Tk 32b revolving fund soon to finance LNG import

Dhaka,  Sun,  24 September 2017
Published : 19 Aug 2017, 00:19:14 | Updated : 19 Aug 2017, 10:58:33
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Tk 32b revolving fund soon to finance LNG import

Money to come from Energy Security Fund
Tk 32b revolving fund soon to finance LNG import
Mehdi Musharraf Bhuiyan


The government has moved to form a revolving fund worth Tk 32 billion to meet the initial import cost of liquefied natural gas (LNG) meant for catering to a growing energy demand.

The money, equivalent to US$ 400 million, for this proposed fund is likely to come from the 'Energy Security Fund' earlier established to help finance future energy projects to avert energy shortfall, officials said.

At present, over Tk 35 billion has accumulated in the Energy Security Fund from higher-rated fuel sales to the public.

Bangladesh plans to start LNG import by April 2018 to bring about a better energy mix against the backdrop of depleting domestic gas reserves.

The country's first LNG-import terminal, with a capacity of 3.75 million tonnes per year, is being developed by US-based Excelerate Energy and is expected to be commissioned in April 2018

A second terminal, which will also come with a capacity of 3.75 million tonnes a year, is being developed by Summit Group and is expected to be commissioned by end of 2018.

Both located on Moheshkhali Island in the Bay of Bengal, the two terminals are expected to add an additional 1,000 million cubic feet per day (MMCFD) to the national gas grid upon their completion.

Besides, the government signed a Sales-Purchase Agreement (SPA) with RasGas of Qatar last month for procuring 2.5MTPA LNG initially. The SPA has already been sent to the Cabinet Committee on Government Purchase for approval.

According to government estimates, around US$ 82 million would be required each month for LNG import in the country: US$ 75 million for actual shipment and an additional US$ 7 million for the regasification of the same.

As per the relevant provisions, Petrobangla would have to repay the amount within 15 days of receiving the relevant invoices. Otherwise it would have to pay additional liquidated damages at a rate of LIBOR plus 4 per cent.

Against this backdrop, Petrobangla recently sent a letter to the Ministry of Power, Energy and Mineral Resources asking for forming a revolving fund out of the Energy Security Fund of Bangladesh Energy Regulatory Commission for defraying this initial cost.   

"Our analysis says that it may take around four to five months to get the payment from the actual LNG consumers," an Energy Ministry high official told FE last week.

"In such case, we would like to use the money from the revolving fund for meeting the initial import cost."  

Back in September 2015, BERC formed the Energy Security Fund, with a hope that its proceeds would be handy in meeting the country's energy demand when the limited gas reserves will be on the wane.

As per the relevant guidelines, for the sale of each cubic meter of gas, Tk 1.01 is supposed to be stored in the special fund. The interest on the savings would also be kept in the fund along with the surcharge and profit on the fund money.

The guidelines also stipulate that the government could use the fund for the import of LNG and LPG as well as for the construction of infrastructure to facilitate the imports.

According to BERC sources, around Tk 35.52 billion has been generated out of this fund until March this year.

Government estimates show that the country may need to import as much as 2,500 million cubic feet of LNG per day by the year 2025, which comes to around 17.5 million tonnes per year.   

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