Summit Group will receive a final nod from the government to set up a floating liquefied natural gas terminal on Moheshkhali Island in Cox's Bazar at a cost of $500 million.

The approval from the cabinet's purchase committee may come this week.

After the approval of the energy ministry's proposal, the local conglomerate will have to sign a final agreement with Petrobangla.

The energy ministry has sought approval for two agreements: one for terminal use and the other for implementation. For Bangladesh, this will be the second LNG terminal agreement.

In July, state-run Petrobangla and US-based Excelerate Energy signed the final deals to set up Bangladesh's first LNG terminal. Petrobangla will pay $158,511 per day to Summit as fixed component fees and $30,500 for port service component fees.

But the fixed component fee and port service charge to be given to Excelerate Energy are $159,186 and $32,000 a day respectively, according to the energy ministry proposal.

“This will save the country $2,500 a day," said an official of Summit Group.

Summit LNG Terminal Company, a unit of Summit Group, will develop the floating facilities within 18 months of signing the final contract.

The LNG terminal company will supply 500 million cubic feet of gas per day, for which the government will pay a total of $ 1.56 billion a year.

The terminal, which will cost Summit $500 million, will be set up on a build-own-operate and transfer basis.

The tenure of the agreement will be 15 years when the terminal will have to be handed over to Petrobangla without any cost, according to the energy ministry proposal.

If deemed necessary, Petrobangla can use the Floating Storage Regasification Unit (FSRU) as an LNG terminal.

Bangladesh is looking outside to alleviate its energy shortage largely caused by the depletion of domestic reserves and rising demand.

Gas supply stands at about 2,700 million cubic feet per day against the demand for 3,300 MMCFD.

The shortage of gas has affected power generation as well as industries and households.

The government aims to set up four land-based LNG terminals and one or two floating storage and regasification units.

The demand for gas will stand at 8,000 MMCFD in 2041, according to an estimate of the Energy Division.

The government has already received proposals from more than a dozen companies for setting up LNG terminals.

China Huanqiu Contracting and Engineering Corporation has proposed to set up an LNG plant in Moheshkhali, while KOGAS-MGCB-KSBL Consortium wants to set up a land-based terminal in Sonadia. Besides, Singapore's Sembcorp Utilities Pte Ltd submitted a proposal for setting up a Gravifloat terminal and storage tank in the deep sea.

The Gravifloat technology allows the LNG terminal to be fully built and completed at a shipyard and installed in shallow waters to facilitate direct ship loading of LNG.

In December, Petrobangla signed an initial agreement with India's energy company Petronet to set up an LNG regasification terminal on Kutubdia Island and a pipeline at an estimated cost of $950 million.