The Financial Express

Bangladesh's plan to purchase LNG from spot market fading away

| Updated: October 27, 2020 11:45:12

- Reuters file photo used for representation - Reuters file photo used for representation

The government's plan to purchase at least one-fourth of total LNG from the international spot market is fading away due to higher-than-expected price, market insiders said.

The Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources initiated a move to import LNG, or liquefied natural gas, from the spot market after two years of the country's first LNG cargo imports in August 2018.

So far it could purchase only one LNG cargo from the spot market at 'expected' price, said a senior energy ministry official.

Global energy prices including that of spot LNG soared recently due to its huge demand in developed countries including the US and Europe over the ensuing winter.

Market insiders, however, said the spot LNG prices might come down again as coronavirus cases are on the rise again globally.

Bangladesh has already cancelled the tender to import LNG from the spot market in November as the offers from two bidders to supply a 138,000 cubic metres of cargo were found too 'expensive' by the evaluators.

The country may cancel the early December tender for a similar cargo too as the lone bidder Vitol Asia's offer was also found 'high' on close of the bid submission deadline on Thursday, a senior Petrobangla official said.

Vitol Asia and Swiss AOT Trading AG had submitted bids for November delivery but the price they quoted was almost similar to the price of long-term contracts with Qatargas and Oman Trading International, or OTI, he said.

The spot LNG price for early December delivery as offered by the lone bidder Vitol is even higher than that of the two long-term contractors--Qatargas and OTI.

State-run Rupantarita Prakritik Gas Company Ltd, or RPGCL, the state-run entity that oversees LNG imports, had invited 14 previously selected global LNG suppliers to quote prices on both the occasions.

RPGCL has a plan to invite a similar bid to import LNG from the spot market for late December delivery.

Bangladesh has initiated importing LNG from the spot market in late September in an effort to take advantage of low prices and meet the country's growing demand, said RPGCL managing director Kamruzzaman.

Diversifying LNG sourcing beyond term contracts was the key, he said.

Vitol Asia Pte delivered the first and so far the lone spot LNG cargo carrying around 138,000 cubic metres of LNG from the spot market on September 25.

Re-gasified spot LNG entered the national gas grid immediately after the start of unloading.

Bangladesh could save around Tk 300 million (US$ 3.52 million) in purchasing LNG from the spot market from first cargo compared to regular LNG market.

Vitol Asia had offered the best bid at $3.8321 per million British thermal unit, or MMBTu, to bag the deal to supply its first LNG cargo in Bangladesh.

Four suppliers including Vitol Asia had submitted bids among 14 selected suppliers.

The 14 selected suppliers include Mitsui & Co Ltd, Marubeni Corporation, Osaka Gas Co Ltd, and Jera Co Inc. of Japan; Cheniere Marketing International LLP, Vitol Asia Pte Ltd, Trafigura Pte Ltd, and Diamond gas International Pte Ltd of Singapore; Excelerate Energy Ltd Partnership of USA, Woodside Petroleum Ltd of Australia, Eni S.p.A of Italy, AOT Trading AG of Switzerland, Petronas LNG Ltd of Malaysia, and the joint venture of Summit Corporation Ltd & Summit Oil & Shipping Co Ltd of Bangladesh.

Currently, the country's LNG import price under long-term deal with Qatar's Qatargas and Oman's Oman Trading International, or OTI, ranges around $5.50-$6.0 per MMBtu, RPGCL official said.

Bangladesh now buys LNG under term deal from Qatargas under a 15-year contract, to import around 2.5 million metres of LNG every year.

The price as agreed is 12.65 per cent of the three-month average price of Brent crude oil plus $0.5 constant per MMBTu.

The country has also a 10-year term-deal to import LNG from Oman's OTI at 11.9 per cent of the three-month average price of Brent crude oil plus a constant price of $0.40 cents per MMBTu.

Bangladesh has two operational FSRUs, or floating, storage, and re-gasification unit to re-gasify imported LNG.

Each of the two operational FSRUs in Bangladesh has the capacity to re-gasify around 500 mmcfd equivalent of LNG.

Excelerate Energy started supplying re-gasified LNG from its FSRU commercially since August 2018, while Summit started supplies in April 2019.

State-run Petrobangla was operating the FSRUs at about half their capacity before as the pipeline was not ready to carry re-gasified LNG.

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