Summit urges govt to reverse decision to scrap floating LNG terminal deal

Summit LNG Terminal II Co Ltd, a unit of Summit Group, has called on the interim government to reconsider its decision to terminate a contract to set up a third floating storage and regasification unit (FSRU) project of Bangladesh.

Summit LNG Terminal II said it had received a notice from the Bangladesh Oil, Gas & Mineral Corporation (Petrobangla) on 7 October notifying the termination of the project at Moheshkhali in Cox's Bazar, according to a press statement issued by Summit Group today (9 October).

The Moheshkhali terminal is the second floating gas terminal project undertaken by Summit Group with a planned regasification capacity of 600 million standard cubic feet per day, it said.

The statement reads that Summit LNG Terminal II is owned by Summit Power International Limited, the largest private sector investor in energy in Bangladesh with a proven track record of developing long-term infrastructure projects in a responsible and transparent manner.

"Our investments have helped to catalyse foreign direct investment into Bangladesh. 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," the company said in the statement.

Regarding the project, Summit LNG Terminal II gave a few clarifications in the statement.

In late 2020, the government made a strategic decision to transition from coal-fired power generation to natural gas, a cleaner energy source. The initiative was also aimed at boosting gas supply to ensure energy security and support industrial growth, it said.  

Summit Group submitted a proposal on 11 October 2021, to implement an FSRU on a "Build, Own, Operate, and Transfer" basis. The proposal was approved by the Cabinet Committee on Economic Affairs on 14 June 2023.

"The approval followed two years of extensive negotiations and consultations with international law firms to address the contractual and technical challenges."

Summit, in collaboration with Petrobangla and Rupantarita Prakritik Gas Company Limited, finalised the Terminal Use Agreement and Implementation Agreement on 12 October 2023. These were legally vetted and approved by the Cabinet Committee on 12 December 2023, reads the statement.

Summit LNG Terminal II signed the deals on 30 March 2024 with Petrobangla and the government for a 2nd FSRU of the group. 

On the same day it also signed a long-term Sale and Purchase Agreement to supply 1.5 million tonnes of liquefied natural gas (LNG) to Petrobangla, starting in October 2026.

To fulfil the initial conditions precedent of the agreements signed on 30 March 2024, Summit LNG Terminal II  has to date committed investments of approximately $15 million to implement the 2nd FSRU.

"The termination notice received on 7 October 2024 was issued on the basis that the agreements signed on 30 March 2024 had not become effective as a performance bond was not submitted within 90 days as stipulated, i.e. on 28 June 2024." 

As that date fell on a Friday,  not a banking day in Bangladesh, the performance bond was delivered on the next possible working day, with acknowledgement by Petrobangla, said the Summit statement.

Summit lawyers have confirmed that the company had not breached any conditions precedent (CP) of the agreements of 30 March 2024. "Even if any CP was delayed, Petrobangla did not notify SLNG II (Summit LNG Terminal II) within the agreed 30-day window and had therefore deemed the CP as accepted."