LNG glut favours BD as spot purchases undercut long-term deals

Bangladesh has purchased liquefied natural gas (LNG) from the spot market at a price lower than that of its long-term suppliers, capitalising on a recent supply glut of the fuel despite the ongoing winter in Europe and other energy-hungry Western countries, according to market insiders.

The country purchased its latest spot LNG cargo at $9.93 per million British thermal unit (MMBTu) from Vitol Asia Pte Ltd for delivery on March 8-9 to the US-owned Excelerate Energy's floating storage and regasification unit (FSRU) at Moheshkhali Island in the Bay of Bengal.

The Cabinet Committee on Government Purchase approved the spot LNG import deal on January 31, 2023, when state-run Petrobangla's buying price from long-term suppliers was above $10.50 per MMBTu, a senior Petrobangla official told The Financial Express.

Encouraged by the lower spot market price, Petrobangla has floated tenders to purchase three more LNG cargoes for March, bringing the month's total spot market purchases to four.

This will be the highest single-month purchase of LNG from the spot market, the official said.

Energy experts predicted that spot LNG prices will remain low for the next few years as LNG producers ramp up production and vessel manufacturers build new LNG carriers, leading to a glut of supply coupled with increased availability of LNG vessels.

But Bangladesh is increasing its reliance on long-term suppliers to meet its future energy needs, the official said.

All long-term contracts are linked to Brent crude, he added.

Sources say that Bangladesh's LNG imports from long-term suppliers alone are expected to triple to around 10 million tonnes per year (MTPA) from 2026 onwards.

The growing dependence on LNG comes amid the government's desperation to rapidly increase LNG imports and expand regasification facilities in the private sector.

The country currently imports around 3.5 MTPA of LNG from its two existing long-term suppliers -- Qatargas and OQ Trading (formerly Oman Trading International).

Over the past several months, Bangladesh's state-run Petrobangla has signed three new sales and purchase agreements (SPAs) with QatarEnergy, OQ Trading of Oman and Excelerate Energy of the USA to import a combined 4.0 million tonnes per annum (MTPA) of additional LNG from 2026 onwards.

A further agreement with local firm Summit Group is expected to be signed soon, the official said.

Under Petrobangla's agreement with QatarEnergy, the Qatari company will supply 12 LNG cargoes in 2026, with an option to increase this to 24 in the same year.

From 2027 onwards, QatarEnergy will deliver 24 cargoes annually, equivalent to around 1.50 MTPA.

As per the agreement, OQ Trading will supply four LNG cargoes in the first year of the contract for 2026, followed by 16 cargoes annually in 2027 and 2028; and 24 cargoes per year from 2029 to 2035.

Under the agreement with Excelerate Energy, Petrobangla has agreed to purchase 0.85 to 1.0 MTPA of LNG from Excelerate for 15 years beginning from January 2026.

Excelerate will deliver 0.85 MTPA in 2026 and 2027, increasing to 1 MTPA from 2028 to 2040.

Local firm Summit Oil and Shipping Company Ltd (SOSCL), a subsidiary of Summit Group, is expected to supply up to 1.5 MTPA of LNG from 2026 for 15 years.

Contacted, Professor M Tamim of the Bangladesh University of Engineering and Technology (BUET) said the benchmark for setting LNG import prices from long-term suppliers should be gas-linked, rather than linked to Brent crude oil.

This, he opined, would help keep long-term LNG prices lower.

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