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Bangladesh overcomes pipeline hurdles to boost LNG re-gasification capacity

Highlights

Re-gasification capacity to rise around 66% from current levels

Platts Analytics expects imports to grow nearly 3 Bcm in 2020

Coronavirus pandemic to create hurdles for demand in near term

Dhaka — Bangladesh's LNG re-gasification capacity will rise sharply following the completion of a natural gas transmission pipeline, as it would ensure full utilization of the country's two operational floating storage and regasification units as well as boosting imports over the longer term.

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The South Asian country will be able to re-gasify around 66% more LNG from the current regasification level of around 600,000 Mcf/d, the government officials said.

"Additional pipeline connectivity and expansions of their regasification capacity will help the country to grow their imports as overall gas demand grows," said Jeff Moore, manager for Asian LNG Analytics at S&P Global Platts.

Bangladesh has been one of the fastest-growing LNG import markets since starting imports in 2018. S&P Global Platts Analytics expects the country's total imports to grow nearly 3 Bcm in 2020 over 2019 levels, and imports are expected to reach nearly 9 Bcm by 2022.

State-run Gas Transmission Company Ltd, or GTCL, completed the 181 km Chattogram-Feni-Bakhrabad gas transmission pipeline early this month, GTCL managing director Md. Atiquzzaman told Platts.

He said the pipelines were now ready to carry the full capacity of around 1.0 Bcf/d of regasified LNG. Before laying the pipeline, GTCL could carry a maximum of around 650,000 Mcf/d of re-gasified LNG to end-users.

Each of the FSRUs in Bangladesh has the capacity to re-gasify around 500,000 Mcf/d 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 has been operating the FSRUs at about half their capacity over the past one year as the pipeline was not ready to carry the re-gasified LNG.

Officials said the delay in constructing a 30-km 42-inch diameter Anwara-Fouzdarhat gas transmission pipeline initially held back expected utilization of the first FSRU by several months.

But now the pipeline constraints are largely over.

To meet the domestic gas demand, Bangladesh currently has been importing LNG under long-term deals from Qatar's RasGas, as well as Oman's Oman Trading International.

The country has recently inked final deals with 14 global suppliers to source LNG from spot market in an attempt to diversify the LNG sourcing.

DEMAND CONCERNS

Although the pipeline work has been completed, the coronavirus pandemic and the resultant lower demand of natural gas has now created a barrier to initiate full capacity re-gasification of LNG at the two FSRUs at Moheshkhali island in the Bay of Bengal.

Petrobangla has slashed natural gas production as the nationwide shutdown to combat the coronavirus has dented domestic demand.

While demand has slipped by around one-third to 2.13 Bcf/d, it has kept imports of LNG almost unchanged compared with the pre-shutdown period.

With Brent crude hovering below $30/b in the international market, Bangladesh's LNG import cost dropped below $4.5/MMBtu, which is almost half the price when the country started import of LNG in April 2018, said Md Kamruzzaman, managing director of state-run Rupantarita Prakritik Gas Company Ltd.

JKM, the benchmark for spot LNG prices for North Asia, plunged to a historic low of $1.925/MMBtu Friday, down 63.4% from the beginning of the year, Platts data showed.

In an oversupplied spot LNG market, the outbreak of the pandemic has further eroded the buying appetite of Asian buyers and added to the existing supply glut.

Almost all types of gas-based industries and factories are now shuttered under the nationwide shutdown aimed at slowing the spread of coronavirus.

Only the gas-guzzling power plants are operational with limited output due to lower electricity demand across the country, which fell on an average by around 30% to around 7,000 MW, according to the state-run Bangladesh Power Development Board.

More than half of Bangladesh's natural gas demand comes from the power sector, according to the International Energy Agency.

The country consumes significant volumes of natural gas in its power sector, where roughly 65% of the total electricity generation is produced from natural gas, according to Platts Analytics.

Bangladesh has been seeing strong growth in industrial gas demand and its fertilizer, textile and leather sectors were expected to account for almost 30% of total natural gas demand by 2024. This could be temporarily jeopardized depending on how severely its economy contracts in the coming weeks and months.