Regulating LNG market

Bangladesh has started importing Liquefied Natural Gas (LNG) from August 22, 2018 in the wake of continuing mismatch between gas supply and its demand. The imported LNG has been re-gasified at a floating terminal (FSRU) at Moheshkhali, Cox's Bazar and supplied by 30-dia Maheshkhali-Anwara pipeline to Chottotram for consumers. The USA based company Excelerate Energy has been supplying natural gas after re-gasifying it from imported LNG to Petrobangla pipelines under the scope of its contract. It is expected that the supply of gas from imported LNG (so far 250 MMCFD) will help address the primary energy supply scarcity in Chattogram area and industries and businesses will be greatly benefited. Although the FSRU is ready to supply 500 MMCF gas daily (the present demand from Chottogram), absence of appropriate pipelines constraints the supply. Another FSRU (to be operated by the local company Summit Group) with regasification capacity of 500 MMCFD gas is expected to commence gas supply from end March 2019. The Moheshkhali-Fauzdarhat gas pipeline should be connected by that period to enable gas transmission from the two FSRU at Maheshkhali.

Petrobangla, so far, has signed contracts for 2.5 million tonnes of LNG with Qatar (RasGas) and one million tonne with Oman annually. Petrobangla has been continuing negotiation with Indian company Petronet LNG and Swiss company AOT for supply of additional 2.5 million tonnes of LNG annually. Besides, a number of Memorandum of Understanding (MoU)s have been signed by Petrobangla with Sembcrop of Singapore, Reliance Energy of India, Hong Kong Shanghai Manjala of China and HQC also of China for supplying of re-gasified LNG (RLNG) and installation of land based LNG terminals at different sites of the coastal areas of Bangladesh. If these are materialised, Bangladesh may expect to import 4,500 MMCFD equivalent LNG annually (7 million tonnes of LNG may be regasified to 1000 MMCFD gas). However, Petrobangla is considering that the target 18 million tonnes of LNG import and re-gasification facilities (including land based LNG terminals) can be implemented within 2025 considering the expected 7 years time for installation and commissioning of a land based LNG re-gasification terminal in Bangladesh. The additional volume of LNG should be re-gasified and supplied to pipelines through installation of more than one land based LNG re-gasification plants. The potential sites for such re-gasification plants could be Maheshkhali, Matarbari, Kutubdia or Payra. The specific weather patterns of the Bangladesh coast present threat to the FSRU operations at the coastal areas as, for around 90 days a year, the sea remains turbulent and cyclones and tidal surges become frequent. For a country like Bangladesh such a situation leads to serious natural constraints for LNG unloading from the carrier ships and to operate the FSRU. Petrobangla, therefore, considers encouraging investment for installations of land based LNG terminal and re-gasification facilities.

Government plans for ensuring electricity to all has been progressing well. At present the installed power generation capacity has been increased from 4,942 MW in 2009 to 18,353 MW in 2018 which is undoubtedly a great success of the present government. The power sector development initiatives have been steadily progressing to attain 24,000 MW generation capacity within 2021. LNG supply will meet significant part of the required fuel for power generation in the country. Therefore, the government welcomes proposals not only for investments in land based LNG terminal developments, but also for supply of LNG and RLNG to pipelines. Additionally, proposals for building gas pipelines and generating power with RLNG has been encouraged. It has become obvious that import and utilisation of LNG and liquid fuel will significantly increase in the coming years in the country. At the same time, the share of imported coal, imported electricity will grow. The impacts of growing dependency on imported energy and the balance of payments issues require urgent attention of the government. So far, no policy guidelines have been made available for securing the balanced share of import of primary energy for the country. Experts have stressed the need for carrying out a long term pricing policy and development of price model for primary fuel supply in the country. Instead, the countrymen have been witnessing systematic increase of gas and power price adjustments on the basis of the demands from the utility suppliers. As reported, Bangladesh Energy Regulatory Commission (BERC) has been reviewing further increase of per unit supply of gas price following the LNG imports. National Board of Revenue (NBR) has recently issued Statutory Regulatory Orders (SRO) to waive duties and taxes on LNG import by Petrobangla. However, Prof. M Tamim of BUET in his article in the Energy & Power Magazine (June 16, 2018) calculated a scenario suggesting that import of 500 MMCFD RLNG at a price of Taka 32/m3 (on the basis of present LNG price) if blended with locally produced gas (of Taka 7.35/m3) will make the weighted average mix gas price Taka 11.20/m3, provided Petrobangla production remains at 2700 MMCFD. If the RLNG import increases to 2000 MMCFD to supplement 2000 Petrobangla production (depleted from present 2700 MMCFD), the blended mix gas may have weighted average price of Taka 23.78/m3. Thus import of LNG and supply of RLNG have created a completely new reality for the local primary energy market and the government needs to urgently carry out gas and energy pricing guidelines. Also the government needs to ensure optimal mix of primary fuel keeping in mind the global market realities and our capacity for import payments.

Mushfiqur Rahman, a mining engneer, writes on energy and environment.

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