Contracted foreign suppliers slash LNG sale to Bangladesh

M AZIZUR RAHMAN | Tuesday, 26 October 2021

Contracted foreign suppliers slash LNG sale to Bangladesh as spot-market prices are overshooting contract rates, it is alleged, amid a sort of gambling with energy on the global market to cash in on post-corona business rebound.

Sources said the long-term liquefied natural gas (LNG) suppliers are providing a minimum quantity of the gas to state-run Petrobangla as the contract price of the fuel is cheaper than spot-market rates.

"The suppliers prefer trading in LNG on the volatile spot market where prices surged around fivefold the LNG price under term deals," said one source.

They supplied maximum quantities of LNG to Bangladesh during last year when the spot price of the liquefied gas was lower compared to the prices agreed upon under term deals, market-insiders said.

Qatar's Qatargas and Oman's Oman Trading International (OTI) are the long- term suppliers of LNG to Bangladesh.

One of them supplied around 128,000 cubic meter of LNG with a single cargo recently to Petrobangla.

On the contrary, they had supplied as high as 150,000 cubic meters of LNG with a single cargo during their 'favourable' price of LNG, they added.

The regular size of an LNG cargo is 138,000 cubic metres.

Under long-term deals with Qatargas and OTI, the purchase prices for Bangladesh range up to US$11 per million British thermal unit (MMBTU), according to the latest price as on October 25, 2021.

Whereas the LNG price in Asian spot markets surged above $50 per MMBTU recently and for November deliveries the spot price surged up to $56 per MMBTU.

Sources said OTI had delayed a cargo in January this year when the LNG price on spot market was on surge, which resulted in natural gas crisis in the country that led to short supply of the fuel to industries and power plants.

The state corporation Petrobangla, however, did not take any punitive measure against the supplier, they said.

On the other hand, UAE's Emirates National Oil Company (ENOC), however, faced legal action from Pakistan as it defaulted on its agreement to supply an LNG cargo from spot market, which aggravated natural gas crisis in that country.

Energy crunch, meanwhile, upset economic activity in many large economies, like the UK, the US, EU countries, India and China, amid a bounceback after reopening from pandemic curbs.

Source countries, including the Gulf states and Russia, enjoy a business bonanza on oil and gas now after a slump during the pandemic Covid invasion that had upended normal order of life and business.

Bangladesh has now kept the import of the gas from spot market on hold at least for until December next in view of the price surge and lower demand for natural gas during winter.

Currently, the country imports five to six LNG cargoes from the two long-term suppliers.

Petrobangla started regular import of the liquefied gas on September 9, 2018.

It inked the country's first-ever sales and purchase agreement with Qatar's RasGas to buy annually around 2.5 million tonnes per year, or Mtpa, of lean LNG over 15 years.

During the initial five years of the deal, RasGas will supply annually around 1.8 million tonnes of LNG, which will increase up to 2.5 Mtpa in next 10 years, said a senior Petrobangla official.

The purchase price has been set at around 12.65 per cent of the three-month average price of Brent crude oil plus $0.50 constant per mmBtu.

If Petrobangla has more demand during the first five years, it can increase the import volume annually to 2.5 Mtpa, and during the next 10 years, Petrobangla has the option to reduce the amount by 10 per cent every year.

If Bangladesh takes less than the base amount of LNG, in any year, it will have to pay the price on a take-or-pay basis.

It has a similar SPA with Oman's OTI to import annually around 1.0 Mtpa LNG for 15 years.

Petrobangla has been purchasing LNG at around 11.9 per cent of the three-month average of Brent crude oil prices plus $0.40 cents per mmBtu and the payments are to make within 25 days of delivery.

The petroleum agency has the option of increasing LNG imports to 1.5 Mtpa or lowering it to 0.9 Mtpa without having to pay penalties.

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