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The Financial Express

Global LNG suppliers seek long-term deals with Bangladesh

| Updated: April 24, 2021 18:32:14


Global LNG suppliers seek long-term deals with Bangladesh

Global LNG (liquefied natural gas) suppliers are lobbying Bangladesh to secure long-term deals with an eye to ensuring a stake in the booming energy sector.

The interested suppliers include new firms as well as those who have already inked initial deals and memorandums of understanding (MoUs) with the state-run Petrobangla over the past several years.

They recently wrote to energy and mineral resources division, showing their keen interest to supply LNG under long term, a senior energy ministry official told the FE on Tuesday.

Indonesia's Petramina, Malaysia's Petronas, Brunei's Brunei LNG and Switzerland's AOT Energy AG are among the suppliers that have already inked MoUs or letters of intent with Petrobangla, he said.

They are awaiting final sales and purchase agreements (SPAs).

The firms are in queue to strike long-term supply deals seeing the growing demand for LNG here and consistent purchase from both long-term suppliers and spot market.

Currently, Bangladesh is importing LNG under long-term deals from two global suppliers-Qatar's Qatargas and Oman's Oman Trading International (OTI).

Petrobangla started importing LNG on a regular basis from September 09, 2018.

On September 25 last year, it inked the first-ever SPA with Qatar's RasGas to buy an estimated 2.5-million tonne per year (Mtpa) of lean LNG over 15 years.

During the initial five years, RasGas will supply annually around 1.8-million tonnes, which will increase up to 2.5 Mtpa in the 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 in the first five years, it can raise the import volume to 2.5 Mtpa annually.

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 pay the price on a take-or-pay basis.

It has a similar SPA with OTI to import annually around 1.0 Mtpa of 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.

The payments are to make within 25 days of delivery.

Petrobangla has the option to raise imports to 1.5 Mtpa or cut it to 0.9 Mtpa without having to pay penalties.

Currently, it has a preliminary agreement with AOT Energy to import 1.25 Mtpa of lean LNG for 15 years.

Petrobangla also signed a letter of intent with Petramina to import around 1.0 Mtpa for 10 years.

Sources said the energy ministry did not ink final deals with the intended firms then as the LNG demand was not that much.

But Bangladesh is now importing LNG in large volume to meet the growing domestic demand.

Apart from importing five to six LNG cargoes with 138,000 cubic metres every month, Petrobangla has so far imported around half a dozen cargoes from spot market since September 2020.

Vitol Asia Pte Ltd, AOT Trading and Excelerate Energy have supplied LNG from spot market to Petrobangla.

To avoid 'higher' costs, the ministry earlier shelved plans to build three small-scale floating LNG terminals by suppliers and purchase regasified LNG from them.

Commodity traders Trafigura, Gunvor and Vitol as well as Belgian shipping company Exmar NV were in final talks with Petrobangla to build the FSRUs and sell the gas to Petrobangla.

It also scrapped talks with Indian Reliance Power Ltd to build a new 3.75-Mtpa terminal for LNG imports at Kutubdia island near the port city of Chattogram.

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