Summit Group has urged the Petrobangla to reconsider its decision to terminate the country’s third Floating Storage and Regasification Unit (FSRU) project.
In a statement send to the media on Wednesday, the Singapore-based Bangladeshi power and energy company termed the decision “invalid” and said any delay to the project could put the country’s energy security at stake.
In a notification on 14 January 2025, the Petrobangla and the Ministry of Power, Energy and Mineral Resources terminated the Terminal Use Agreement (TUA) for the FSRU signed earlier with Summit LNG Terminal II Co. Ltd. (SLNG II), a Dhaka-based subsidiary of Summit Power International Limited (SPIL), citing that the agreement had “purportedly not been fulfilled.”
On 30 March 2024, SLNG II had signed the TUA and IA with the Petrobangla and the government of Bangladesh respectively.
Earlier, on 12 December 2023, the TUA and IA were legally vetted and approved by the Cabinet Committee.
However, the Petrobangla on 7 October last year notified that the project in southeast Bangladesh would be terminated.
Summit Group says it has obtained legal advice since then from both local and international legal firms which affirmed that such termination lacks any legal ground.
The company also says it wrote to the Petrobangla, conveying its objections with regard to the termination notice.
“As has been widely reported in Bangladesh media, the country is in dire need of energy infrastructure, including the country’s third FSRU. Any delay in the implementation of this project would result in further energy insecurity in Bangladesh,” Summit said in its media statement.
“As per contract and in the interest of securing much-needed energy infrastructure, we humbly submit that the termination of the TUA is invalid and should be reconsidered,” it added.
The company also claimed that it has already invested US$20 milllion to carry out preliminary work of the project.
The 3rd FSRU, the second such project in Bangladesh undertaken by Summit Group, has a planned regasification capacity of 600 million standard cubic feet per day, which would require investment of about $550 million coming in as foreign direct investment (FDI).
Petrobangla’s notice of 14 January 2025 stated that the decision to terminate was on the basis that a performance bond (PB) for the project was not submitted by SLNG II but by its local parent, Summit Corporation Limited (SCL); that the submission of the PB did not comply with an agreed template; and that the PB was not submitted within a 90-day stipulated deadline.
Citing local and international legal advisers, SPIL said Petrobangla had earlier acknowledged receipt of the PB submitted in the form of a bank guarantee, which does not provide any less security.
However, SLNG II also expressed its willingness to replace the PB in the form of a bank guarantee issued in its name “as a gesture of goodwill.”
SPIL said that the TUA provides a strict timeline of 30 days by which Petrobangla may raise any objections with regard to any performed conditions precedent. Petrobangla did not raise any objection during the stipulated time. SPIL has been advised by their counsels that the issues raised by Petrobangla for the purported termination of TUA are not supported by the terms of the agreement.
“Under the TUA if any condition precedent of the TUA had not been met, either party could have submitted written notice within the 30-day stipulated period, but Petrobangla had not done so and, therefore, does not have any right to terminate,” Summit said.
SPIL also clarified that as the PB submission deadline fell on 28 June 2024, a non-banking day in Bangladesh, the bond was delivered on 30 June 2024, the next banking day.
Under Bangladesh law, if any act is directed to be undertaken on a certain day when the office is closed that day, the act is considered to be undertaken in due time if it is done on the next working day.
SLNG II claims that it has already incurred approximately $20 million for long lead items, met-ocean and geophysical studies and administrative and legal fees related to the project.
“The Summit Group is the largest private sector investor in energy in Bangladesh with a proven track record of developing long-term infrastructure projects in a responsible and transparent manner. Our investments have helped to catalyse FDI into Bangladesh. Once again, we respectfully urge the Government of Bangladesh to uphold the sanctity of contracts and to ensure that investors’ rights are protected and treated fairly and equitably,” SPIL said.
