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Bangladesh becomes first new LNG importer in 2018 with maiden cargo

Singapore — Bangladesh has joined the ranks of LNG importing countries with the arrival of its first LNG cargo at Moheshkhali Port on Tuesday.

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This makes Bangladesh the first new country to start importing LNG in 2018, and only the second since January 1, 2017, as Malta was the only new LNG importer last year. Bangladesh effectively becomes the 41st LNG importing country in the world.

A healthy pipeline of LNG projects, gas shortages and the rapid deployment of floating regasification vessels signal that Bangladesh will be a key LNG importer in coming years, despite commercial challenges like high gas prices.

The Qatar LNG cargo arrived on board the floating, storage and regasification unit, Excellence, at the Moheshkhali LNG terminal on Tuesday, and heralds a new era in Bangladesh's energy sector, State Minister at the Ministry of Power, Energy and Mineral Resources, Nasrul Hamid, told S&P Global Platts.



"We shall continue importing LNG from the global market to meet the country's mounting energy demand and as part of our decision to diversify energy sources," Hamid said, adding that necessary supply infrastructure like pipelines is ready.

State-owned Rupantarita Prakritik Gas Co. Ltd., or RPGCL, a unit of national oil company Petrobangla, said commercial supplies of the gas will be fed into the national gas grid from mid-May to meet end-user demand.

"The FSRU, owned by US-based Excelerate Energy Bangladesh Ltd., carried 133,000 cu m of lean LNG to consumers," RPGCL's Managing Director Md Quamruzzaman said Tuesday, adding that the first cargo could supply gas for around 15-20 days.


MORE LNG TERMINALS IN THE PIPELINE


The FSRU Excellence has a capacity of 3.75 million mt/year and will be moored at Moheshkhali island, near the port of Chittagong.

"The [first LNG import] project was co-developed by Petrobangla, Excelerate Energy and the IFC with a project cost of $180 million to cover the associated infrastructure," Wood Mackenzie's director of gas and LNG research Nicholas Browne said.

He said Bangladesh has a non-investment grade credit rating, due to which international financing agency support was crucial to enable the project to go ahead.

Excelerate Energy will operate the terminal for 15 years at a fee of $90 million per year, after which the ownership will transfer to Petrobangla.

Bangladesh's maiden LNG cargo was delivered under a 15-year long-term contract signed in 2017 between Petrobangla and Qatar's RasGas for 2.5 million mt/year of LNG, priced at 12.5% of the three-month average of Brent plus an additional 0.5%.

On April 19, Bangladesh's cabinet committee approved a sales and purchase agreement with Oman Trading International to import another 1.0 million mt/year of LNG for 10 years.

The country has been in negotiations with other suppliers for LNG imports of more than 3 million mt/year, including both long-term deals and short-term, and spot purchases.

Bangladesh's next second LNG import terminal is also a 3.75 million mt/year FSRU owned by Excelerate Energy, and is being developed by the local Summit Group with an expected startup later this year.

Wood Mackenzie said several other LNG-powered projects are gaining momentum in Bangladesh, and PetroBangla has agreed to several initial supply agreements with AOT, Gunvor and Pertamina.

The projects include an LNG terminal and a 750 MW power plant by Reliance Energy that got financial approval in December 2017, a 1.4 GW power plant, FSRU and LNG supply between Bangladesh Power Development Board and Pertamina in January 2018, and Summit Power, Mitsubishi and Diamond Gas teaming up for a terminal and 2.4 GW power plant in March 2018.

"The longer-term fundamentals for LNG in Bangladesh look sound," Browne said, adding that risks to LNG demand will come from concerns around costs that may lead to a push to build more coal capacity.

He expects the country's domestic gas production to decline by over 25% by 2025, and LNG demand to rise to 11 million mt by 2025.

-- Eric Yep, eric.yep@spglobal.com

-- Azizur Rahman, newsdesk@spglobal.com

-- Edited by Geetha Narayanasamy, geetha.narayanasamy@spglobal.com