Beleaguered Summit Group forfeits lucrative new LNG ventures

Beleaguered Summit Group forfeits two new lucrative ventures on building its second floating storage and re-gasification unit (FSRU) and supply of liquefied natural gas (LNG) under long-term deals, said sources, citing interim government moves.

A four-member committee constituted by the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) has already recommended the scrapping of the new FSRU- building contract with Summit Oil & Shipping Co Ltd (SOSCL), they said.

Once Summit loses the new FSRU contract, it will automatically be out of the 15-year-long-term LNG-supply contract as the supply deal is linked with the building of the FSRU, according to the sources.

SOSCL, a subsidiary of Summit Group, inked the 15-year Terminal Use Agreement (TUA) and Implementation Agreement (IA) with state-run Petrobangla and the MPEMR a couple of months ahead of the fall of authoritarian Awami League government to set up the LNG terminal on Moheshkhali island in the Bay of Bengal.

Summit's new FSRU, named Summit LNG Terminal II Co Ltd, should have a capacity to re-gasify around 600 million cubic feet per day of LNG. The daily fee, as agreed, is US$300,000 per day on a binding take-or-pay basis.

According to the sale and purchase agreement (SPA) between SOSCL and Petrobangla, Summit is supposed to supply 1.50 million tonnes per annum (MTPA) of the gas for 15 years starting from 2026.

The price of LNG was fixed at 13.34 per cent of three months' average Brent crude price plus US$0.29 constant per million British Thermal unit (MMBTu), said sources close to the signing of the SPA.

"The Summit-inked both these deals were signed under the controversial Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010, amended in 2021, bypassing competitive tender and only through negotiations," a senior official at the EMRD told the FE Saturday.

He said that there were no pre-set criteria to initiate negotiations for building the FSRU or supplying LNG as the government was yet to fix any qualifications of the suppliers.

No feasibility study or market analysis was also carried out before signing these agreements having liabilities to pay a substantial amount of foreign currencies.

Official sources say the EMRD under the MPEMR constituted the four-member committee with purchase expert and former secretary of Bangladesh government Md Faruque Hossain as convener on September 11 only to advise the MPEMR about the next course of action regarding Summit LNG Terminal II Co Ltd.

A government circular of the EMRD over the formation of the committee was issued on September 11.

Mr Hossain is also a procurement-policy consultant of the World Bank in Bangladesh.

The committee took copies of the FSRU agreement, scrutinized and submitted its report to the MPEMR last week.

The issues which were considered by the committee before placing recommendations included process of selecting Summit for the new FSRU project, whether any other companies were interested to bag the project or not, the circumstance and approval process and pricing etc.

After inking these deals Summit deposited performance guarantee worth US$20 million for the project, the official said.

Met-ocean survey was already carried out and the report was submitted to the state-run  Rupantarita Prakrtik Gas Company Ltd (RPGCL), the official added.

Summit Group has been operating its first FSRU in Bangladesh since April 2019.

Summit LNG Terminal Company (SLNG) is operating the FSRU having the capacity to re-gasify around 500mmcfd LNG.

Apart from Summit's one, another FSRU owned by US Excelerate Energy is also operational in Bangladesh since August 2018.

Market insiders say the interim government's decision over scrapping Summit's agreements might come following its latest move to reduce dependence on imported LNG which involves huge foreign currency.

The government can drill two onshore wells with the cost it spends to purchase one cargo of LNG from international spot market, adviser for Power and Energy Dr Muhammad Fouzul Kabir Khan told newsmen Thursday.

Given the current international-market scenario, the government requires spending around US$40 million to purchase one spot LNG cargo from the international market, said sources.

The adviser said the interim government has initiated the moves in order to reduce the dependence on imported LNG which involves huge foreign currency.

When contacted, managing director of Summit Corporation Ltd Faisal Khan declined to comment on the development.

Summit Group chairman Muhammed Aziz Khan also wouldn't make comment on the fate of his conglomerate's energy bets.

Contacted, energy adviser of the Consumers Association of Bangladesh (CAB) Dr Shamsul Alam also emphasised immediate cancellation of the special law along with the deals inked under it.

He also seeks punishment of all those involved with the signing of the deals under the special law.

Energy-expert Prof M Tamim also stresses the urgency of annulling all deals under the special law that go against the country's interests.

[email protected]