Summary

Excelerate Energy’s proposal to construct its third floating storage and regasification unit (FSRU) near the Payra seaport in the Bay of Bengal has been unsuccessful due to the cancellation of an initial agreement. Petrobangla has sent a letter terminating the non-binding agreement, and the interim government has canceled the term sheet agreement with the energy giant’s Bangladesh Company. This agreement was canceled just within weeks of former US ambassador to Bangladesh Peter D. Hass joining the company as a strategic adviser. Petrobangla was instructed to cancel the agreement by the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy, and Mineral Resources (MPEMR) since the interim government decided not to sign any new agreements under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010 (Amended 2021). To guarantee its effectiveness, Petrobangla would need to prolong the term-sheet agreement’s duration and sign a terminal use agreement (TUA) with Excelerate Energy.

Context

Excelerate Energy, a US-based company, had planned to build its third floating storage and regasification unit (FSRU) near the Payra seaport in the Bay of Bengal. However, the Interim Government of Bangladesh has revised an earlier agreement with this energy giant. According to insiders, the interim government has cancelled the term-sheet agreement with the oil giant’s Bangladeshi affiliate. A report suggests that the state-run Petrobangla has sent a letter terminating the non-binding agreement with Excelerate Energy, which means that the contract is no longer valid. 

This agreement ended a few weeks after former US ambassador to Bangladesh Peter D Hass, joined Excelerate Energy as a strategic adviser. On Tuesday Petrobangla chairman Zanendra Nath Sarker told a newspaper that  Petrobangla was instructed to cancel the agreement by the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy, and Mineral Resources (MPEMR) since the interim government decided not to sign any new agreements under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010 (Amended 2021). He also added that to ensure its effectiveness Petrobangla would need to prolong the term-sheet agreement’s duration and sign a terminal use agreement (TUA) with Excelerate Energy.

On November 8, 2023, the company signed a term sheet agreement with the Bangladeshi branch of the US multinational Excelerate Energy. According to Petrobangla’s senior command, “the non-binding accord’s tenure was set to expire on November 7, 2024, automatically if the tenure was not extended.” According to the term-sheet agreement for building the FSRU, the US company was expected to sign a new contract to develop a new 4.5MTPA FSRU in southern Bangladesh near Payra Seaport. 

Sources confirm that Excelerate Energy owns both of Bangladesh’s active FSRUs, in Bangladesh which has a collective regasification capacity of about 1,000 mmcfd. In addition to owning its own FSRUs, Excelerate supplied FSRU to Summit Group’s Summit LNG Terminal Company Ltd. for a period of 15 years known as the MLNG terminal. Petrobangla also terminated its contract with Summit Group for the construction of its second 4.5MTPA capacity because of noncompliance with the terms of the agreement. On October 7, the termination letter was sent, and the implementing entity, Summit LNG II Terminal Co. Ltd, was requested to collect a performance bond worth $20 million.  

Moreover, the Implementation Agreement and Terminal Use Agreement were terminated.  By 2026, Summit was expected to construct the FSRU on a BOOT basis and run it for 15 years.

Picture and Article Source: The Financial Express