Bangladesh’s plan to build a third floating LNG terminal in the Bay of Bengal has hit a fresh obstacle after a cabinet committee refused to approve a Chinese company's proposed daily operating fee of $342,000, nearly 35% higher than existing rates.
The decision has complicated efforts to expand the country's gas import capacity at a time when industries are struggling with chronic shortages and declining domestic production.
It also comes amid lobbying by domestic and international energy companies seeking a foothold in Bangladesh's lucrative liquefied natural gas (LNG) market.
The Cabinet Committee on Government Purchase (CCGP), chaired by Finance and Planning Minister Amir Khosru Mahmud Chowdhury, declined to approve the proposal at an online meeting on October 13.
The proposal was submitted by China National Energy Engineering and Construction Company Limited (CNEE) through state-owned Petrobangla.
Several Petrobangla officials, speaking on condition of anonymity, told Daily Waadaa that the Chinese company's proposed regasification fee was the principal sticking point.
CNEE sought $342,000 a day to operate the proposed Floating Storage and Regasification Unit (FSRU).
By comparison, Petrobangla currently pays Summit Group $249,115 a day for one terminal and US-based Excelerate Energy $254,000 for the other.
The Chinese proposal is approximately 37.3% higher than Summit's rate and 34.6% above Excelerate's.
At the proposed rate, the annual regasification charge alone would amount to nearly $125 million, before accounting for the cost of imported LNG.
The cabinet committee instructed Petrobangla to review the financial terms, technical specifications and operational structure before resubmitting the proposal.
The decision does not formally terminate the Chinese project. But it leaves its future uncertain.
On July 28, the Cabinet Committee on Economic Affairs (CCEA) had approved processing CNEE's proposal in principle under a non-competitive government-to-government (G2G) arrangement.
The proposed terminal would operate under a Build-Own-Operate (BOO) model for 15 or 20 years.
It would feature an LNG storage vessel with a capacity of 170,000 cubic metres, intended to provide Petrobangla with greater operational flexibility than the existing terminals.
But the higher tariff has raised concerns about long-term financial commitments.
Officials estimate that accepting the Chinese proposal could impose an additional $270 million to $300 million in costs over the project's operating life.
That estimate will require scrutiny against the final contract duration, operating assumptions and tariff structure.
The financial implications are significant.
Bangladesh's LNG import bill was estimated at around $4.5 billion in FY2025-26, with projections suggesting it could reach $5.2 billion in FY2026-27 amid volatility in international energy markets.
The proposed third terminal has also become the focus of competition among energy companies. Petrobangla officials described lobbying by domestic and foreign interests seeking to influence the procurement process.
The dispute centres on two competing priorities: securing additional gas import capacity quickly and ensuring that Bangladesh does not commit to unnecessarily expensive long-term contracts.
The latest setback follows the cancellation of two earlier LNG terminal projects awarded to Summit Group and Excelerate Energy.
The agreements would have established Bangladesh's third and fourth FSRUs.
Both were revoked after the political transition in August 2024, following the repeal of the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act, 2010.
The law, introduced under the Awami League government, had allowed energy projects to bypass conventional competitive procurement procedures.
Summit has since sought to revive its terminated March 2024 contract for another FSRU.
The company submitted a formal petition to Petrobangla requesting reconsideration of the cancellation.
It has also challenged the legality of the termination order before the High Court Division.
Meanwhile, the United States has been advocating transparent and competitive procurement for major energy infrastructure.
On September 7, US Ambassador Brent Christensen met government ministers at the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).
During the engagement, he highlighted the interest of US companies in building and operating future LNG terminals if Bangladesh introduced open international tenders.
The competing approaches have left policymakers facing a difficult choice. A G2G agreement could potentially shorten procurement procedures, but may limit price competition.
An international tender could attract more bidders and potentially better commercial terms, but would take longer.
Industry estimates suggest that competitive tendering for a major offshore LNG terminal could take 12 to 18 months before a contract is signed.
Construction and installation could require another 18 to 24 months.
Even under CNEE's proposal, Petrobangla officials estimate that the terminal would take at least two years to become operational.
Bangladesh's gas demand currently stands at approximately 3,800 to 4,000 million cubic feet per day (MMCFD).
Supply is around 2,600 MMCFD. That leaves a daily deficit of 1,200 to 1,400 MMCFD, affecting power generation, factories and industrial production.
The country's two operational FSRUs, located off Moheshkhali, can together supply approximately 1,000 MMCFD under favourable conditions.
But rough seas, maintenance shutdowns and other technical disruptions periodically reduce their output.
That dependence has made the gas supply system vulnerable to interruptions.
A third terminal would provide additional regasification capacity and reduce reliance on the two existing facilities, although actual LNG imports would still depend on financing, cargo availability and pipeline capacity.
Petrobangla officials warned that further delays could prolong gas rationing across industrial areas.
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