DHAKA: Bangladesh is planning to sign binding LNG sales and purchase agreements with three suppliers for a combined 3.25 million mt/year, which would rise its total contractual LNG import commitment from 2018 to 5.75 million mt/year. State-owned Petrobangla has stepped up negotiations in the past week, said company Chairman Abul Mansur Md Faizullah Thursday, as the country is faced with a chronic gas deficit due to depleting upstream reserves and rapid industrialization. Petrobangla signed a preliminary deal with Switzerland-based AOT Energy on January 30 for the supply of 1.25 million mt/year of lean LNG over 15 years, with deliveries due to start later this year.
The oil and gas company also signed a preliminary deal with state-owned Oman Trading International January 31 for the supply of 1 million mt/year of lean LNG over 10 years, also starting this year. Lastly, Petrobangla signed a Letter of Intent with Indonesia’s oil and gas company Pertamina on January 28 for the supply of 1 million mt/year over 10 years starting this year, during an official visit to Bangladesh by Indonesian President Joko Widodo. Bangladesh was also heard to be negotiating with LNG trader Trafigura in December on the delivery of 1.5 million mt/year of LNG from mid-2018 over 10 years, although no further updates were immediately available.
You might also like
The preliminary deals with OTI and Pertamina were inked through government to government negotiations, while the one with AOT Energy was closed under the Speedy Supply of Power and Energy Act 2010, said a senior official with the Ministry of Power, Energy and Mineral Resources. Bangladesh had inked memorandums of understanding with the three LNG suppliers in 2017. Binding SPAs are set to be signed later this year, after vetting from the law ministry and approval from the cabinet committee on public purchases. With these deals, Bangladesh’s total contractual LNG volume from 2018 would amount to 5.75 million mt/year, including an SPA with Qatari supplier RasGas for 2.5 million mt/year. The prices of the three preliminary deals have been negotiated with a three-month average of Brent crude oil prices, said Md Quamruzzaman, managing director with state-owned Rupantarita Prakritik Gas Company Ltd, a wholly owned subsidiary of Petrobangla in charge of Bangladesh’s LNG purchases. The slope is lower than that used in the contract with Rasgas, he added, without elaborating. The price of the Rasgas-Petrobangla contract was set at around 12.50% of the three-month average of Brent plus an additional 0.5%.
The rationale is simple. Similar to what Pakistan is already doing, Bangladesh aims to change its electricity feedstock landscape by replacing gasoil and fuel oil with regasified LNG to reduce the country’s electricity bill, so LNG priced at a low slope to crude oil would guarantee the competitiveness of LNG in the power sector. Bangladesh imports around 2 million mt of 180 CST high sulfur fuel oil and 0.05% sulfur gasoil to run its power plants, mostly from Asia and the Middle East. Ultimately, Bangladesh’s HSFO and gasoil consumption to generate electricity will be on a downtrend after LNG imports start,” Quamruzzaman said last month
