Key Highlights:

• Each spot LNG cargo estimated to contain 3.36 million British thermal units (MMBtu) of liquefied natural gas
• Bangladesh set to receive a record number of five spot LNG cargoes in May 2024
• Govt has increased its spot LNG import plan from 13 to 23 cargoes for the first half of 2024

The Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) in Bangladesh has recently made a strategic decision to boost the country’s spot LNG imports. This move comes in response to the favorable conditions in the international market, where lower prices present an opportunity for Bangladesh to capitalize on cost-effective energy sourcing.

The government has revised its initial plan of importing 13 spot LNG cargoes to now importing a total of 23 spot LNG cargoes during the first half of 2024. This decision was communicated to the state-run Petrobangla by the EMRD, with instructions to import an additional 10 cargoes. This adjustment aims to leverage the current market dynamics and secure cost-efficient energy resources for the country.

Expansion Efforts by RPGCL to Meet Rising Gas Demand

To support the increased spot LNG imports, the Rupantarita Prakritik Gas Company Ltd (RPGCL) has taken proactive steps by initiating tenders to import two additional spot cargoes in May. These cargoes are intended to address the escalating gas demand, particularly during the summer months. The cargoes will be directed to Moheshkhali island, with flexibility to utilize the country’s floating storage and regasification units (FSRUs) for distribution.

Each spot LNG cargo is estimated to contain 3.36 million British Thermal Units (MMBtu) of Liquefied Natural Gas. Bangladesh is set to receive a record number of five spot LNG cargoes in May (2024), marking a significant milestone in its procurement history. The country has already finalized delivery tenders with various suppliers, securing competitive prices below $10 per MMBtu for May deliveries.

• Each spot LNG cargo: Estimated to contain 3.36 million British thermal units (MMBtu) of liquefied natural gas.
• Record number: Five spot LNG cargoes scheduled for May 2024, marking a significant procurement milestone.
• Competitive prices: Secured below $10 per MMBtu for May deliveries.

Long-Term Supplier Arrangements and Price Comparisons

In addition to spot purchases, Bangladesh continues to maintain agreements with long-term LNG suppliers such as Qatar Energy and OQ Trading. While long-term contracts typically involve higher prices around $11 per MMBtu, the country’s focus on spot market acquisitions reflects a strategic shift towards cost optimization. Petrobangla anticipates sustained affordability in spot LNG prices due to the current oversupply in the global market.

Future Outlook and Strategic Considerations

As Bangladesh navigates its energy procurement landscape, the emphasis on diversifying sourcing strategies and capitalizing on market opportunities underscores a forward-looking approach by the government. By balancing spot purchases with long-term agreements, the country aims to meet its growing gas demand efficiently while ensuring economic viability in its energy sector.

Does Bangladesh’s LNG demand rebound despite challenges?

Concerning Bangladesh, Shafiqul Alam, Lead Analyst for Bangladesh Energy at IEEFA, remarked that the rebound in demand by 17.9% in 2023, following a 14.4% decline in imports in 2022, was driven by low spot market LNG prices. However, he highlighted the country’s susceptibility to volatile LNG prices, fiscal constraints, and competition from other energy sources in the power sector, indicating a moderate growth in medium-term demand.

IEEFA addressed the global LNG demand, noting a lackluster growth in demand alongside a significant influx of new export capacity, potentially leading to an oversupply in global liquefied natural gas (LNG) markets within the next two years. Notably, LNG demand in key importing regions like Japan, South Korea, and Europe is projected to decrease until 2030.

In emerging Asian markets, the growth in LNG demand is expected to encounter various challenges encompassing economic, political, financial, and logistical factors, which may persist despite an oversupplied market.

Despite uncertainties in demand, global LNG supply capacity is anticipated to surge to 666.5 million metric tonnes per annum by the end of 2028, marking a 40% increase over five years. This surge, coupled with sluggish demand growth, is forecasted by IEEFA to induce an extended phase of oversupply in LNG markets, driven by a record expansion in export capacity until 2028.

LNG in 2023

In 2023, Bangladesh resumed importing liquefied natural gas (LNG) after a temporary pause during the Russia-Ukraine conflict. The Cabinet Committee on Government Purchase (CCGP) endorsed Petrobangla’s proposal to import one LNG cargo at a rate of $19.78 per million British thermal units (MMBtu), amounting to Tk850 crore.

The government, under the leadership of Agriculture Minister Abdur Razzaque, intends to import 12 LNG cargoes to meet the rising demand for natural gas. In line with advice from the International Monetary Fund (IMF), adjustments were made to gas prices for industries and power plants to reduce subsidies and secure loans. However, tariffs for households, fertilizer production, CNG-powered vehicles, and tea gardens remained unchanged. Despite local production reaching 2,300 million cubic feet per day (MMCFD), Bangladesh continues to import LNG to fill the 500 MMCFD demand gap, including 350 MMCFD from long-term agreements with Qatar and Oman and 150 MMCFD from the international spot market.

In conclusion, Bangladesh’s strategic decision to ramp up spot LNG imports underscores its commitment to ensuring energy security and capitalizing on favorable market conditions to meet the nation’s growing energy demands effectively.

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