Petronet LNG plans Rs 5,000-cr terminal at Bangladesh island

India's biggest gas importer Petronet LNG Ltd has plans to set up a Rs 5,000 crore LNG import terminal at Kutubdia islands in Bangladesh as it looks to build terminals to feed demand in neighbouring countries.

 "We have proposed to construct a 5 million tons per annum capacity liquefied natural gas (LNG) import terminal at Kutubdia islands off Cox's Bazar," Petronet LNG Managing Director & CEO Prabhat Singh said here.

The terminal will be besides 3.5 MT terminal at Bangladesh is looking to set up, for which Petronet is one of the firms that has been shortlisted. "Bangladesh has huge unmet gas demand particularly to power generation. So during the recent visit of Petroleum Minister Dharmendra Pradhan to Dhaka, we proposed to set up a 5 million tons capacity terminal on government-to-government basis," he said.

Initial response from Bangladesh, he said, has been encouraging and the company would be visiting Dhaka again this month to make a presentation on its plans. "While we will source gas (from international market) and supply (to utilities in Bangladesh), we are seeking some kind of payment assurances to cover for our investments in an event where we have to pull out of the country," he said.

Besides Bangladesh, Petronet LNG has also proposed to set up 1 mt LNG terminal in Sri Lanka to meet local demand. Singh said that Kutubdia islands has a natural harbor with good draft and a natural breakwater, ideal for setting up LNG terminal.

The proposed terminal is besides the one Bangladesh is looking to set up at Matar Bari in Moheshkhali Island of Cox's Bazar district or Anwara, Chittagong. The terminal, to be set up on the build-own-operate basis, will supply gas to power plants.

Petronet is one of the five global energy firms shortlisted for setting up this LNG import terminal. The others shortlisted include Anglo-Dutch super-major Shell, China's Huanqiu Contracting & Engineering, Tractebel Engineering of Belgium and Japan's Mitsui.

Bangladesh is looking at importing gas to ease its energy crisis in southeastern Chittagong region, which was once almost self-reliant in natural gas but started facing a supply crisis in 2006 as output diminished from the Sangu gas field. The country's sole offshore gas well, Sangu-11, was permanently closed in October 2013. As a result, some plants are running below the capacity and a few have been shut due to non-availability of gas.

Sources said the LNG terminal will supply gas to a proposed 1,000 MW combined cycle power plant as well as the existing power plants in Raozan and Sikalbaha through a planned pipeline. Bangladesh is also looking at setting up a floating LNG import facility in Bay of Bengal. The Floating Storage and Regasification Unit (FSRU) of 500 million cubic feet a day capacity can however meet only a part of the growing demand for gas in power, fertiliser, factory and industry.

Meanwhile, OIL-IOC-BCPL combine's USD 2.02 billion deal to acquire 23.9 per cent stake in Russia's Vankor oilfield has spoilt ONGC Videsh Ltd's chance of negotiating down the price for additional 11 per cent it is buying in the same field. OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), had in September last year bought 15 per cent stake in Russia's second biggest oilfield of Vankor for USD 1.268 billion.

In March this year, Rosneft agreed to sell another 11 per cent to OVL. Simultaneously, it struck a deal to sell 23.9 per cent in Vankor to a consortium of Oil India Ltd (OIL), Indian Oil Corp (IOC) and a unit of Bharat Petroleum Corp Ltd (BPCL). Sources said the board of OVL wanted the price of the additional 11 per cent stake to be renegotiated downwards.

Going by the September 2015 agreement, OVL would have to pay about USD 930 million for the additional stake. But the company board was of the opinion that since it was picking up a sizeable stake in the field operated by US-sanctioned company, the asking price has to be renegotiated. But as OVL sought renegotiations, the OIL-IOC-BPCL consortium last month signed definitive agreements for buying 23.9 per cent stake in Vankor for USD 2.02 billion.

OIL-IOC-BPCL consortium has also agreed to pay interest to Rosneft till such time the deal is closed and all payments made, which is likely by September 30. Sources said Rosneft is now arguing that when the buyer of larger 23.9 per cent stake is willing to pay a price in line with the September 2015 deal, there remains no scope for negotiating it with a buyer who is picking up less than half, about 11 per cent.

After all deals close, Indian state firms will have 49.9 per cent stake in Vankor, entitling them to 220,000 barrels per day (11 million tons a year) of oil production. Vankor field, located in East Siberia, is Russia's second largest field by production and accounts for around 4 per cent of Russian production and currently producing about 422,000 barrels of oil per day.

It is the largest of the fields, discovered and commissioned in Russia during the last 25 years and is located in the North of Eastern Siberia in Turukhansk district of the Krasnoyarsk Territory, 142 km away from Igarka town. The recoverable resources of the Vankor field as of January 1 stood at 361 million tonnes of oil and condensate and 138 billion cubic meters of gas.

The 23.9 per cent stake would be split in the ratio 33.5-33.5-33 between IOC, OIL and Bharat PetroResources Ltd (a subsidiary of Bharat Petroleum Corp Ltd) — IOC and OIL will take 8 per cent stake each while the remaining 7.8 per cent stake would go to BRPL.