Warmer temperatures, low gas production push govt towards spot LNG purchase

Highlights: 

• Bangladesh needs around 4000mmcf of gas per day
• The daily supply stands at around 3070mmcf
• Some 2,314 mmcfcome from local fields 
• 758 mmcf come from LNG 
• Bangladesh usually receives 5-6 LNG cargoes under long-term contracts
• In April, Bangladesh imported two additional LNG cargoes from spot market
• Three more cargoes are planned for next month

A surge in demand for electricity ensuing from warmer temperatures and dwindling gas production from local fields have pushed the government into importing liquefied natural gas (LNG) from the spot market.

Faced with an outcry from the power sector, apparels industry and other sectors, Petrobangla, the state-owned oil, gas and mineral corporation, has now floated tenders to import LNG from the spot market, even though the price is hovering close to a record high.

Such high demands from two other South Asian countries, Pakistan and India, have also pushed prices higher in Asian spot markets, reports Natural Gas Intelligence (NGI), a US-based organisation that provides natural gas price transparency and key news, insights, and data.

According to the NGI report, the state-owned Pakistan LNG issued a buy tender for a 1-2 May delivery to Port Qasim, closing on 21 April. Pakistan LNG is also due to close a separate six-cargo buy tender for delivery in May and June.

India's GSPC put out a new buy tender for a cargo between 6-15 June. Offers are due by 21 April.
Bangladesh's Petrobangla is seeking an 11-12 May cargo through a tender closing on 24 April. Offers will stay valid until 28 April.

Currently, Bangladesh needs around 4,000 million cubic feet (mmcf) of gas per day while the supply is only 3,070mmcf.

Owing to Ramadan in the summer and an ongoing irrigation season, demand for gas has reportedly jumped in the power generation sector.

But instead of boosting supply, gas production from the local fields drastically dropped at the beginning of this month in the face of issues at theBibiyana field, the country's largest gas field.

Because of that, gas production from the local fields dropped to 2,023 mmcf from the regular 2,314.9 mmcf.
Following the supply shortage, load-shedding was witnessed in different parts of the country as electricity generation was interrupted.

As different consumers' groups weighed in on the matter, Petrobangla immediately booked an LNG cargo that was delivered on 8 April.

As per Petrobangla information, it had intended to import three cargoes from the spot market for the running month, but could not import more than two due to high costs.

The latest LNG cargo from the spot market cost $36 per metric million British thermal unit (mmBtu).

For the next month, Petrobanglahas set a target of importing three cargoes as the required funds and suppliers are available, said an official with direct knowledge of the matter.

Of the target, it will receive a cargo with 3.2 million mmBtu LNG at $35 per mmBtu, said the official.

Apart from the spot market sourcing, Petrobanglahas also received five to six LNG cargoes from two long-term contractors. 

The current buying price of LNG from long-term suppliers hovers at around $13 per mmBtu.
Bangladesh started importing LNG through Excelerate Energy's floating storage regasification unit in August 2018.

Summit LNG terminal, the second of its kind in the country, started deliveries in April 2019. The combined capacity of the terminals is 1,000 million cubic feet per day (mmcfd).