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Fund crunch hits GTCL gas compressor project

Power plants, upcoming power projects, large industries to suffer from gas crisis

Sharier Khan
As deteriorating gas pressure and supply crisis continues to cause huge power generation shortfall, the Gas Transmission Company Ltd's (GTCL) latest bid to install three gas compressor stations to improve gas supply has been halted due to severe fund crunch.
If this project fails to launch in time, the gas supply scenario will be grimmer within the next two years. Petrobangla sources said that the present gas supply shortfall of 100 to 200 million cubic feet of gas a day would deteriorate further and due to lack of adequate gas transmission pressure, supplies to many areas will be affected.
Earlier this month, the GTCL's second
tender for installing the compressors drew two offers; ABB of Italy sought $256 million excluding 8.5 percent tax while Hyundai of South Korea sought $149.7 million including the tax.
While Hyundai's bid is a clear winner, GTCL says it only has $55 million for the job. This job is part of a $189-million project financed by the Asian Development Bank (ADB) to set up three pipelines and install these three compressor stations. The pipeline and compressors together would enhance the gas supply and pressure quality within two years.
The GTCL that held its first failed bid in 2006 says that it always knew that $55 million was not adequate for the scheme but it had not arranged additional funds
in the last three years.
There is no shortcut to resolving the present gas crisis and all measures to significantly increase gas supply or production will take at least two years. Installing the compressors themselves will take nearly 22 months to complete.
According to Petrobangla sources, demand for gas has spiralled over the years beyond the capacity of the existing gas delivery system.
Petrobangla is now delivering more than 1,800 million cubic feet of gas a day, while it believes that the demand is hovering between 1,900 million cubic feet and 2,000 million cubic feet of gas a day. Official documents show that Petrobangla can supply 2,042 million cubic feet of gas a day against a demand of 2,018 million cubic feet of gas a day this year. But the reality is different.
The 1,800 million cubic feet of gas a day is not being supplied at optimal pressure. The need for the compressors has become very urgent as low gas pressure and lack of gas is already causing 550megawa(t (MW) to 700MW power generation shortfall Ghorashal and Palash Urea Fertiliser factories have suspended production due to low gas pressure.
Without the compressors, new pipelines will fail to deliver gas at proper pressure, jeopardising all upcoming power projects, sources said.
In Titas gas supply area, nearly 100 large industrial consumers, who have already invested crores of taka, are without gas supply.
"New industrial growth and private investment will be badly affected and discouraged. The major foreign exchange earning sectors like readymade garments will be affected. Even, the future import of gas from neighbouring countries may be affected,' said a Petrobanglasource.
Due to non-availability and low pressure of gas, the supply situation will worsen in June-July when new power projects with the total capacity of 700MW will be added to the national grid. This will not help improve the load shedding scenario.
This summer power cuts will increase between l,000MWand2,000MWaday.
"While installing the compressors will not immediately help the gas supply system, we should not plan on anything without them because nothing will work," said an official.
The three compressor stations wall increase gas pressure and supplies to the old power plants, plus ensure quality gas supply to future power projects like the 450MW and 150MW Sirajganj schemes or the new Haripur 360MW, Siddhirganj 300MW, Chandpur 150MW schemes in Titas area and the south-western and northern regions of the country.
"Without the compressors, the three new GTCL pipeline projects will not be able to transmit gas with adequate pressure to run any power pl^nt or heavy industries. In other words, the pipeline projects themselves will not be meaningful," said a Petrobangla high official.
"Gas is supplied at l.OOOpsi (pounds per square inch) from the gas fields to the national pipeline grid. But as gas flows a great distance, the pressure falls. For instance, the gas
pressure drops to 600psl at Ashuganj," said the official.
Such drops arc causing Raozan power plants to produce only J60MW of power though these can generate 360MW. Last week, the Tongi 80MW power plant tripped due to low gas pressure. Even domestic gas supplies in Mirpur area of the capital are being affected.
PROJECT DETAIL
An ADB loan of $235 million was offered to the government in 2006. Of this fund, $189 million was given to the GTCL for die compressors and three pipelines while the rest was marked as clean fuel project and Petrobangla's manpower training.
Keeping around S14 million as contingency budget from the $189 million fund, the GTCLheld separate tenders for the pipeline and compressor projects.
The three pipeline projects are: Monohardi-Elenga 30 inch 51km pipeline to transmit gas to Sirajganj and up to Khulna; Jamuna West-Naika-Bheramara 30 inch 98km, and Bheramara to Khulna 20 inch 162km. The tenders for the two latter projects are now in advance stage while the first one--the Monohardi-Elenga pipeline--is in the primary stage.
The Monohardi project is a supply reinforcement scheme as there is already another pipeline.
The GTCL floated the first tender for the compressors in April, 2006, in which three companies participated. It was then alleged that some GTCL officials in connivance with bidder Punj Lloyd and compressor vendor Solar were manipulating the tender. The ADB investigated the allegation and permanently blacklisted Solar from the project and other ADB-funded projects in the world for two years. AGTCL official was also fired. The second tender was held in January 23,2008, and closed on June last year in which four companies participated. ABB and Hyundai qualified technically and their financial offers were opened earlier this month. Compressor stations will be installed in Muchai, Ashuganj and Elenga.
FINANCINGALTERNATIVES The GTCL, Petrobangla and the energy ministry had been holding meetings for the last two weeks to figure out how to finance the project. The government already proposed to the ADB to increase the loan. The ADB refused and suggested that the government seek a new loan.
As a new loan is a time
consuming process, a Petrobangla director suggested that one of the compressors be installed by oil company Chevron at a higher cost under production sharing contract (PSC) with the Bibiyana Gas Field.
Chevron has already submitted a proposal to install a compressor station using devices from Solar at the cost of $52 million at Muchai; whereas Hyundai s proposal for a station there costs only $40 million. The director suggests that another compressor be dropped from the scheme for now and Hyundai , be asked to install just one compressor.
An official said, “In addition to being a costly soludon, the question is why we should involve Chevron in it? Chevron's cost in Bibiyana Gas Field has been recovered under the PSC and Petrobangla is now enjoying 78 percent share as free gas from Bibiyana's production of 500 million cubic feet of gas a day. Once we let Chevron add this compressor station, Chevron will recover its cost on priority basis. Its share will increase. We are giving our own money- - $ 12 million extra --to Chevron. This is not a good option at all."
There are other soludons.
The GTCL believes that the $38 million tender for Monhardi-Elenga pipeline project may be suspended for now as its financial offer has not been opened. As this is a supply reinforcement project, it can be delayed by a year before new financing is available.
If this $38 million is diverted and added to the existing $55 million, the GTCL instandy gets $96 million ready. Plus, the GTCL also has S14 million as contingency fund, making the total $110 million available for thejob.
"If the government exempts 8.5 percent tax from Hyundai's offer, the Hyundai proposal slides down to $136.7 million. The remaining money can easily be arranged by bridge financing from the government's Annual Development Project (ADP) allocation for the energy sector," said an official.
The government has allocated to the energy sector Tk 784 crore under rhe ADP this fiscal year. Of this, only 20 percent has been utilised, the rest of this huge fund is now available for better use, the official argued.
"If the government is going to cancel this tender, a retender will take a lot of time and the price offers are likely to go up." the official added.