Bangladesh, a nation grappling with energy demands, has strategically capitalised on the recent abundance of liquefied natural gas (LNG) supply, securing spot market purchases at favorable prices compared to those of its long-term suppliers.
The Cabinet Committee on Government Purchase approved the spot LNG import deal on January 31, 2023, at $9.93 per million British thermal units (MMBtu) which is significantly lower than its long-term supplier rates.
State-run Petrobangla's buying price from long-term suppliers was above $10.50 per MMBTu, a senior Petrobangla official told Bangladesh Post. Thus, the spot market is now favourable. Per MMBTu Bangladesh is saving 0.57 US Dollar. In contrast to the previous year, the government intended to import 24 LNG cargoes from the spot market between January and December 2024, a senior Petrobangla official told Bangladesh Post.
According to official sources, LNG import costs surpassed Tk 32,000 crore in 2023, and will further increase this year. In the September of the last year, Petrobangla imported 33.6 lakh MMBTU of LNG from Switzerland's Total Energies Gas and Power Limited. The price of each unit of LNG was $13.77.
To purchase LNG and fuel Bangladesh gets loans worth $2.1 billion from the International Islamic Trade Finance Corporation (ITFC). The corporation signed an agreement with the Energy and Mineral Resources Division of Bangladesh on Wednesday to provide the loans.
Ministry officials said the loan will be used to import petroleum fuel and LNG. Under the credit agreement, the IITFC will finance the state-owned Bangladesh Petroleum Corporation (BPC) to import petroleum fuels and the state-owned Petrobangla to import liquified natural gas (LNG).
The loan will facilitate the smooth import of petroleum fuel and LNG in Bangladesh.
Nasrul Hamid told reporters that Bangladesh has been receiving financial support from the ITFC of the IDB for a long time. He said this credit support will help the government to smoothly import petroleum fuel and LNG.
He said that $1.6 billion would be utilised to import petroleum fuels while the remaining $500 million would be used to import LNG.
The latest spot LNG cargo, procured from Vitol Asia Pte Ltd, is scheduled for delivery on March 8–9 to the floating storage and regasification unit (FSRU) at Moheshkhali Island in the Bay of Bengal, owned by US-based Excelerate Energy.
This purchase, approved by the Cabinet Committee on Government Purchase on 31 January this year, highlights Bangladesh's adeptness in navigating the energy market dynamics.
Encouraged by the advantageous spot market prices, Bangladesh has expanded its procurement plans, intending to acquire three additional LNG cargoes for March. This surge in spot market purchases signals a proactive approach toward meeting the country's burgeoning energy needs.
Energy experts foresee a prolonged period of low spot LNG prices, attributing it to increased production by LNG producers and the construction of new LNG carriers.
However, amidst the current reliance on spot market purchases, Bangladesh is strategically shifting towards long-term contracts to secure its future energy requirements.
Currently importing approximately 3.5 million metric tons per year (MTPA) of LNG from long-term suppliers like Qatargas and OQ Trading, Bangladesh is poised to triple its LNG imports to around 10 MTPA from 2026 onwards.
The government's commitment to rapidly increase LNG imports and expand regasification facilities underscores its determination to address the nation's energy challenges.
Dr Md Helal Uddin, NDC Member (Gas), Bangladesh Energy Regulatory Commission told Bangladesh Post that the LNG prices are gradually declining on the global market, and it may continue, so definitely it’s a good sign.
In pursuit of bolstering its LNG supply, Bangladesh's state-run Petrobangla has inked several sales and purchase agreements (SPAs) with major players in the LNG market, including QatarEnergy, OQ Trading, Excelerate Energy, and Summit Group. These agreements, totaling 4.0 MTPA of additional LNG from 2026 onwards, mark a significant step towards enhancing the country's energy security.
Despite these strides, voices of concern regarding the pricing mechanism for LNG imports persist. Professor M. Tamim of the Bangladesh University of Engineering and Technology (BUET) advocates for a shift towards gas-linked pricing, suggesting it could potentially mitigate long-term LNG prices.
2026 and beyond will be a defining moment for our nation's energy security. The steps we take during this period will have a transformative impact. With careful planning and execution, we can achieve significant improvements that will benefit generations to come.
But the present situation is crucial; no time frame can be established because there are no concrete steps to raise the proportion of domestic energy resources in the country's energy mix, according to Dr. Badrul Imam, Honorary Professor in the Department of Geology at the University of Dhaka, who made this statement to Bangladesh Post.
The industrial sector is already exhibiting the first indications of factory closures due to the complete lack of progress in taking energy exploration seriously, the failure to extract proven coal reserves at the policy level, and the war-footing exploration of Bangladesh's existing and probable gas fields.
Bangladesh's proactive stance in navigating the global energy landscape reflects its commitment to ensuring sustainable energy access for its citizens while optimizing economic resources.
As the nation charts its course toward energy security, the balance between short-term market opportunities and long-term sustainability remains paramount.
