Petrobangla's notice to terminate gas project is invalid, may affect energy security in country: Summit Group
The SPIL, the largest private sector power generation and energy infrastructure company in Bangladesh, is the parent company of Dhaka-based Summit Corporation Limited, which owns SLNG II
Summit Group has urged the Petrobangla to reconsider a notice to terminate the country's third Floating Storage and Regasification Unit project, saying it could stoke further energy insecurity in Bangladesh if implementation was delayed.
In a press release issued today (22 January), it said the termination of the project, for which Summit has already invested approximately $20 million on implementation, was invalid.
The SPIL, the largest private sector power generation and energy infrastructure company in Bangladesh, is the parent company of Dhaka-based Summit Corporation Limited, which owns SLNG II.
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The Petrobangla and the Bangladesh Ministry of Power, Energy and Mineral Resources on 14 January issued a letter notifying that certain conditions under the Terminal Use Agreement signed earlier with SLNG II had purportedly not been fulfilled and as such the TUA was terminated.
Summit has said the SLNG II had signed the TUA and IA for the 3rd FSRU on 30 March 2024 with Petrobangla and the Bangladesh government respectively and both the documents were legally vetted and approved by the Cabinet Committee on 12 December 2023.
The 3rd FSRU, the second such project in Bangladesh undertaken by Summit Group, has a planned regasification capacity of 600 million standard cubic feet per day, which would require investment of about $550 million coming in as foreign direct investment.
However, on 7 October 2024, Petrobangla notified that the project in southeast Bangladesh would be terminated.
"Since then, Summit Group has obtained legal advice from both local and international legal firms which affirmed that such termination was invalid pursuant to the terms of the TUA.
"Based on such advice, the Summit Group engaged with Petrobangla and the Government of Bangladesh to reconsider the decision," the release says.
Petrobangla's notice of 14 January 2025 states that the decision to terminate was on the basis that a performance bond for the project was not submitted by SLNG II but by its local parent, SCL; that the submission of the PB did not comply with an agreed template; and that the PB was not submitted within a 90-day stipulated deadline.
In response, SPIL, citing advice from renowned law firms Herbert Smith Freehills of Singapore and Dr Kamal Hossain & Associates, said Petrobangla had earlier acknowledged receipt of the PB submitted in the form of a bank guarantee, which does not provide any less security. Nonetheless, as a gesture of goodwill, SLNG II is willing to replace the PB in the form of a bank guarantee issued in its name, the release says.
The SPIL said the TUA provides a strict timeline of 30 days by which Petrobangla may raise any objections with regard to any performed conditions precedent.
"Petrobangla did not raise any objection during the stipulated time. SPIL has been advised by their counsels that the issues raised by Petrobangla for the purported termination of TUA are not supported by the terms of the agreement."
Additionally, the release says under the TUA if any condition precedent of the TUA had not been met, either party could have submitted written notice within the 30-day stipulated period, but Petrobangla had not done so and, therefore, does not have any right to terminate.
Summit said as the PB submission deadline fell on 28 June 2024, a non-banking day in Bangladesh, the bond was delivered on 30 June 2024, the next banking day.
"Under Bangladesh law, if any act is directed to be undertaken on a certain day when the office is closed that day, the act is considered to be undertaken in due time if it is done on the next working day.
"As has been widely reported in Bangladesh media, the country is in dire need of energy infrastructure, including the country's third FSRU. Any delay in the implementation of this project would result in further energy insecurity in Bangladesh. As per contract and in the interest of securing much-needed energy infrastructure, we humbly submit that the termination of the TUA is invalid and should be reconsidered," the SPIL said.
"Once again, we respectfully urge the Government of Bangladesh to uphold the sanctity of contracts and to ensure that investors' rights are protected and treated fairly and equitably."
