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LNG re-gasification falls to lowest level

Originally posted in The Financial Express on 15 February 2023

Liquefied natural gas (LNG) re-gasification declined to its lowest level on Monday due to lower imports, reducing electricity generation to some extent and causing additional losses to the government exchequer on capacity payments.

Since becoming operational, officials said, it was the lowest utilisation of the country’s two floating storage and re-gasification units (FSRUs) just before resuming the imports from the spot market after a seven-month hiatus.

The FSRUs processed only around 370 million cubic feet per day (mmcfd) on Monday, only 37 per cent of their aggregate capacity, according to Petrobangla.

Earlier in the winter of 2022, re-gasification had plummeted to around 400 mmcfd as the Summit Group’s one tripped due to technical faults.

The electricity generation also fell to around 10,349MW during the peak hours on Monday, according to Bangladesh Power Development Board (BPDB). Incidents of power load-shedding were reported from the city and elsewhere across the country.

The power generation hovers around 13,500MW during the usual summer period.

Officials said the power generation would have reduced further to intensify the power outage had there been no supply from the Payra power plant.

The minimum re-gasification means paying maximum capacity payments in US dollars.

The government will have to pay around US$8.5 million every month to the two private FSRUs due to re-gasifying LNG at lower than their cumulative capacities, insiders said.

According to agreements, sources said, Petrobangla has to pay around $450,000 per day to re-gasify up to 1,000 mmcfd of LNG from the FSRUs located at Moheshkhali Island in the Bay of Bengal.

It pays US Excelerate around $237,000 per day and Summit LNG around $217,000 per day. The payment is obligatory no matter whether LNG is re-gasified in the agreed quantity or less.

Both the deals are on a take-or-pay basis, meaning Petrobangla will have to pay the stipulated amount after commissioning of the FSRUs, no matter if it re-gasified LNG or not.

Both the FSRUs are designed to re-gasify around 500 mmcfd, which is the agreed quantity.

On top of that, owners of both the FSRUs – US Excelerate Energy’s Excelence and local Summit Group’s Summit LNG – are also enjoying exemptions from payment of import duties and value-added tax (VAT) regarding implementation of the FSRUs.

The companies are also enjoying exemption from payment of VAT, advance tax and supplementary duty on products and services, according to a senior official of the National Board of Revenue (NBR).

Meanwhile, Bangladesh is all set to receive an LNG cargo from the spot market on February 21-22 from French supplier Total Energies at Matarbari FSRU.

The firm was selected as the lowest bidder to supply the fuel at $19.78 per million British thermal unit (MMBTU) as compared to the highest bid of around $24/MMBTU from bidders included Vitol Asia, Gunvor, and Excelerate.

Before ceasing LNG imports from the spot market, Bangladesh had imported its latest LNG cargo for June 22-23, 2022 delivery to its Moheshkhali FSRU from Gunvor Singapore Pte Ltd at S$24.75 per MMBTU.

Bangladesh’s Brent crude linked purchasing cost of LNG from Qatargas and OQ currently hovers around $10.50 per MMBTU.

It will start importing increased quantities of LNG regularly from the spot market from March, Petrobangla Chairman Zanendra Nath Sarker said earlier.

Bangladesh has a target to ramp up the country’s overall natural-gas output to more than 3,000 mmcfd as industries seek uninterrupted gas supply to keep the wheel rolling on a full scale in the process of a rebound, he said.

Bangladesh’s overall natural gas supply now hovers around 2,600 mmcfd with re-gasified LNG of around 370 mmcfd.

Energy experts and rights groups are, however, critical over the government’s deals over the FSRUs.