LNG-fired power plant shelved

The government had taken an initiative to set up a 3600-megawatt power plant based on liquefied natural gas (LNG) at Kalapara upazila in Patuakhali in 2017. The following steps of land allotment and feasibility study were also completed. But the government is now stepping back from the power project due to the spiraling price of LNG in the global market. 

According to the Power Division, the North West Power Generation Company Limited (NWPGCL), a state-run power company, made a deal with German multinational company Siemens AG, to implement the power project.

In 2020, a multilateral agreement was drafted with US energy giant Excelerate Energy and power sector investor China National Machinery Import and Export (CMC) to build an LNG terminal for the power plant.

In the latest development, the NWPGCL issued a letter to the power division last month, requesting it not to finalise the deal. However, the power division is yet to disclose a formal decision regarding the issue.

The state-run power company said in the letter that there is no need to build a separate terminal for the power plant as the government has already taken an initiative to build a floating LNG terminal in the deep sea along the Payra coast.

Some certain clauses of the draft multilateral agreement on LNG supply are no longer relevant in the present context. The NWPGCL board hence decided to cancel the deal.

There was a plan to generate 3600 megawatt electricity in three phases, with 1200 megawatt at each phase, at the Payra power plant.

However, the NWPGCL said a 1200-MW power plant can be built at the initial stage under own management and the authorities may install two other units in the following phases, in line with the future power demand.

Two power division officials said that the demand for power did not increase as the economic growth slowed down in the two years marred with the Covid-19 pandemic and the plans of setting up new industrial areas were not executed properly. There is no need for new power generation projects before 2030 and this is why the 3600-MW LNG-based power project is being dropped. 

AM Khorshedul Alam, chief executive officer of NWPGCL, said the power division has been asked not to finalise the multilateral deal as there is no guarantee of gas availability in the current situation. If necessary, the power plant can be built later.

Besides, those who were supposed to work in the power project did not raise any objections, he added.

According to NWPGCL sources, some 100 acres of land was allocated for the 3600-MW power plant and an amount of Tk 600 million was spent for four surveys and land development. This data can be used while implementing any project under own management.

A fresh proposal was placed to install a solar power plant there for now, but it was not accepted as the plant will have the maximum power production capacity of only 30 to 40 MW.

State minister for power, energy and mineral resources Nasrul Hamid told Prothom Alo that the government is no longer thinking about the project as the LNG-fired plant would cost Tk 28-29 to generate each unit of electricity.

The latest progress report of the Power Development Board (PDB) on power generation reveals that three projects are currently underway for LNG-based power generation under the private sector. The plants are likely to go into production by next year.

Three more private plants are awaiting agreements. Besides, there are plans to build two large-scale jointly owned and seven more public LNG power plants by 2030.

The Power Cell, a policy research institute of the power division, released a report last year, comparing the cost of power generation in LNG and coal fired plants. According to the report, it will cost Tk 7.78 to generate each unit of electricity using imported coal at the Payra power plant. The cost will fall to Tk 5.57- Tk 6.20 if a mixture of locally extracted gas and imported LNG is used in the power generation process.

Apart from that, a coal-fired power plant requires 15 times more land than an LNG-fired one. LNG is environment-friendly and its installation, repair and maintenance cost is comparatively lower.

However, the Centre for Policy Dialogue (CPD) contradicted the Power Cell report, saying that the plan for establishing LNG-based power plants will not be a good one in the present context.

The average cost per unit of LNG import has exceeded Tk 50, which pushed up the gas price and reduced its import, the CPD said while explaining its stance.

The CPD did not find any rationale behind the plan of installing 11 LNG-power plants.

Golam Moazzem, senior research director of CPD, described the government decision to withdraw from LNG-based power plants as a positive move.

Now renewable energy based power plants can be built there with foreign investments. The LNG-based power plants in the pipeline should also be replaced by renewable energy based plants. It will not require LNG imports and will reduce the long-term pressure on the foreign exchange, he added.