Govt continues LNG import at high prices to fulfil contracts
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SUNDAY, JANUARY 29, 2023
Govt continues LNG import at high prices to fulfil contracts

Energy

Eyamin Sajid
20 April, 2020, 01:45 pm
Last modified: 20 April, 2020, 02:13 pm

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Govt continues LNG import at high prices to fulfil contracts

For the same reason, Bangladesh is paying almost three times the price for LNG, than its current international value

Eyamin Sajid
20 April, 2020, 01:45 pm
Last modified: 20 April, 2020, 02:13 pm

Although the demand for natural gas has plummeted amid the Covid-19 pandemic, Bangladesh continues to import Liquefied Natural Gas (LNG) at almost the same volume as before, to fulfil contractual obligations with two Middle Eastern countries.

For the same reason, the government is paying almost three times the price for LNG than its current international value, official sources said.

The price per thousand cubic feet of LNG in the global market is now around $3 to $3.4, while Bangladesh is paying between $9 and $10. The government spends around $150 million for the import every month.

However, Bangladesh will be able to get cheaper prices for LNG from next month as per the pricing formula outlined in the agreements with Qatar and Oman. The price is set on the basis of three monthly average international sales prices.

The government has been importing LNG since August 2018 to tackle the country's persistent gas crisis that has been affecting power generation and industrial output.

To accommodate the import, the government has reduced gas production from 70 local gas wells under three gas companies (excluding the biggest producer Chevron).

On March 7, Bangladesh supplied 2,882 mmcfd (million cubic feet per day) of gas to consumers across the country. Of the volume, 600 mmcfd came from LNG imports.

After a month on April 7, the gas supply came down to 2,431 mmcfd. This drop was entirely shouldered by local producers, and the supply from LNG imports remained unchanged.

"As per the condition of the contract, we are supposed to import a certain amount of LNG from RasGas of Qatar. We have to pay the money whether we take the gas or not," said Anisur Rahman, senior secretary of the Energy and Mineral Resources Division.

"Therefore, we decided to reduce production in local fields during the shutdown period. It will help us save local reserves, and allow the proper usage of import contracts," he added.  

Bangladesh is importing LNG from two long-term suppliers – Qatar's RasGas and Oman's Oman Trading International (OTI) – to re-gasify in the lone operational facility in Moheshkhali, which has the capacity of processing 3.75 million tonnes per annum.  

As per the contract with RasGas, Petrobangla is obliged to import 2.5 million tonnes of LNG per annum.

However, under the contract with Oman Trading International, Petrobangla has the option to increase LNG imports to 1.5 million tonnes per year, or lower them to 900,000 tonnes annually.

Bangladesh imported 0.32 million tonnes of LNG last month, down just one cargo from February.

As of April 5, there have been no reports of a "force majeure" or a reduction in contractual deliveries by state-owned Petrobangla with the long-term suppliers Qatar Petroleum and Oman Trading International Ltd.

And the amount of LNG import is expected to remain the same in the next few months, despite the looming uncertainty on future payments due to the imminent financial shortfall caused by the pandemic shutdown.

The price of oil per barrel is now $25 – down by more than 50 percent in just one month.

Responding to a query, the Energy Division's Senior Secretary Md Anisur Rahman said Bangladesh will not get the benefit of lower prices until it starts importing LNG from the spot market.

"LNG import from the spot market is currently under process," he said.

Besides, Petrobangla, the state-owned LNG importing agency, says it will get cheaper prices from next month's delivery of LNG from Qatar and Oman.

"We are getting a limited benefit as the price is being set on three months' average prices," said Engineer Md Kamruzzaman, director (operation and maintenance) of Petrobangla and managing director (additional charge) of Rupantarita Prakritik Gas Company Ltd (RPGCL).

The last cargo arrived at the Moheshkhali facility on April 4, said an official of RPGCL who has direct knowledge of the matter.  

Currently, the major portion of the gas goes to power plants to generate electricity, and the remaining portion is supplied to the domestic sector.

On April 5, a total of 1,210 million cubic feet of gas was supplied to the power sector out of the country's total supply of 2,500 million cubic feet on that day.

Fertiliser industries consumed 173 million cubic feet and others, including domestic sectors, used 1,123 million cubic feet.

Bangladesh / Top News

LNG / Liquefied natural gas (LNG) / LNG Import

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