LNG supply and capacity payment

That some government agencies here are more prone to putting the cart before the horse is, more or less, a proven fact.  Taxpayers' money is often wasted just because of neglect, inefficiency and lack of coordination in putting all the necessary factors in place to make projects and programmes a success. The Petrobangla's programme to supply imported liquefied natural gas (LNG) from next month using the facilities of the country's first floating, storage and re-gasification unit (FSRU)-based terminal at Moheskhali could soon be such an example.

The state-owned agency has already struck deals on the import of LNG from a number of sources and the construction of the terminal by a US firm is now reported to be at the final phase. The stage is also set for putting into effect yet another hike in gas prices for the domestic consumers to compensate for high cost of imported LNG. However, what is not yet fully ready is the pipeline to carry the entire volume of gas to be made available by the LNG terminal to the consumers.

A report, published in this paper quoting a senior official of Petrobangla, said the lack of preparedness, in terms of gas transmission pipeline, is likely to cost the government an additional amount, in the form of capacity payment, from the first day of the commercial launch of the terminal. It would not be able to evacuate the entire volume of re-gasified LNG from the terminal; a large part of the gas transmission pipeline between Anwara-Fouzderhat is yet to be laid. But as per contract with the builder of the terminal, the government would have to make full payment to the former even if it fails to evacuate lower than actual volume of LNG.

What is more frustrating is that the government is at risk of making capacity payment when a large number of industrial units in Chittagong region have remained gas-starved for years together. It is almost certain that the capacity payment would be substantial since the Gas Transmission Company Limited (GTCL) is yet to acquire land for laying the Anwara-Fouzderhat pipeline. The development, thus, speaks of usual sloth and inefficiency ingrained in the state entities.

However, some state entities have developed a habit of making capacity payments to private parties in recent years. The Power Development Board (PDB) is one such organisation that has been paying billions of taka to private rental power plants for its failure to utilise the generating capacity of the latter.

Allegations are aplenty about irregularities in such payments. It is not unlikely that the scopes for indulging in irregularities are deliberately created in deals struck between the private parties and the state agencies to share funds beyond regular ones. The relevant ministry should look into the issue of probable capacity payment to the LNG terminal and the delay in laying a major part of the pipeline. 

• Courtesy: The Financial Express/ editorial/ march 04, 2018