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Future gas pact

Petrobangla to scrap compensation clause?

25 June 2022

News Desk :
After failing to enhance local gas production, state-owned Petrobangla has now initiated a move to modify the current structure of the gas supply agreement (GSA) with future power plants in Bangladesh.
UNB has learnt that a draft of the revised GSA was recently sent to the Bangladesh Power Development Board (BPDB) seeking its opinion on the proposed move. And on their part, a top BPDB official said, the file has been forwarded to the Power Division with notings.
"We'll soon hold a meeting with all power companies -- public and private -- to discuss in detail the merits and demerits of the revised GSA, before taking a final call on the proposal," said a senior official of the Power Division, who didn't wish to be named, reports UNB.
He, however, said that the Power Cell, a technical wing of the Power Division, had been asked to analyse the proposal and prepare a detailed report, which would help the
Power Division to take a "right decision" on the file.
Sources said that the recent excessive hike in gas prices in the global market due to the Russia-Ukraine war forced Petrobangla to initiate such a move to revise the GSA.
Petrobangla is the sole authority of gas supply to any power plant in the country. As a result, the BPDB and a private company have to sign a GSA with Petrobangla before moving for setting up a gas-fired power plant in the country.
"After a series of discussions and negotiations, Petrobangla sign a GSA with a power plant ensuring a timely supply of gas," said an official. "The recent volatility in gas and crude prices in the global market has put the organisation in a dilemma."
Under the current structure of the GSA, Petrobangla has an obligation to ensure gas supply to a power plant. If it fails to supply the same to the power plant, the latter can claim compensation from Petrobangla.
But now Petrobangla wants more flexibility in the future GSAs, basically to get out of this financial obligation, he said.
However, energy experts in Bangladesh believe that such a move would give a negative signal to future investors in the power sector.
"If any investor does not get a firm commitment about gas supply to power plants, they will not be interested to invest in the country," eminent energy expert Dr M Tamim said.
According to the experts, in the last one-and-a-half decade, no new gas fields have been discovered in the country "due to lack of exploration initiatives".
Instead Petrobangla has increased production mainly from the existing foreign company-operated gas fields, but that's insignificant when compared with the rising demand.
Moreover, Petrobangla has to import about 25 percent of its gas from abroad at higher prices and sell it at lower prices to its local consumers.

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