BD eyes short-term LNG deal with Saudi's Aramco

Bangladesh is currently in talks with Saudi oil giant Aramco to import liquefied natural gas (LNG) under a short-term contract as part of its strategy to stabilise domestic gas supply and reduce reliance on the volatile spot market.

Petrobangla Chairman Md Rezanur Rahman told The Financial Express on Saturday that Aramco has shown interest in supplying LNG to Bangladesh as part of its expanding global export operations.

"We are scrutinising a proposal from Aramco to enter into a short-term sales and purchase agreement (SPA)," he said.

Aramco, through its trading arm Aramco Trading Company, has been shortlisted as a potential LNG supplier by Bangladesh. So far, it has delivered one spot cargo through a competitive bidding process.

If the proposed SPA moves forward, this would mark Aramco's formal entry into Bangladesh's LNG supply chain beyond occasional spot market trades.

"We want to import a similar volume of LNG as we plan to bring in from Oman's OQ Trading starting August this year," Mr Rahman noted.

Bangladesh recently signed its first-ever short-term LNG supply agreement with OQ Trading, under which the country will import 17 LNG cargoes between August 2025 and December 2026. This includes five cargoes in 2025 and 12 in 2026, averaging one cargo per month.

The OQ Trading deal marks Bangladesh's debut in procuring LNG under a pricing formula linked to the Platts-assessed Japan Korea Marker (JKM) -- the benchmark index for LNG deliveries to Northeast Asia. Under this SPA, Bangladesh will pay a premium of 15 cents per million British thermal units (MMBtu) over the JKM price.

Although pricing details for the potential Aramco deal have not yet been finalised, Petrobangla officials indicated that it may follow a similar JKM-linked pricing structure. A draft of the agreement between Petrobangla and Aramco is currently under vetting by the relevant authorities.

Aramco Trading Company, the trading arm of the Saudi oil major, is among several newly shortlisted global LNG suppliers for Bangladesh. Previously, it delivered one LNG cargo to Bangladesh via the spot market following a competitive tender process.

Officials say the planned short-term imports from both Aramco and OQ Trading are expected to enhance the stability of gas supply during periods of peak demand -- such as summer and Ramadan -- and reduce dependence on the unpredictable spot market.

At present, Bangladesh imports LNG from QatarEnergy LNG (formerly Qatargas) and OQ Trading under long-term contracts indexed to Brent crude prices. While these contracts ensure base supply, they lack flexibility in pricing and volume.

The short-term SPAs, by contrast, provide greater agility and cost-competitiveness, officials noted. They also serve as a bridge before larger volumes from new long-term contracts begin flowing into the country.

Rupantarita Prakritik Gas Company Ltd (RPGCL), the state entity responsible for LNG procurement, typically purchases three to four spot cargoes each month, depending on market conditions. This number rises during high-demand periods.

Earlier this year, Bangladesh planned to import six additional spot cargoes between late May and August to meet rising industrial demand. However, tenders floated by RPGCL attracted limited interest or bids with steep price premiums due to long offer validity periods and perceived payment risks.

Market insiders say suppliers often impose premiums ranging from 50 to 70 cents per MMBtu over JKM -- and in volatile times, even up to $1.50 per MMBtu -- to hedge against price fluctuations during the bid validity window.

The strip contract with OQ Trading offers a solution by locking in a fixed premium over JKM and removing the uncertainties associated with spot pricing. It also provides assurance to suppliers against extended tendering and delayed payments.

According to Petrobangla estimates, Bangladesh plans to import around 52 spot LNG cargoes in 2025 -- the highest in any single year.

azizjst@yahoo.com