Third floating LNG terminal likely via G2G deal, sidelining open bid
The proposed FSRU is expected to have a regasification capacity of about 600 million cubic feet per day (mmcfd), aimed at meeting rising demand for imported liquefied natural gas (LNG) amid dwindling domestic gas reserves
Highlights:
- Bangladesh shifts third FSRU plan from open tender to G2G
- Move aims for faster execution, but experts warn reduced transparency
- Six foreign firms show interest, including Aramco and Excelerate
- G2G timeline of two months deemed unrealistic by experts
- FSRU crucial as gas demand rises, domestic reserves decline sharply
- Critics fear local firms sidelined, missing skill development opportunities
Bangladesh had planned an open tender for its third Floating Storage and Regasification Unit (FSRU) at Moheshkhali Island, Cox's Bazar. The initiative, however, has slowed, with the government now favouring a government-to-government (G2G) deal over competitive bidding.
Petrobangla had been pursuing the development of the third FSRU after it scrapped the second Summit FSRU deal on 7 October last year, citing the company's failure to submit the required performance bond within 90 days of signing the agreement.
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The proposed FSRU is expected to have a regasification capacity of about 600 million cubic feet per day (mmcfd), aimed at meeting rising demand for imported liquefied natural gas (LNG) amid dwindling domestic gas reserves.
Officials familiar with the development told The Business Standard that "the open tender process has been placed on the back burner" adding that authorities now believe a G2G model would ensure faster execution and more reliable financing with lower cost.
An Energy Division official, speaking on condition of anonymity, said, "Petrobangla had already prepared the tender documents and sent them to the division for approval. The division had initially given the go-ahead to float the tender, but it has been temporarily put on hold for now."
Petrobangla's Director (Operations) Engr Md Rafiqul Alam told TBS, "We are fully prepared to float the tender for the third FSRU. Once the Energy Division gives us the go-ahead, we will proceed."
Energy experts, however, warn that while the G2G approach may speed up the implementation process, it risks reducing the scope for competitive pricing that a tender process usually offers.
"The government is prioritising energy security at this stage, but transparency in costs and long-term commitments will remain key concerns," said one analyst talking about the sudden policy shift.
Last year, Power, Energy and Mineral Resources Adviser Muhammad Fouzul Kabir Khan said all future procurements in the power and energy sector would be conducted through open tenders to reduce prices and prevent monopolies.
"The price of fuel oil imports will drop by 35% due to open competition, saving Tk370 crore," he said at a Dhaka Chamber of Commerce and Industry event in December 2024.
Timeline doubts, risks
Former special assistant to the 2008-09 caretaker government for power and energy, M Tamim, echoed similar concerns.
Speaking to The Business Standard, he said, "We went for G2G with Gazprom, and the perception is that the deal escalated costs. The G2G method is primarily used for two reasons – financing or technology transfer. But will the designated company transfer technology to us that is not available through the open tender process?"
Energy Division officials said the main motivation for the G2G move is faster execution of the project, with a target of concluding the deal within two months – a timeline procurement experts call unrealistic considering previous G2G negotiations and bureaucratic processes.
"To initiate a G2G process, a ministry must first sign a memorandum of understanding or a framework agreement with its foreign counterpart. Then come discussions on financing, technology, and contractor nomination," explained a procurement expert, talking about the timeline.
The expert added that a joint committee is typically formed to conduct feasibility studies, evaluate technical and financial proposals, and negotiate cost and implementation timelines before the proposal is submitted to the Cabinet Committees on Economic Affairs and Government Purchase. "Trying to complete all these steps in two months risks rushed negotiations, reduced transparency, inflated costs, and potential favouritism."
M Tamim further said, "I heard that the government was negotiating with South Korea for the third FSRU, bypassing competitive bidding. Regardless of the method Bangladesh chooses, it will take at least three years to complete the installation work."
Six firms show interest
According to Petrobangla and Energy Division sources, six companies have expressed interest in a potential G2G deal for the project – Oman's OQ Trading International, Saudi Aramco Trading Company, Azerbaijan's Socar, US-based Excelerate Energy, Russia's Novatek, China International Marine Containers (CIMC), and a South Korean firm.
OQ Trading, which has delivered over 125 LNG cargoes to Bangladesh since 2019, has no prior experience in building or operating FSRUs.
Saudi Aramco Trading also lacks FSRU experience but has extensive expertise in pipelines, gas processing, and petrochemicals. The remaining four firms have direct experience developing and operating FSRUs.
Why the third FSRU matters
With local gas reserves depleting and demand steadily rising in the power and industrial sectors, Bangladesh will have to significantly increase its LNG imports in the coming years.
However, the country's limited regasification capacity remains a major constraint.
According to Petrobangla data, LNG imports have surged from just 11 cargoes in 2018 to 86 in 2024, with the figure projected to reach 108 cargoes in 2025.
When Bangladesh operated two FSRUs – one owned by US-based Excelerate Energy and another by Summit LNG –they had a combined capacity of 1,100 mmcfd.
Both projects were signed under the Speedy Supply of Power and Energy (Special Provision) Act, 2010, on a Build–Own–Operate–Transfer (BOOT) basis. Under the method Excelerate deal was signed in 2016 and Summit deal was signed in 2017.
Due to maintenance and rough sea conditions, operational capacity typically ranges between 85% and 90%, allowing the units to process around 930-1,000 mmcfd.
Officials said that under the current infrastructure, the country's two FSRUs can handle a maximum of 115 cargoes a year.
"Whatever initiative is taken now, it may already be too late to avert a looming gas crisis," warned energy expert Tamim. "Bangladesh is heading toward a severe gas supply disaster, and emergency measures must be implemented immediately."
The heavy dependence on natural gas has made the economy vulnerable to global price shocks and supply disruptions, he added.
Local capacity overlooked
While Bangladesh's private power producers now generate 39% of total electricity output – operating 70 plants with a combined capacity exceeding 11,000 MW – domestic participation in the gas and LNG sector remains minimal.
Experts warn that awarding the third FSRU through a G2G deal could again sideline local firms and limit opportunities for skill development.
"Involving domestic companies would give the government more leverage and help avoid the pitfalls of G2G projects – such as high-interest loans, costly foreign consultants, and unfavourable EPC and O&M contracts," said one energy expert.
They also noted that local firms have shown resilience in past crises, continuing operations when foreign suppliers halted deliveries due to payment issues.
