Bangladesh LNG Deal , Published comments by Josh and Mak International

The Josh and Mak team thanks Mr Andrew Walker from ‪#‎Interfax Natural Gas Daily for the interview this week regarding the news that #‎Excelerate in Bangladesh has secured $500 million in funding from the International Finance Corp. (IFC), a member of the World Bank Group, which provides finance for private-sector ventures in developing countries.

The article mentioned us as follows :

Aemen Zulfikar Maluka, a barrister at Pakistan-based law firm Josh & Mak, suggested the conditions of the loan would add impetus to the project and help avoid delays.

“Domestic gas pricing will continue to be a key issue. Despite an increase in gas and electricity prices in 2015, electricity
and fertiliser plants pay approximately $1-1.20/MMBtu, which is significantly lower than LNG market prices,” she told Interfax Natural Gas Daily.

“Assuming that Bangladesh starts to import 60 cargoes per annum mostly dedicated to the power and fertiliser markets, the government will have to spend nearly $1 billion per annum to subsidise the difference between re-gasified LNG and power/fertiliser prices,” she said.

The article by Inter Fax Energy Can be viewed here.

Original Comments Submitted Dated 21 July 2016

The much anticipated progress of the LNG project in Bangladesh is being carefully watched, as there is news that agreements have been signed between the government and Excelerate Energy.A key point of concern are the next steps for Bangladesh.

A common concern is that FSRU projects are difficult to coordinate given the number of contracts that need to be organized including finalizing an LNG supply contract and securing downstream buyers for the gas.

This has led to concerns as to whether Bangladesh is likely to have this secured by early 2018 when the project is expected to start up?

Bangladesh is one of the many countries including Egypt, Jordan, Pakistan, Poland and Uruguay, which expect to build new regasification terminals in the coming years. This sharp increase has been witnessed since 2000.

Bangladesh entered into agreements on 18 July to construct its first liquefied natural gas (LNG) terminal at Moheshkhali Island in the Bay of Bengal,

The Ministry of Power, Energy and Mineral Resources and state-owned Bangladesh Oil, Gas & Mineral Corp. (Petrobangla) signed two agreements with EEBL (Excelerate Energy) to build a floating storage and re-gasification unit (FSRU).

The initial tender was floated in 2010.

It is being said that the EEBL will complete construction of the FSRU within 18 months of the signing of the agreements and LNG imports may commence in early 2018. For Bangladesh what I see within the proposed re-gasification project are political, developmental, or financial hurdles which had also prevented a final investment decision being made since 2010.However given the fact that the Bangladesh bureaucracy has managed to sit on the process for a long time, it may be that the contracting will be delayed, but given the pending threat of a much more serious shortage of Gas in the future, it is hoped that the Bangladesh government will expedite the process.

The reason this is unlikely to get delayed in the future is that Excelerate Energy is investing $500m for infrastructure costs and other expenses to set up the terminal and this money is a loan from International Finance Corporation. Therefore if the IFC and an international energy company are involved, the delays are unlikely as the consequences of delay can trigger financial losses and lengthy lawsuits.

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