TDS Desk:

Bangladesh Petroleum Exploration and Production Company (Bapex), the state-owned oil and gas company, has scrapped a project to install compressors at four wells at the Srikail gas field in Cumilla. Citing delays and slow progress, the company terminated the contract without offering a technical or financial explanation. The decision has left plans to boost output at Srikail uncertain while stranding a $15.92 million investment by the Romanian company, SC Euro Gas Systems SRL.

Bapex confirmed the cancellation in a January 8 letter to Euro Gas Systems’ managing director. The letter, signed by company secretary and general manager Monjurul Haque, accused the Romanian firm of breaching the contract and failing to meet its terms. It cited an earlier breach notice sent on November 23 last year.

The November notice said the work at Srikail was to be completed by December 31 under the compressor installation agreement. It stated the company had halted work and failed to supply required materials on time. Bapex also said Euro Gas’s representatives in Bangladesh had suspended activities at the project site from September 19 without prior notice. While two consignments of equipment were delivered, Bapex’s queries on the schedule for the remaining materials went unanswered.

Separately, however, a source said Euro Gas did respond. Following Bapex’s November letter, the Romanian firm wrote on December 19 outlining the reasons for the delay and the status of the outstanding work.

In the letter, SC Euro Gas Systems SRL said 70 percent of the project’s civil works had been completed. It said it had sought oral and written approval from Bapex to finish the remainder but received none. The company added that it had invested BDT 100 million, submitted 81 design-related transmittals, and had numerous documents awaiting Bapex’s approval, preventing timely filing.

The Romanian firm also cited payment issues. It said that under the letter of credit, 80 percent of costs were due once materials reached the site, but only 70 percent had been paid, leaving 10 percent outstanding. It pointed to commitments to foreign suppliers for equipment, alongside local spending and design costs. It also blamed delays on repeated LC violations and slow settlement of local bills. Euro Gas sought an extension of the deadline to December 2026.

Mohammad Hasanuzzaman Sikder, Bapex’s project director for Srikail, gave a different account. He told journalists that the company had issued the cancellation notice and that Euro Gas replied through legal counsel. “We sent them letters before the cancellation about progress and other issues, but we got no reply,” he said.

Sikder said most local work at Srikail had been completed and purchase orders for equipment placed. “We want the work done,” he added. “But we received no substantive response from them for a prolonged period. If they want to work, they must re-engage through official correspondence. We’ll then place the matter before the board following due process, and whatever decision is reached will be implemented.”

The cancellation has triggered allegations that Bapex may be positioning a third party to take over the work. Critics say the state-owned company’s decision to terminate the contract without a technical or financial justification clears the way for a fast-tracked tender and a preferred bidder.

Munirul Huda Bhuiyan, local representative of SC Euro Gas Systems SRL, said the company was ready to execute the compressor project and its principal remained committed. He told journalists: “About 70 percent of local work had been completed. We (the firm) have invested around $8 million in the project. It’s highly regrettable that Bapex terminated the project directly, without following the amicable solution or arbitration process stipulated in the contract.”

He added, “This sudden termination has put the substantial funds we invested at severe risk. Our ongoing procurement processes, financial investments, international operations and commercial relationships with our principal have been severely damaged.”

The tender process to boost gas output from wells 2, 3, 4 and East-1 at the Srikail Gas Field concluded in March 2023. A purchase order followed in March 2024. The project was scheduled for completion within 14 months. Under its terms, Euro Gas was to install three 10 MMSCFD capacity natural gas wellhead compressors to sustain production and maintain the required inlet pressure at the processing plant and transmission line.

Industry sources said re-tendering would likely more than double the original cost and add at least two and a half years. Drilling new wells as an alternative would take longer and cost more, requiring three to four years. By contrast, fast-track execution of the original contract could have lifted domestic gas supply within a year, according to experts in the field.

Bapex managing director, engineer Md Fazlul Haque, did not respond to repeated phone calls seeking comment.