Bangladesh to increase listed firms to supply spot LNG

Originally posted in The Financial Express on 1 May 2022

Bangladesh will increase the number of listed liquefied natural gas (LNG) suppliers from international spot market expecting to get more participants in the selective bidding process and purchase the fuel at a competitive price.

“We shall invite expressions of interests, or EOIs, from interested global LNG suppliers soon to select new listed firms to source LNG from spot market,” Petrobangla chairman Md Nazmul Ahsan told the FE.

Currently, state-owned 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 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 bidding process to supply spot LNG, a senior RPGCL official said.

Bid participants could increase and purchase cost of LNG from spot market could be lower, if Bangladesh increases the number of listed LNG suppliers to purchase the fuel from spot market, said sources.

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 overcome the country’s mounting gas crisis.

Petrobangla has already purchased two LNG cargoes from 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 re-scheduling its previous cargo delivery plan to help meet the growing demand of LNG from 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 375 million tonne per year (MTPA), capacity operational floating, storage, re-gasification units (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 mmcfd, 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.

Country’s energy experts and rights groups also opined for more competition in purchasing LNG from spot market.

Bangladesh 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 initiated importing LNG from long term supplier.

After importing the first LNG cargo from spot market in September 2020, Bangladesh did not import LNG 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 16 global suppliers to source LNG from spot market.

Bangladesh is importing spot LNG, having a gross heating value ranging 1,025-1,100 Btu/ standard cubic feet, or 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.