The government is set to sign revised Gas Sales Agreements (GSAs) with two multinational companies—Karnaphuli Fertilizer Company Limited (Kafco) and LafargeHolcim Bangladesh PLC—anytime soon, officials confirmed.
Kafco Agreement Nears Finalisation
An official from the Energy and Mineral Resources Division (EMRD) stated that the GSA with Kafco is at its final stage and expected to be signed within the current month.
The new agreement with Kafco will be based on a floor pricing mechanism for fertilizer. For instance, if the international market price of urea fertilizer is US$300 per metric tonne, the gas tariff will be set at Tk 30 per cubic meter. Should the price of urea decline, the gas tariff may drop to as low as Tk 26 per cubic meter in line with the global market.
LafargeHolcim Proposal Linked to Tariff
LafargeHolcim Bangladesh PLC has proposed a $1 billion investment during the Bangladesh Investment Summit, contingent upon a fixed gas tariff being ensured.
The company has previously filed a case in an international arbitration court against the additional gas tariff imposed by the Bangladesh Energy Regulatory Commission (BERC), arguing it violates prior agreements.
An EMRD official confirmed that LafargeHolcim is seeking to bypass the BERC-determined tariff and pay a lower, negotiated rate instead. The company reportedly owes Tk 754 crore in unpaid gas bills despite continuing to use natural gas in its operations.
Disputes Over Tariff Caps
Back in 2003, the government signed agreements with multinational organizations (MNOs), including Kafco and LafargeHolcim, that set an upper ceiling for natural gas tariffs at US$2.11.
These deals have allowed the companies to benefit from a capped rate for years, though the agreements are now nearing expiration.
“We have already decided to sign revised GSAs with Kafco and LafargeHolcim, and we are hopeful to finalize them very soon,” said Monir Hossain Chowdhury, Joint Secretary of the EMRD, speaking to Just Energy News.
Negotiations are currently ongoing with both companies, he added.