CORRECTED-Bangladesh's second LNG terminal to start in March; supply faces hiccups

(Corrects to say Summit Corp is a subsidiary of Summit Power International, not of Summit Holdings, in paragraph 2.)

* Delays in construction of domestic gas pipeline

* FSRU expected to be ready by mid-March

SINGAPORE/DHAKA, Jan 15 (Reuters) - Bangladesh’s second liquefied natural gas (LNG) terminal is expected to start operations in mid-March though domestic pipeline constraints means it will be unable to fully supply gas demand to the country’s capital Dhaka.

Summit Corp, a subsidiary of Singapore-based Summit Power International, and partner Mitsubishi Corp are expected to start operations at their floating storage and regasification unit (FSRU) off the country’s coast by the middle of March and ahead of schedule, a source familiar with the matter told Reuters on Tuesday.

A Summit Corp spokeswoman confirmed in an emailed response that the Summit LNG terminal is on schedule, but did not elaborate.

However, construction delays on a pipeline that will carry regasifed gas from the coastal city of Chattogram, near where the FSRU will be anchored, to Dhaka means that the vessel will not be fully utilised, the source said.

Until the pipeline is fully connected, the FSRU will handle about 300 million cubic feet per day (mmcfd) of gas which will be supplied to the Chattogram area, the source said. The ship can regasify up to 500 mmcfd of LNG, according Summit’s website.

Once the pipeline is completed, state-owned energy company Petrobangla will be able to send up to 1,000 mmcfd from both the Summit FSRU and a vessel operated by U.S. company Excelerate that started up in August, the source said.

“Our target is to complete all the connecting gas transmission pipelines by April,” Ali Al-Mamun, managing director of the Gas Transmission Company Limited, a subsidiary of state-owned Petrobangla, told Reuters.

He added that the company has awarded a contract to Chinese oil and gas major CNOOC to build a 7-km (4.2 mile) pipeline that connects the Summit FSRU to the shore.

Other pipelines that will connect the offshore pipeline to the country’s main gas grid near the city of Bakhrabad are still being built, he said.

Summit LNG’s FSRU will anchor 6 km off the island of Moheshkali in the Cox’s Bazar district of the Chattogram division, where it will regasify LNG procured by Petrobangla. The planned LNG import volume of the project is about 3.5 million tonnes a year, which will double the country’s LNG import capacity to 7.5 mmtpa once fully operational.

Bangladesh has scrapped plans to build additional floating LNG terminals in favour of land-based stations after the start-up of Excelerate’s vessel was delayed by several months due to technical problems and bad weather. (Reporting by Jessica Jaganathan in SINGAPORE and Ruma Paul in DHAKA; Editing by Christian Schmollinger)