Aramco LNG import planned to cut reliance on spot buys

Bangladesh now looks to import liquefied natural gas (LNG) from Saudi oil- giant Aramco under an envisaged long-term deal to reduce reliance on volatile spot market for the must-have fuel.

Market insiders say the country may import around 1.0-million-tonne-per-year (MTPA) of LNG, to begin with, from this year once the deal is inked.

The Saudi energy pact is coming close on the heels of such a long-term deal a US firm has already clinched to supply the liquefied gas meant to ramp up the fuel supply to energy-starved economy, industries in particular.

"Aramco has sent a proposal to the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) expressing its intention to deliver LNG to Bangladesh," adviser for the ministry Muhammad Fouzul Kabir Khan told The Financial Express Thursday.

The exact volume and price would be fixed during negotiations with Aramco, he said.

Khan said he had visited Saudi Arabia recently to take part in an international conference and had a meeting with top Saudi energy policymakers.

Another adviser of the interim government, Syeda Rizwana Hasan, who holds the environment ministry, said Tuesday that Aramco agreed to supply LNG to Bangladesh at a price below the current market rate.

Sources in the field say a long-term deal with Aramco would help reduce Bangladesh's dependence on the volatile spot LNG market where price fluctuates, mostly on an upturn.

Spot LNG prices remain high on the international market and Bangladesh's overdue payments to suppliers of spot LNG climb higher.

Platts JKM, the benchmark price reflecting LNG delivered to Northeast Asia, was assessed at $13.21 per million British thermal unit (MMBtu) on March 5.

But the government had to buy one spot LNG cargo for March 05-06 delivery at US$16.43 per MMBTu, which accounts for around 24.37-percent higher than the international market rate, as the country's payment to LNG suppliers got delayed.

Sources have said Aramco's trading arm Aramco Trading Co (ATC) has already been shortlisted by Rupantarita Prakritik Gas Company Ltd (RPGCL) to initiate supply of LNG from spot market.

A master sales and purchase agreement (MSPA) is expected to be inked with Aramco, along with a couple of dozen potential spot LNG suppliers, soon.

Separately, a couple of months back on January 25th US's Louisiana-based Argent LLC inked a non-binding transformative Heads of Agreement (HOA) with Bangladesh Investment Development Authority (BIDA) to supply up to 5.0MTPA LNG.

The deal was signed by BIDA Executive Chairman Ashik Chowdhury and Chairman and CEO of Argent LNG Jonathan Bass in a ceremony at the Bangladesh Embassy in Washington, evidently in the wake of unfolding developments in bilateral and multilateral relations of the new US government, and also a regime change in Bangladesh.

"Petrobangla has been seeking a long-term solution to the rising demand for energy in Bangladesh. This agreement not only ensures a reliable energy supply for Bangladesh's expanding industrial base but also strengthens our strategic partnership with the United States," Mr Chowdhury had said then after inking the deal.

"Argent LNG is pleased to announce the signing of a HOA with Bangladesh, marking a significant step in strengthening energy partnerships," said Bass after the deal-making.

"This agreement paves the way for the United States to supply reliable baseload energy to Bangladesh, enabling the country to expand its ability to grow. This partnership underscores our shared commitment to fostering bilateral and equitable trade, supporting supply-chain securitisation, and deepening ties between our two nations," he added.

It happens to be the first major American LNG-supply deal made since President Donald Trump took office in January for a second term and kicked off world-rattling policies and actions that include 'tariff war' and global aid freeze.

"Signing a non-binding HOA that outlines key terms but leaves room for negotiation is the first step in a process," the BIDA top brass said further about the deal with Argent Energy.

He said any subsequent binding agreement would adhere to Bangladesh's legal framework, including the Public Procurement Act 2006, the Public Procurement Rules 2008, and the Foreign Private Investment (Promotion and Protection) Act 1980.

Argent LNG is developing a 25-MTPA LNG facility in Louisiana, a southeastern US state on the Gulf of Mexico. The facility is slated to go into operation in early 2030.

If the Argent LNG project in Port Fourchon is completed, its cargoes could be sold to Petrobangla, the BIDA top executive said.

Bangladesh currently imports LNG from Qatar Energy and OQ Trading international under long-term deals and purchases the fuel also from spot market to re-gasify in its two operational FSRUs having the total capacity of 1.10 billion cubic feet per day (Bcfd).

The country has been reeling from an acute energy crisis as its natural gas output is depleting, as exploration has been neglected over the years while import-dependence grows.

Bangladesh has been rationing gas supply to industries, power plants and other gas-guzzling industries to cope with the mounting demand against dwindling supply.

The country's overall natural gas supply is currently hovering around 2.85 Bcfd, including 0.98 000 Bcfd of re-gasified LNG, against the demand for over 4.0 Bcfd, according to official data of Petrobangla as on March 5.

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