Bangladesh to expand LNG sourcing amid energy dearth

Originally posted in The Financial Express on 13 May 2022

Bangladesh opts to expand LNG sourcing amid a global dearth and already invited newer suppliers to buy the fuel at competitive prices, sources say.

The government has invited global liquefied natural gas (LNG) suppliers to submit expressions of interests (EOIs) to enlarge the list of suppliers through wider participation in the bidding process.

Currently, Rupantarita Prakritik Gas Company Ltd (RPGCL), a wholly-owned subsidiary of the state-run Petrobangla, invites bids from only 16 listed suppliers to purchase LNG from spot market.

But among the 16 suppliers, only a few – numbering half a dozen at the maximum–usually submit bids to supply the expensive fuel to the Petrobangla.

“Only three to four listed suppliers — Vitol Asia Pte Ltd, Switzerland’s AOT Trading AG, US’s Excelerate Energy, and Gunvor — are the regular participants in the biddings to supply spot LNG,” a senior RPGCL official says.

The number of bid participants could increase and purchase cost of LNG from spot market could be lower if Bangladesh increased the number of listed LNG suppliers to purchase the fuel from spot market, a senior Petrobangla official hoped.

Spot market is a public financial market in which financial instruments or commodities are traded for immediate delivery.

Spot market for LNG has developed over the past several years with gluts of LNG output alongside growth of emerging markets for the fuel.

Currently, the Petrobangla has increased LNG import from volatile spot market to mitigate the country’s mounting gas crisis.

It has already purchased two LNG cargoes from the international spot market at over US$35 per million British thermal unit (MMBTU), for May deliveries.

Qatar’s Qatargas also increased supply of the fuel under term contract by rescheduling its previous cargo-delivery plan to help meet the growing demand for LNG in Bangladesh.

Augmented import from both spot market and term suppliers jacked up the country’s regular LNG re-gasification to around 800 million cubic feet per day (mmcfd), close to the highest re-gasification capacity from the two 3,75-million-tonne-per-year (MTPA), capacity operational floating, storage, re-gasification unit, or FSRUs.

Bangladesh’s overall natural gas supply now hovers around 3,100 mmcfd with re-gasified LNG standing around 800 mmcfd, against the demand for over 4,100 mmmcfd, according to Petrobangla.

Bangladesh’s current buying prices of LNG from term suppliers hover around $14 per MMBTU, considering the Brent crude price at around $108 per barrel.

The country imports half a dozen LNG cargoes from two long-term suppliers – Qatargas and Oman Trading International, or OTI.

Petrobangla started importing LNG from long-term supplier in September 2018.

It started importing LNG from spot market in September 2020, two years after it had initiated importing LNG from long-term suppliers.

After importing the first LNG cargo from spot market in September 2020, Bangladesh did not import the gas regularly until February due to ‘higher’ prices during summer and lower demand in winter seasons, a senior RPGCL official said.

Bangladesh previously selected 16 global suppliers to source LNG from spot market after inviting EOIs from the interested firms. RPGCL has master sales agreements (MSAs) with the 16 suppliers to source LNG.

The country is importing spot LNG having a gross heating value ranging 1,025-1,100 Btu standard cubic feet (scf).

The imported spot LNG is blended with locally produced natural gas, which is sulfur-free and sweet gas, before it is delivered to end-users.

Spot suppliers supply the fuel on a delivered ex-ship basis, or DES, and the vessel sizes range between 125,000 cubic metres and 220,000 cubic metres.