Petrobangla in dilemma over fresh bidding process for cancelled LNG terminals in private sector

Petrobangla – the Bangladesh Oil, Gas & Mineral Corporation – faces uncertainty about how to proceed with a new bidding process for establishing two private sector LNG terminals, recently cancelled by the interim government.

Petrobangla officials revealed that they remain unclear about whether to follow the Public Procurement Rule (PPR) 2008 to invite a tender for the two projects or to consult the Public-Private Partnership (PPP) office for implementation.

Of the two cancelled projects, Petrobangla had signed a contract with Summit Group for one terminal, while a Memorandum of Understanding (MoU) had been signed with the US-based Excelerate Energy for the other under the previous Awami League government.

However, upon taking office, the interim government's Adviser for the Power, Energy, and Mineral Resources Ministry directed Petrobangla to cancel both projects. 

The contracts had been awarded to private sponsors under the Speedy Increase of Power and Energy Supply (Special Provision) Act 2010 without any tender.

These cancelled projects are in addition to two existing floating storage and regasification units (FSRUs), commonly known as LNG terminals, located in Maheshkhali and established in the private sector under the same Special Provision Act of 2010, also without a tender process.

The US-based Excelerate set up the first terminal in Moheshkhali in 2018, with a daily capacity of 600 million cubic feet (MMCFD) of gas. 

Local firm Summit Group developed the second terminal in 2019, also in Moheshkhali, with a capacity of 500 MMCFD.

Through these two terminals, Petrobangla has been supplying roughly 1,100 MMCFD of gas to the national grid by importing LNG from abroad.

Bangladesh's current daily gas production stands at about 3,100 MMCFD, including 1,100 MMCFD from imported LNG, against a demand of approximately 4,000 MMCFD.

To address the rising demand, the previous Awami League government had initiated plans to set up two additional LNG terminals with similar capacities, awarding contracts to the same private sponsors, Excelerate Energy and Summit Group.

Under these agreements, both Excelerate and Summit Group secured billion-dollar annual contracts to provide LNG regasification services. 

However, following the departure of the previous government, the interim administration decided to cancel the projects, aiming to re-award them through a more transparent and competitive bidding process.

Petrobangla subsequently encountered uncertainty in launching a fresh tender process for the two LNG terminal projects. 

The issue lies in whether to proceed with the Public Procurement Rule (PPR) 2008 or to follow the Public-Private Partnership (PPP) framework.

"We are still evaluating both legal frameworks to determine which one to follow," Petrobangla Chairman Zanendra Nath Sarker told UNB.

"A renowned procurement expert is also assisting us in this matter," he said. 

He mentioned that once the tender process is clarified, Petrobangla intends to release an open tender for the LNG terminal projects.

The chairman acknowledged that Petrobangla faces difficulties since no previous project in the private sector has been implemented through an open tender.