Wed, Jul 17 2024 17 July, 2024

Bangladesh LNG imports to treble: concerns mount

Energy experts and rights groups fear that mounting Bangladesh LNG import dependence might weaken its already strained economy.

Sadarghat, the city river front, in the Bangladeshi capital Dhaka (Photo credit: Samuel/Adobe Stock)

Despite fiscal and climate woes, there are plans to treble Bangladesh LNG imports from international markets from 2026 to meet the country’s growing energy demands.

The South Asian country thus risks increasing reliance on costly imported LNG, leaving domestic gas exploration hobbling in the slow lane.

Sources said Bangladeshi LNG imports, only from long-term suppliers, are expected to soar three-fold to around 10.50 million tonnes per year (MTPA) from 2026 onwards.

The growing dependence on LNG comes amid government desperation to ramp up imports of this fuel and keep expanding regasification facilities in the private sector.

Bangladesh currently imports around 3.5 MTPA of LNG from two existing long-term suppliers – Qatargas and OQ Trading, previously known as Oman Trading International.

Over the past four months Bangladesh’s state-run Petrobangla inked two new sales and purchase agreements (SPAs) with QatarEnergy and OQ Trading of Oman to import up to 3.0 MTPA of additional LNG from 2026 onwards, Petrobangla chairman Zanendra Nath Sarker told Gas Outlook.

According to the SPA between QatarEnergy and Petrobangla, the Qatari firm will supply a total of 12 LNG cargoes in 2026 under the deal, and has an option to increase the supply by 12 more cargoes in 2026.

From 2027 onwards, the Qatari LNG supplier will deliver a total of 24 cargoes annually, which is equivalent to around 1.50 MTPA.

As per the SPA with the OQ Trading, the Omani company will supply four LNG cargoes during the first year of the new contract in 2026, 16 LNG cargoes each year during 2027 and 2028 and, 24 cargoes per year from 2029 onwards, until 2035.

The cabinet committee on economic affairs also approved the inking 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 Ltd (SOSCL) and Excelerate Energy Bangladesh Ltd, a subsidiary of U.S.-based Excelerate Energy, from 2024 onwards, he said.

From Malaysia’s Perintis Akal Sdn Bhd, Petrobangla eyes initiating the import of up to 1.0 MTPA in 2024.

As approved by the cabinet body, SOSCL, a subsidiary of Summit Group, is expected to supply up to 1.5 MTPA of LNG from 2026 for 15 years.

Under a similar proposal, Excelerate Energy is expected to supply up to 1.5 MTPA from 2026 for a period of 15 years.

An aggregate volume of around 4.0 MTPA of LNG is expected to be imported from these three sources, a senior official at the energy and mineral resources division under the Ministry of Power, Energy and Mineral Resources, told Gas Outlook.

Once fully executed, the SPAs with Excelerate Energy, SOSCL and Perintis Akal Sdn Bhd will be Bangladesh’s seventh, sixth and fifth LNG-import agreements respectively, following two recent SPAs with QatarEnergy and OQ Trading, which are the third and fourth SPAs signed by Bangladesh.

Apart from LNG imports from long-term suppliers, Petrobangla is expected to continue importing LNG from the spot LNG market too, which will continue to further increase Bangladesh’s overall LNG imports from the international market, he said.

The already-struggling state-owned oil, gas and mineral corporation will have to count huge import expenses against LNG imports, said the official.

The government will ink all the SPAs under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010, which was extended for five years from 2021, until 2026.

The law has a provision allowing the bypassing of a competitive tendering process with immunity given to those involved in quick-fire energy solutions.

Bangladesh LNG payments overdue

Petrobangla is now struggling to make payment against purchases to global LNG suppliers – both long-term and spot sellers – due to a brewing currency crisis. And outstanding overdue payments to those LNG suppliers are currently totalling around US$300 million.

France’s TotalEnergies and Gunvor Singapore issued notices to Petrobangla in July to clear about US$113 million in outstanding payments for spot LNG cargoes or forfeit monetary guarantees with the state bank, said a Petrobangla source.

The warnings prompted Petrobangla to ask the Ministry of Power, Energy and Mineral Resources to intervene and ensure that the state banks disburse dollars to avoid overdue interest on the outstanding amounts, the officials said.

While Petrobangla had sufficient money in the company’s bank account, final invoices for three cargoes could not be paid on time by the bank due to a dollar shortage, they added.

Following the notices, Petrobangla held an emergency meeting with ministry officials leading to a partial payment being released to Gunvor to maintain spot LNG supply, along with assurances that other payments would be cleared soon, the officials said.

Payment delays by Petrobangla to its two long-term LNG suppliers Qatargas and OQ Trading also led to an issuing of letters from the suppliers for early disbursement of the outstanding dues.

Despite delayed payment to LNG suppliers, Bangladesh is now desperate to ensure future LNG supplies to meet future demand in industries, power plants and other gas-guzzling clients, said a senior Petrobangla official.

Rights groups and energy experts fear that the mounting Bangladeshi LNG import dependence might weaken the country’s already strained economy.

Energy security concerns

The growing dependence on LNG imports will jeopardize Bangladesh’s future energy security, the energy adviser of the Consumers Association of Bangladesh (CAB), Professor M Shamsul Alam, told Gas Outlook.

“It is pre-planned and an outcome of intentional non-exploration of local energy resources,” he lamented.

The special law has protected this ‘misdeed’ to create a monopolistic situation in the energy sector, Alam deplored.

“It will be risky for the country’s future energy security if the government continues relying more on LNG imports,” energy expert Prof Ijaz Hossain told Gas Outlook.

Although LNG is less polluting than coal and petroleum oils, excessive use of LNG will affect the country’s overall climate in the long run, said Hossain, who is a professor of Bangladesh University of Engineering and Technology, the top-ranked public university in the country.

The U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA) is calling afresh for an urgent overhaul of Bangladesh’s energy sector development with greater integration of renewable energy to enhance the country’s energy security.

The plan for further LNG expansion in Bangladesh amid the country’s excessive reliance on imported fossil fuels will likely exacerbate the situation of the already suffering energy and power sectors, Shafiqul Alam, an energy finance analyst at IEEFA, told Gas Outlook.

With no certainty over cheap LNG prices in the future, there remain concerns over LNG supply in the coming years, he said.

Struggles over imported fossil fuel bills have already challenged the current energy sector planning process, he said.

Although Bangladesh will not be able to completely rely on its local resources to meet future energy demands, it must rein in steeply rising imported fossil fuel consumption, Alam suggested.

The best bet would be to augment energy efficiency to reduce demand, shore up renewable energy capacity and explore its own gas, he added.

All these efforts to enhance national energy security will require stronger and faster policy action to stimulate the necessary investment on the ground.

Regarding the implications of growing Bangladeshi LNG imports, he said a growth in LNG consumption throughout the world has significant impacts on the climate.

The combustion of LNG produces roughly 20% to 25% less CO2 emissions compared to diesel combustion, he said, but added that across the LNG supply chain, there are cases of methane leakage. Methane’s global warming potential is much higher than that of CO2.