Dhaka and New Delhi yesterday signed an agreement to set up a liquefied petroleum gas (LPG) handling plant in Chittagong to meet the growing energy demand in Bangladesh and north-eastern India.

Indian Oil Corporation Ltd (IOCL) and Bangladesh Petroleum Corporation (BPC) inked a memorandum of understanding at the Radisson Blu hotel in Dhaka.

New Delhi had made the proposal for the LPG plant.

“This facility symbolises win-win partnership as it would benefit both the countries by supplying LPG to Tripura and the north-eastern part of India and at the same time cater to the gas demand in Bangladesh,” Dharmendra Pradhan, petroleum and natural gas minister of India, told reporters after the signing of the deal.

Under the agreement, the two companies would form a joint venture to set up the LPG plant and terminal which would use imported gas, said Nasrul Hamid, state minister for energy, power and mineral resources.

He said the Indian government had sought Bangladesh's help in supplying LPG to eastern India through pipeline.

India would send a work plan on the feasibility study within a week or so. The IOCL would conduct the study with its own money, said an official of the BPC.

When completed, the plant would help meet the local demand to a large extent. The plant would supply LPG to Tripura, initially by road and later through a pipeline, according to the official. 

Bangladesh now has a huge demand for LPG and home users are suffering from dwindling gas supply through pipes.

State-run Eastern Refinery Ltd (ERL), a company of BPC, supplies only 14,000 tonnes of LPG, while the Kailashtila LPG plant chips in with 4,000 tonnes. Private producers supply the bulk of the 135,000 tonnes of LPG produced in the country.

Pradhan also held a meeting with Hamid for two hours at the same venue ahead of the media briefing, with an aim of deepening energy cooperation between the two countries.

At the meeting, it was decided that Bangladesh would import high-speed diesel (meant for high rpm diesel engines) from Numaligarh Refinery Ltd in India to Parbatipur in Bangladesh through pipeline on a long-term basis.

On March 19, Bangladesh received 2,200 tonnes of diesel from India through rail.

In April last year, Bangladesh and India agreed to install a 135km cross-border pipeline to help Dhaka import 10 lakh tonnes of diesel from India a year under a joint venture for setting up the Indo-Bangla Friendship Pipeline from NRL's Siliguri marketing terminal in West Bengal to the BPC's Parbatipur depot.

Only five kilometres of the pipeline would be in Indian territory.

India also agreed in principle to supply liquefied natural gas from its LNG facility in Odisha to the Bangladesh border and integrating the supply with Bangladesh's gas grid, sources said.

The Indian minister also proposed setting up of an LNG terminal in Moheshkhali by Petronet LNG Ltd.

“India is setting up a deep-sea LNG terminal. We have already installed a pipeline up to Khulna. We have discussed whether we can connect the two,” said Hamid.

“If connected, we will be able to ensure uninterrupted supply of gas to industries and the under-construction power plants in Khulna.”

Hamid said India could use the same pipeline to supply LNG to West Bengal via Rangpur.

“With this, the two countries would benefit.”

The state minister said there was also discussion on setting up a land-based LNG station through government-to-government initiative. “We have requested them to give a formal proposal.”

Dhaka also expressed willingness to import gas from Tripura.

“There is gas shortage in our eastern side. If we can bring up to 70 million cubic feet of gas from Tripura, we will be able to reduce our energy crunch to a large extent,” said Hamid.  

Pradhan said he would take the issue up with his government.

All the proposals that came up yesterday would be discussed in details at the energy secretary-level meeting due in the first week of June this year. 

Meanwhile, Engineers' India Ltd and ERL would sign a contract in Chittagong today to work as a consultant for expanding the capacity of ERL by another 3 million tonnes.

“This again is expected to cater to the huge unmet demand of petroleum products in Bangladesh,” said Pradhan.

“We attach highest importance to our relations with Bangladesh, a close neighbour with whom we share a lot. Our bilateral relations have never been better. While our cooperation is very broad-based, we are simultaneously exploring new vistas of engagement.”

Bangladesh now imports 600 megawatts of electricity from the neighbouring country and plans to purchase more to meet its growing demand for power. More than 40 percent Bangladeshis do not have access to the power grid.