Legal tangles plague LPG terminal

A project to build a large liquefied petroleum gas (LPG) deep sea terminal in Moheshkhali, which is expected to help cut the import cost of the domestic cooking fuel drastically, has become uncertain because of legal tangles and complications in the tender process.

The Bangladesh Petroleum Corporation (BPC) initiated the project last year to annually import over one million tonnes of LPG through the terminal. This quantity is close to the present annual LPG import of the country.

The terminal will be able to handle large LPG ships directly, helping cut down import and distribution costs by $35-$40 per tonne.

The LPG delivered there will be sent directly via special smaller ships to various storage facilities of different private companies in Chattogram and Mongla at a cost much cheaper than the current rate.

As a result, the market price of a 12.5kg LPG cylinder is projected to come down by Tk30-Tk40, according to market players.

Presently, companies import LPG from the Middle East by small or bigger ships that are anchored far away from Chattogram and Mongla ports. Smaller lighterage ships unload the gas and deliver it to storage tanks on shore. This process adds a huge extra cost.

The project was initiated in September 2019 through an unsolicited proposal of Japanese company Mitsui along with two partners – South Korean SK Gas and Bangladeshi East Coast Group.

They proposed a joint venture with BPC and offered it a 15% share for the land while the companies would invest money and technology for the $300 million project.

But earlier this year, two more unsolicited proposals were tabled to the BPC – one led by two Japanese companies, Marubeni and Sumitomo. These bidders offered up to 30% share to BPC.

With no tender document or policy guideline regarding a project of this nature, BPC is now not very sure about choosing the best bidder. 

It, therefore, is stalling the process, said sources at the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources.

BPC Chairman Abu Bakar Siddique said the project has become uncertain due to various legal implications.

He noted that the BPC neither handed the required land at the Moheshkhali sea port nor did it have the legal mandate to form a joint venture with private companies.

"No government law allows us to form a joint venture with other private organisations. A joint venture can be between private companies only," he said.

The project emerged as the result of a bidder's interest in building the terminal on a joint venture basis instead of the BPC floating a tender, said Siddique. 

Industry insiders say BPC is not comfortable with the minority share offered by the bidders and wanted the majority share.

Following Mitsui's interest, BPC, however, asked international companies to submit their proposals for the project late last year. Accordingly, four more bidders submitted their proposals in March last. However, two of the proposals were dropped because those were incomplete.

The remaining two were a consortium of Marubeni, Singapore's Vitol and Bangladeshi Power Co International, and another one of Sumitomo, Japanese Gyxis Corporation and SHV Energy of the Netherlands.

While Mitsui outlined the project cost at $310 million with a 15% share for BPC, Marubeni proposed a $305 million budget with a 30% share for BPC, the highest offer for the state-owned corporation.

However, following this move, Mitsui made a counter offer, raising the share of BPC by a small percentage.   

The Energy and Mineral Resources Division, on 24 September, sent a summary of the project with no particular recommendation to the prime minister for her approval.

The Prime Minister's Office (PMO) returned the proposal, asking the ministry to report which of the three bidders is the most experienced in handling large terminals, said BPC Director (operation and planning) Syed Mehdi Hasan.

"Three bidders submitted their reports on 15 November and those were sent to the PMO. The evaluation of the bidders will begin after the PMO sends back its opinion," he added.

Private companies presently spend around $100 on per tonne of LPG as cost of carrying via small ships that transport up to 3,000 tonnes of LPG from abroad. If the BPC terminal is built, this cost will come down to about $60.

There will be a jetty in the terminal for anchoring a vessel carrying 40,000 tonnes of refrigerated LPG.

Later, the stored LPG will be supplied to the LPG gas companies across the country by ships of 1,500-4,000 tonnes capacity.