Building LPG terminal: BPC accepts proposals without setting parameters

The Bangladesh Petroleum Corporation (BPC) has accepted proposals from two foreign companies to build a liquefied petroleum gas (LPG) terminal without setting any evaluation criteria or conducting a feasibility study.

Despite accepting the proposals, however, neither the BPC nor the Energy and Mineral Resources Division have been able to take any definite decision regarding construction of the LPG terminal at the Matarbari deep seaport, according to senior officials of both organisations.

BPC Chairman Abu Bakar Siddique confirmed that the two Japanese companies have shown interest in constructing the LPG terminal at Matarbari.

Asked how the proposals would be evaluated, he said they are reviewing the proposals. Criteria for selecting or evaluating the proposals would be fixed soon.

M Tamim, professor of the Department of Petroleum and Mineral Resources Engineering at BUET, said the LPG terminal at Matarbari is a long-term project.

“Before undertaking this project, its feasibility and proposal evaluation criteria must be determined. Otherwise there will be problems in the future,” he explained.

Badrul Imam, professor of the Department of Geology at Dhaka University, said that without setting the required qualification criteria and without a feasibility study, the adoption and implementation of such projects will create various complications and risks.

“No long-term projects can be undertaken in this manner.”

Relevant officials of the energy division and BPC said there are plans to build a total of three separate terminals at Matarbari, the country's first deep-sea port — a coal terminal, an LNG terminal and an LPG terminal.

The terminals will be built at Matarbari with funding from the Japan International Cooperation Agency (JICA). During Prime Minister Sheikh Hasina's visit to Japan last year, the Japanese government pledged an additional $3.2 billion for these projects.

At the same time, the government of Bangladesh promised to implement the terminal projects with the investment of Japanese companies.

The government has given the responsibility of constructing the terminals under a PPP initiative to the BPC — the state-owned oil importer under the energy division.

Last month, a consortium led by the Japanese company Mitsui & Co. submitted an investment proposal to the Bangladesh government.

The consortium proposed to build the LPG terminal on a build-own-operate (BOO) basis. The consortium includes a Korean company called SK Gas, which owns a very large gas carrier (VLGC). Local partner for this is the East Coast Group, the largest LPG operator in the region which has about 35 years of experience in the downstream petroleum sector.

Marubeni Corporation, another Japanese company, has shown interest in the project as well. They counter-proposed a Netherlands-based company called Vital. Marubeni and its associate Vital have supplied LPG to the international market, but never built or operated such a deep-sea terminal for LPG.

In the construction of the LPG terminal, the two Japanese companies are now in fierce competition to get the project.

Experts in the energy sector say that BPC should first undertake a feasibility study for the implementation of the project and then work on the implementation of the LPG terminal project by formulating a selection criteria or policy.

According to sources, after multiple meetings with the BPC, Energy and Mineral Resources Division and the state minister for Power, Energy and Mineral Resources, Mitsui submitted a near $300 million investment proposal to BPC and gave it 30% equity.

It further stated that the East Coast Group would purchase future imported LPG and guarantee an additional investment of $150 million to purchase six new vessels to transport goods from the LPG terminal to the operator terminals. JICA has also added such a condition for implementation of this project.

Like Mitsui, Marubeni Corporation has also offered a similar 30% equity to BPC.