Chevron to resume Jalalabad gas project after Petrobangla clears $237m dues
Late payment penalties totalling $26m still due
Highlights
- Petrobangla cleared arrears in April this year
- LIBOR to SOFR transition delayed penalty payments
- Petrobangla to clear penalties by July 2025
- Chevron earlier committed $65m to project
- Urges timely future payments to avoid disruption
US energy giant Chevron has confirmed its decision to proceed with the stalled Jalalabad Compression Project in Sylhet following the full settlement of its outstanding bills by Petrobangla earlier this year.
In a letter dated 22 June, Chevron Bangladesh President Eric M Walker informed Petrobangla Director AKM Mizanur Rahman that the company would resume work on the project, which had been suspended for over a year due to payment disputes.
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The long-awaited project is expected to boost gas output from the Jalalabad field by up to 3,52,000 mmcf.
Chevron had earlier committed $65 million to the project but withdrew its support as unpaid dues mounted between 2023 and early 2025. By August 2024, Petrobangla's liabilities to Chevron had reached $237.55 million. The state-run energy corporation cleared the entire amount on 21 April 2025.
The day before settling the debt, Petrobangla had formally requested Chevron to resume work on the project. In his reply, Walker acknowledged the payment and said Chevron was encouraged by the resolution of the long-standing financial dispute.
"Chevron Bangladesh has made the decision to proceed with the Jalalabad Compression Project considering Petrobangla'sclearance of the outstanding arrears balance in April," the letter said.
$26m in penalties still due
Although all outstanding bills have now been paid, late payment penalties totalling $26 million are still due. These penalties could not be settled earlier due to complications arising from the global phase-out of the London Interbank Offered Rate (LIBOR), which was replaced by the Secured Overnight Financing Rate (SOFR) in 2024.
According to the original production sharing contract (PSC) with Chevron, such penalties were to be calculated using LIBOR. However, since LIBOR was discontinued and the PSC did not mention SOFR, Petrobangla was legally unable to process the payments.
"We amended the production sharing agreement on 22 June to pave the way for paying due late payment fees," said MizanurRahman. "Now that the change is in place, we will clear all late payment penalties worth $26 million by July."
Chevron has made it clear that the continuation of the Jalalabad project depends not only on payment of the penalties but also on Petrobangla remaining current with future invoices.
"Please be reminded that the continuance of the JBC is dependent upon Petrobangla remaining current with its monthly gas and condensate invoices and fully repaying all late payment interest amounts due by 30 September 2025," Walker wrote in the letter.
The Jalalabad gas field, under a production sharing agreement with Chevron valid until 2038, produced an average of 160.82 mmcfd in FY24.
The new compression project is expected to increase production capacity and help address the country's ongoing gas shortage.
Petrobangla estimates that it will now take around three years to complete the project, which was initially scheduled for completion by 2025.
"Considering the country's gas situation, we are pursuing Chevron to complete the work as early as possible," said Mizanur Rahman.
