Bangladesh energy crisis spurs pivot to Indian gas

Bangladesh is planning to import re-gasified liquefied natural gas (RLNG) from neighbouring India in a desperate move to diversify its fossil fuel sources to meet the country’s mounting energy demand.

The South Asian country is in talks with Indian firms to import RLNG for the first time through a cross-border pipeline from India under a greater contingency plan for failsafe fuel supply, amid volatility on the global energy market.

Nasrul Hamid, the country’s state minister for the Ministry of Power, Energy and Mineral Resources, hopes that the government will be able to start getting around 500 million cubic feet per day (mmcfd) of supply from India after 2025.

India’s H-Energy, a subsidiary of Hiranandani Group, intends to supply around 300 mmcfd of RLNG to the Bangladeshi government, Minister Hamid told Gas Outlook in an interview.

The Bangladeshi government aims to have the remaining 200 mmcfd of RLNG from a private company – Dipon Gas – after a couple of years, he said.

The private company plans to import around 500 mmcfd of RLNG from India in total, of which it intends to sell around 200 mmcfd to state-run Petrobangla and the remaining 300 mmcfd to private consumers in Bangladesh, Hamid said.

India’s H-Energy is eyeing the supply of RLNG from Digha in West Bengal to Khulna in Bangladesh after laying an around 275 km cross-border pipeline from Kanai Chatta in East Midnapore district to Shrirampur in Khulna.

With this aim in mind, the state energy corporation, Petrobangla, inked a memorandum of understanding (MoU) with H-Energy a couple of years ago.

The initial target is to import RLNG equivalent to around 1 million tonnes per annum (mtpa) from H-Energy through this pipeline to feed the 800 MW Rupsha combined-cycle power plant, owned by Bangladesh’s state-run North West Power Generation Company, for 22 years.

The Indian company will have an option to increase the RLNG supply equivalent to around 2 mtpa of LNG, said one source.

Prior to the H-Energy accord, India’s state-owned Indian Oil Corporation also inked an MoU to supply RLNG to Bangladesh.

The under-construction 800 MW plant at Rupsha in Khulna would be the major consumer of the imported RLNG. The plant will require around 130 mmcfd of RLNG to generate electricity.

The remaining gas could be supplied into the national grid.

The Asian Development Bank has agreed to lend US$600 million and the Islamic Development Bank around $200 million to implement the Rupsha power plant project with two gas-fired units, each having 400 MW capacity. The Bangladeshi government intends to provide the remaining $150 million.

Alongside RLNG imports, Bangladesh has planned to augment LNG imports, said Minister Hamid, adding that Bangladesh eyes inking more sale and purchase agreements (SPAs) with the suppliers.

“Nigeria and some other countries have sent proposals for striking SPAs to supply LNG under long-term arrangements,” the minister said.

Recently, Petrobangla inked two new SPAs with QatarEnergy and OQ Trading of Oman to import up to 3.0 mtpa of additional LNG from 2026 onwards.

The cabinet committee on economic affairs also has approved the signing of three more new SPAs to import LNG under long-term deals from Malaysia’s Perintis Akal Sdn Bhd, local Summit Oil and Shipping Company, and Excelerate Energy Bangladesh, a subsidiary of U.S.-based Excelerate Energy.

Imports under the new deals are likely to start from 2024.

“With plenty of long-term LNG suppliers booked, Bangladesh is expected to squeeze LNG imports from the volatile spot market after 2027,” Hamid said about the advance energy planning.

Since beginning LNG imports from the spot market on September 25, 2020, Bangladesh had imported a total of 36 LNG cargoes by August 2023, according to state-run Rupantarita Prakritik Gas Company statistics.

Apart from the plan to augment imports, Bangladesh has also chalked out a plan to boost natural gas supply from local gas fields, the energy minister said.

A total of 15 gas wells will be drilled within the next one year and 31 more within the next several years to augment the country’s overall natural gas output, he said.

“A 65 km pipeline will be built within several years to bring stranded gas from Bhola island into the mainland,” he added.

Chevron Bangladesh has also planned to augment natural gas supplies from new areas by 2027, he said.

The U.S. company already got a new flank area adjacent to the country’s largest-producing Bibiyana gas field for exploration. It initiated drilling the BY-27 well in late August, which is set to be completed within several months, according to Petrobangla.

The U.S. oil major is also in talks with Petrobangla to expand its exploration area further especially in the unexplored onshore Block-8 and Block-11, Minister Hamid said.

Chevron, along with another American firm, ExxonMobil, also is in talks with the government to carry out offshore exploration, he said.

Officials have said that Bangladesh has recently amended a policy to allow the private sector to import RLNG through pipelines and encourage LNG imports to reduce the government burden on fuel imports from the volatile international market.

Private parties concerned will have the liberty to sell RLNG at prices negotiated with their buyers under an amended LNG import policy adopted by the government in early August this year.

Under The LNG or RLNG Infrastructure Installation, Import and Supply Policy 2019 (amended 2023), private parties, local or foreign, are free to import both LNG and RLNG, re-gasify LNG by building floating storage and re-gasification unit (FSRU) and sell the RLNG to consumers of their choice.

Under the previous policy adopted four years back in 2019, the private sector was allowed only to import LNG, re-gasify it in their FSRUs and sell the re-gasified fuel to clients.

But not a single private entrepreneur came onto the scene who wanted to import LNG, build FSRUs and sell the fuel, a senior official at the Energy and Mineral Resources Division of the Bangladeshi energy ministry told Gas Outlook.

The government will not interfere in fixing the selling prices of the re-gasified LNG imported by private parties, the policy spells out.

The private sector LNG or RLNG importers would also be allowed to use the imported LNG or re-gasified LNG in their own power plants and industrial units and for other commercial purposes.

They would also have the liberty to supply the re-gasified LNG to others’ power plants, industrial units and commercial entities.

The private importers will, however, be allowed to sell the ‘surplus’ re-gasified LNG, not exceeding 25 per cent of their total imported volume, to state-run Petrobangla that markets petroleum products locally, the policy states.

But the price of the re-gasified LNG to be sold to Petrobangla should be determined by it, the policy notes.

To facilitate the smooth import of LNG and supply of RLNG to consumers, the private sector will have to build international-standard jetties or platforms, storage tanks, re-gasification plants and pipeline networks.

The importers can also use Petrobangla’s gas pipeline or distribution network to supply their re-gasified LNG to the end-users with its prior permission and on payment of a wheeling charge.

Any potential private party must have the experience of constructing or maintaining heavy industries in the power and energy sector.

In case of any consortium, the third party must have a minimum of five years’ experience in construction or maintenance of any LNG project.

The LNG or RLNG importers must provide necessary documents about the potential buyers and the required volume of LNG before obtaining an import permission.

To continue importing, the private sector will have to obtain no-objection certificates from the government department concerned every year.