Bangladesh in talks to sign more LNG sales, purchase agreements: officials

Bangladesh is in talks to sign more LNG sales and purchase agreements, or SPAs, with several global LNG suppliers to increase its long-term LNG imports, national oil and gas company Petrobangla's chairman Nazmul Ahsan said.

He said state-run Petrobangla has already initiated negotiations with three LNG suppliers – Texas-headquartered Excelerate Energy, UAE's Emirates National Oil Co or ENOC, and local energy firm Summit Group – to reach a consensus on the terms and conditions for SPAs, he said.

The South Asian country is seeking to boost LNG purchases to meet acute energy shortages as a growing number of Asia's LNG importers seek the protection of long-term contracts to insulate themselves from market volatility and energy market turmoil.

Bangladesh currently has SPAs with only two LNG suppliers -- Qatargas and Oman Trading International or OTI -- to import around 3.5 million mt/year of LNG.

The talks with Excelerate Energy and ENOC are for supply of 1 million mt/year of LNG each for at least 10 years, while Summit Group has shown interest to supply around 1.50 million mt/year of LNG for 15 years, a senior official at state-run Rupantarita Prakritik Gas Co Ltd, or RPGCL, said separately. RPGCL is the subsidiary of Petrobangla that looks after LNG imports and trading.

Excelerate Energy was interested in starting LNG supply to Bangladesh from January 2022 using the Japan, Korea, Marker, or JKM, index, to reflect spot LNG prices, the official said. For 2023 and onwards, the Texas firm has proposed to supply LNG at around 11.70% slope of the three-month average price of Brent crude plus a 35 cent constant, the RPGCL official said.

Summit is interested in supplying contracted LNG from January 2023 onwards, but given volatile global prices, Summit's price would not be below the current contracted suppliers, officials said. They said initial contract prices will likely be high, and then decline afterwards.

Excelerate Energy, ENOC and Summit Group did not immediately respond to queries. Petrobangla officials did not disclose price discussions with ENOC.

Excelerate Energy has already been involved in Bangladesh Moheshkhali Island terminal via its FSRU "Excellence" with a capacity of 136,000 cubic metres of lean LNG from Qatar. Bangladesh started importing LNG on April 24, 2018, at Moheshkhali.

Tough markets

Petrobangla intends to ink long term SPAs under the Speedy Supply of Power and Energy (Special Provision) (Amendment) Act 2010 that allows it to bypass the competitive tendering process and provides immunity for companies meeting urgent supply needs.

Officials said other global firms have also proposed to supply LNG under long-term deals including Switzerland's AOT Energy AG, and commodity trades Gunvor and Vitol Asia, but these talks had not advanced.

Of the existing long term LNG suppliers, Oman Trading International, now known as OQ Trading, had offered last year to double its LNG supply to Petrobangla to 2 million mt/year under similar terms, but Petrobangla had not responded to the proposal yet, while Qatargas is yet to propose an increase to its contracted volume, the RPGCL official said.

Meanwhile, Petrobangla has been trying to increase its spot market procurement, as well as boost volumes from existing long-term suppliers to overcome a mounting energy crisis.

It purchased two spot LNG cargoes over $35/MMBtu for May delivery, which represents some of the highest prices it has paid for imported gas, while other tenders were cancelled due to high price levels. Qatargas has also re-scheduled its cargo delivery plan to help meet shortages.

But both Qatargas and OQ Trading are only supplying LNG at the minimum contractual level under existing term agreements despite requests for more volumes in 2022, according to another senior Petrobangla official.

He said both suppliers have committed to provide a total of 54 LNG cargoes in 2022, which is 15.62%, or 10 cargoes fewer than the 64 cargoes delivered in 2021. Out of this, Qatargas is likely to supply 36 LNG cargoes in 2022, down from 40 cargoes in 2021, and Oman will supply 18 cargoes, down from 24 in 2021.

Bangladesh saw its LNG re-gasification rise to around 800,000 million cu ft/d in recent weeks, in line with strong imports for April. Its two operational floating, storage and re-gasification units, or FSRUs have a combined capacity of 3.75 million mt/year.

Bangladesh's overall natural gas supply now hovers around 3.10 Bcf/d with re-gasified LNG standing around 800,000 Mcf/d, against total demand for over 4.10 Bcf/d, according to Petrobangla. It is paying around $14/MMBtu for its oil-linked contracts with Brent crude at over $100/barrel.