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Feature: Bangladesh LNG hopes stranded on troubled waters

Highlights

Maiden LNG cargo delayed by three months

Excelerate to attempt FSRU mooring this week

LNG demand to exceed 10 million mt/year by 2023

Singapore — Technical issues, rough seas and pipeline construction delays have kept Bangladesh's first ever LNG cargo stranded off the south coast of Chittagong for more than three months, highlighting the difficulties of opening new LNG demand centers in emerging Asian markets.

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The vessel Excellence, carrying 136,00 cu m of lean LNG from Qatar, arrived at the Moheshkhali Island terminal April 24, according to S&P Global Platts trade flow software cFlow, and was due to start injecting gas into the pipeline network for consumption in Chittagong from May 7, state-owned Rupantarita Prakritik Gas Co. Ltd. managing director Md Quamruzzaman said late last week.

However, technical difficulties around mooring the floating storage and regasification unit to the docking facility and connecting it to the subsea pipelines have delayed the delivery of the cargo at least four times, according to officials with state-owned Petrobangla and the Energy and Mineral Resources Division of the Ministry of Power, Energy and Mineral Resources.

Excelerate Energy, who owns, supplied and operates the FSRU, will make another attempt to dock the FSRU and connect it to the sub-sea pipeline August 1, Quamruzzaman said. Previous attempts had failed because of two meters and above sea waves, added a project engineer who requested anonymity.

A senior official with Excelerate Energy declined to comment.

Despite logistical and commercial challenges, Bangladesh is set to become a key LNG importer in the coming years, supported by growing consumption, dwindling domestic reserves and a healthy pipeline of LNG import and gas distribution projects. S&P Global Platts Analytics forecasts Bangladesh's LNG demand to exceed 10 million mt/year by 2023.

PIPELINE DELAYS

However, even if the FSRU was successfully moored this week, it would only be able to operate at around half of its 3.75 million mt/year capacity, as the construction of the necessary pipelines has yet to be completed, Quamruzzaman said.

The 30 km pipeline between Anwara and Fouzdarhat seems to be the major hurdle, he said, adding that the 91 km segment of the pipeline between Moheshkhali and Anwara has already been completed and tested.

The current infrastructure only has capacity for around 250,000 Mcf/day, half of the LNG project's regasification capacity, a senior official with state-owned Karnaphuli Gas Distribution Company Ltd., which supplies the key consuming region of Chittagong, said.

The business and economic impact of the delay is being felt on both sides of the supply chain, with Excelerate facing mounting operational costs, and Bangladesh's industrial output being hampered by the gas shortage, Quamruzzaman said

Under the contract, Excelerate Energy is set to charge $ 0.49/Mcf against imports and regasification services. The US-based company is set to operate the terminal for 15 years at a fee of $90 million per year, after which the ownership will be transferred to Petrobangla.

Bangladesh's maiden LNG cargo is part of 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%.

The cargo is due to make Bangladesh the first 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 would effectively become the 41st LNG importing country in the world.

The $179.5 million LNG import project, developed by the World Bank Group and Excelerate Energy, is the first fully integrated floating terminal solution whereby all services, including the FSRU, are provided under a single contract by a single provider - Excelerate, the energy company said after signing the terminal concession agreement in July last year.

-- Abache Abreu, abache.abreu@spglobal.com

-- Azizur Rahman, newsdesk@spglobal.com

-- Edited by Norazlina Jumaat, norazlina.jumaat@spglobal.com