenses.
With the start of LNG import, according to energy experts, the country’s overall energy cost will go up, even to a level of double diminishing the existing business competitiveness if there is no specific plan for utilising the imported gas for any specific sector.
The government is currently buying gas from international oil companies (IOCs) at US$ 2.6 per unit. After mixing its own gas with the purchased one, the average production cost of natural gas stands at US$1.6 per unit.
However, the government’s latest contract with foreign oil companies was signed fixing the gas price at $5.5 per unit for shallow blocks and $ 6.5 per unit for deep sea blocks.
Official sources said the cost of imported LNG at US$ 17.10 per unit was quoted in a proposal submitted by the Energy Division to the Cabinet Economic Affairs Committee seeking its approval to sign the final contract with a Singapore-based American company for setting up LNG terminal and re-gasification system.
As state-owned principal body in the country’s hydrocarbon sector, Petrobangla on June 26 this year initialed a term sheet agreement with the Singapore-based Astra Oil and Excelerate Energy Consortium.
Officials said once Energy Division received the Cabinet body’s approval, Petrobangla will sign the final deal with Astra Oil to set up the proposed LNG terminal with floating storage and re-gasification unit (FSRU) with 500 million cubic feet per day (MMCF) capacity.
As per the proposed agreement, Astra Oil will set up the LNG terminal and operate it for 15 years and then hand it over to the Petrobangla. In this case, Astra Oil will deposit US$ 2 million to Petrobangla as security guarantee.
The American company has to complete the construction work on the terminal by 16 months from the date of final agreement targeting a tentative commission date of the project in mid 2016.
To utilise the LNG terminal, the government has already signed a memorandum of understanding (MoU) with Qatar to annually import 4 million metric tons (mt) of LNG to meet the country’s growing energy needs.
In this case, it is estimated that each unit of LNG will cost US$ 14 per unit (each 1000 cubic feet) after meeting the freight charge (delivery ex-ship). The LNG terminal operator Astra Oil will charge US$ 0.49 per unit of gas for providing storage and re-gasification service.
After paying taxes and duties, each unit of LNG will cost US$ 17.10 at the transmission end. But when it reaches the user end, the cost will go up further.
To import LNG and supply it to public, the government has to spend a total of US$ 2.7 billion per year as the LNG import will cost US$ 2.58 billion while LNG terminal charge will cost US$ 90.16 million.
The proposal reveals that once the government starts LNG, the gas price has to be adjusted with upward value. In that case, when the imported LNG of 500 MMCFD is mixed with locally produced 2,500 MMCFD gas, the overall gas price will go up to US$ 4.39 per unit. When this gas is supplied to a combined cycle power plant, the power generation cost will stand at Tk 4.37 per unit per unit (kilowatt hour).
About the LNG proposal, eminent energy expert and head of BUET’s Petroleum and Mineral Resources Engineering Department Prof Mohammad Tamim said when the imported LNG is supplied to the power plants, the production cost will go up by at least 60 percent. In some cases, it might be double.
At present, he said, the country’s average gas production and supply cost is US$ 1.6 per unit after its purchase of gas from the IOCs. The government supplies the gas at US$ 1 (one) per unit to state-owned power plants. The gas price is US$ 2.2 per unit for private sector plants, particularly to independent power producer (IPP) plants.
“But when the LNG comes, as per government estimation, this will go up to US$ 4.37 per unit which is just double,” Prof Tamim said if the government does not have a very clear and specific plan about the supply of high-cost imported LNG, then the whole economy will face dilemma in competitiveness with such high-value energy.
He also said when the LNG comes into effect at the consumer level, the per unit electricity tariff will go up to Tk 10 per unit from existing average tariff of Tk 6 per unit.
Prof Tamim said both the prices of Oil, LNG and gas is now declining and in the case of long term LNG, the price is about US$ 12 per unit. So, before entering into any deal with Qatar, they should rethink about the matter.
“But for a national like Bangladesh, coal should be the cheaper energy source”, he added.
Defending the government stance on LNG import at US$ 17.10 per unit, Energy Division secretary Abu Bakar Siddique in the proposal said that the country now has a shortfall of 600 MMCFD gas.
“The deficit will further rise against the backdrop of falling gas reserve and also growth in investment in the economy which may lead to a severe gas crisis in the country if there is no alternative arrangement,” he said adding that different countries, including Japan and South Korea, are importing LNG to meet their energy needs.
