Chevron collects Tk 3.66b in penalties under pressure

With domestic gas production continuing to decline, the import of higher-priced liquefied natural gas (LNG) has increased. Yet, the US multinational company Chevron has suspended a promised investment to expand gas production.

While keeping the investment on hold, the company exerted pressure and recovered its invoice in full. Furthermore, without commencing work, Chevron has also collected interest on delayed payments, amounting to penalties.

According to Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) sources, under contractual obligations, gas bills must be paid within 30 days of submission. Failure to do so incurs penalties. This time, penalties exceeding USD 30 million (equivalent to Tk 3.66 billion at Tk 122 per dollar) have been paid.

Petrobangla officials stated that Chevron produces gas from three fields (Bibiyana, Moulvibazar, and Jalalabad). On average, their monthly bills amount to approximately USD 40 million. During the tenure of the previous Government, when dollar shortages led to delayed payments, Chevron began applying pressure.

At the time of the Government’s fall, USD 240 million remained outstanding. To recover the dues, Chevron halted new investments, thereby creating additional pressure. Having conducted business in Bangladesh for three decades and received various benefits over time, such behaviour has been deemed unexpected.

Sources at Petrobangla indicated that the Government is undertaking successive programmes of well repairs, development, and drilling to increase gas production. However, production is also declining in Chevron-operated fields.

To boost output in the Jalalabad gas field in Sylhet, Chevron was scheduled to install a compressor, with completion expected by December this year. The company had even extended the project’s contractual term. Nonetheless, citing the prevailing political situation, Chevron has been delaying investment by various means.

It was reported that on 4 April last year, Chevron wrote to Petrobangla stating that, until the invoice were fully settled, investment in the Jalalabad compressor project would be deferred.

After the interim Government assumed office, steps were taken to clear arrears in the power and energy sector. On 17 April, Chevron’s outstanding dues were fully paid. Subsequently, on 20 April, Petrobangla issued a letter to Chevron, noting that upon completion of the project, Chevron had earlier indicated that an additional 352 billion cubic feet of gas could be produced from Jalalabad.

Failure to complete the project on schedule, however, would result in a significant decline in production. This would undermine the principal purpose of extending the contractual term for the Jalalabad gas field. As all outstanding payments have now been cleared, Petrobangla expressed the expectation that Chevron will promptly commence work at Jalalabad.

According to Petrobangla sources, two months after Petrobangla’s letter, Chevron issued another condition in a letter dated 22 June. Alongside the regular bill payments, the company demanded that Petrobangla pay the penalties for delayed bill settlements by 30 September. Petrobangla cleared the entire penalty amount ahead of schedule, on 29 August. On 31 August, Petrobangla once again wrote to Chevron, urging the company to commence work promptly in order to realise the benefits of the Jalalabad project.

A responsible Petrobangla official stated that once work begins, it may take up to two years to complete the project.

Chevron Bangladesh was asked in writing how ethical was it to exert pressure in this way to recover arrears and penalties? When they intended to commence work, given that both arrears and penalties had now been settled? In response, Sheikh Zahidur Rahman, Media and Communications Manager of Chevron, told Prothom Alo that regular discussions were ongoing with the Government to explore opportunities. However, he added that, as a matter of long-term policy, Chevron Bangladesh does not disclose its specific commercial plans.

Reserves have slightly increased in two of the three gas fields operated by Chevron. At Bibiyana, recoverable reserves have now been assessed at 7.66 TCF, with current reserves standing at just 1.25 TCF, enough for approximately four more years of production.

In Moulvibazar, reserves amount to around 20 billion cubic feet (BCF). Daily production is 16 million cubic feet, equating to roughly four years of supply. At Jalalabad, reserves stand at less than 700 BCF, with daily production of 128 million cubic feet. At this rate, production can continue for approximately one and a half years.

Mohammad Saiful Islam, Secretary of the Energy and Mineral Resources Division, told Prothom Alo that, now all arrears have been cleared, Chevron is expected to commence work at Jalalabad as a priority project.

Geologist Badrul Imam, speaking to Prothom Alo, commented that multinational companies operating in any country for an extended period must take political fluctuations into account. However, exerting pressure in this manner to extract payment is an act of arrogance. He emphasised that such conduct is neither rational nor ethical. He further stated that Petrobangla should now apply pressure to compel Chevron to begin work without delay.