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Compressor sought to up gas supply

Proposal to add cost to cost-recovered Bibiyana field; Chevron proposes gas compressor outside its jurisdiction

Shakier Khan
Although there is no legal provision. Petrobangla is considering a "cost recoverable" proposal of American oil giant Chevron to install a gas compressor station in the national pipeline grid at Muchai, owned by Gas Transmission Company Ltd (GTCL), to boost gas supply pressure and quantity.
Sources said a high official of Petrobangla is promoting the idea when the GTCL is already scrutinising a bid from Korean company Hyundai to install three such gas compressors to ensure proper gas supplies to existing and future
power and fertiliser plants.
Unfortunately, the GTCL's bid. three years behind schedule, drew lowest price offer three times the initial estimate. The Petrobangla official is now putting for ward the idea as an alternative to installing one of these three gas compressors.
“But as the Production Sharing Contract (PSC) with Chevron does not allow such installation, we will have to find a new modality on the basis of negotiation,” said a well-placed Petrobangla source.
Such an installation costing around $ 52 million would make Chevron's investment cost recoverable under the PSC for
Block-12 that includes Bibiyana gas field. The price is in sharp contrast with Hyundai's offer of $40 million for the same in Muchai under the GTCL bid.
As per the PSC, Chevron's recoverable investment will get priority, and it will hold majority share of gas produced from Bibiyana while Petrobangla will get a smaller quantity of free gas as minority shareholder.
But Chevron's investment of around $ 240 million in Bibiyana field will be completely recovered within this month, and Petrobangla will then get around 70 percent of the 550 million cubic feet gas per
Compressor
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day (mmefd) for free as majority shareholder. This means Bibiyana gas would become very cheap for Petrobangla, sources said.
On February 26, Chevron proposed to the authorities that it would install a compressor at Muchai, but the government must give a go-ahead within March 14. Otherwise, the fund earmarked for this project would be diverted to some other schemes. The proposal addressed to the director, PSC of Petrobangla, was also forwarded to the energy adviser to the prime minister and the GTCL, amongothers.
To install this compressor. Chevron will also install a 800 metre-long pipeline with a diameter of 12 inch at a cost of $1.5 million . With this pipeline, gas supply from Bibiyana can be increased by 60-80 million cubic feet a day, said a source in Chevron.
Increasing gas production further from Bibiyana would not damage the gas structure, he claimed. "New data shows the field can sustain larger production without damage.”
Meanwhile, Petrobangla last week held a meeting to review GTCL’s bid for the compressor stations. It noted that the GTCL drew two offers -- ABB of Italy sought $256 million excluding 8.5 percent tax while Hyundai of South Korea $149.7 million including tax. But the estimate for this project, prepared by an international consultant in 2006, is only $ 55 million. The GTCL, which is also floating tenders for four gas transmission pipelines, needs additional funds for the job.
The Petrobangla board spelled out some options as alternatives for the compressors by prioritising the pipeline projects. At the bottom of this list of options later sent to the energy ministry for further directives, Petrobangla oddly mentioned the Chevron proposal. "This is odd because this document is about the GTCL project and Chevron is a PSC operator," said a source.
"However, as the PSC does not allow such an installation, the government probably could not reach a decision about it within Chevron's deadline expiring on March 14. We shall need time,” said a Petrobangla source.
“Again, we should also consider that the pipeline belongs to the GTCL. If a station is installed there, Chevron would become a party to the control of gas supply system. It has already become ine dominant gas supplier in the country." he added.
The idea of Chevron's (ornpressor station was first tabled a few months back it the level of the Technical Financial Committee under the PSC foi Block-12.The committee flatly rejected it saying it is out oi ( hevron's jurisdiction. Later, the Joint Monitoring ( ommittee--the apex body for approval of any schemes undei the PSC approved it