Govt to import LNG from spot markets soon

The government has decided to import LNG (liquefied natural gas) from the international spot market for the first time to meet the growing demand of natural gas. 

To this end, a shortlist of 17 LNG suppliers has been made on the basis of the Master Sale and Purchase Agreement (MSPA). 

Finance Minister AHM Mustafa Kamal on Wednesday said Cabinet Committee on economic affairs approved a MSPA in connection with the purchase.

The minister said out of 43 companies' expressions of interest (EOI) the Cabinet Committee had selected the 17 companies. A Petrobangla official said, “We are fully ready to import any amount of LNG from the spot market to meet the demand.”

The short-listed companies are: Mitsui & Co Ltd Japan, Marubeni Corporation Japan, Osaka gas company Ltd Japan, AOT Trading AG Switzerland, Diamond Gas International Pte Ltd Singapore, Summit Corporation Ltd and Summit Oil & Shipping Co Ltd, Excelerate Energy Limited  Partnership USA, Jera Co Inc Japan, Vitol Asia Pte Ltd Singapore, Trafigura Pte Limited Singapore, Woodside Petroleum Ltd Australia, Gazprom Marketing and Trading Singapore Pte Ltd Singapore, Eni S.p.A Italy, Petronas LNG Ltd (PLL) , CNOOC (China Natural Offshore Oil Corporation)  Gas and Petroleum Trading Marketing Limited China, Cheniere marleting International LLP, Singapore and Chevron USA Inc (Singapore Branch) Singapore MSPA.

The government started importing liquefied natural gas (LNG) in August last year in the face of falling domestic production. Since then, the government has spent Tk 14,000 crore to subsidies the import. Because the price of imported gas was much higher than that of those produced locally. Gas production cost stands at Tk 14 per cubic metre, after the imported LNG is mixed with the locally produced gas. Now, the government sells it at Tk 7.17.

Spot market is a public market in which financial instruments or commodities are traded for immediate delivery. Spot market for the LNG was developed over the past several years with the gluts of LNG output alongside the growth of emerging markets for LNG (liquefied natural gas). Market insiders said the Platts JKM, which delivers spot cargoes to northeast Asia at an average price of $4.93 per MMBtu (million British thermal unit) in the second quarter of 2019, down from $8.26 per Mmbtu a year ago.

However, state-run Petrobangla has been importing LNG under term deals within the range of around $8.5 per Mmbtu to $10 per Mmbtu over the past one year since April 24, 2018, when the first shipment reached Moheshkhali Island in the Bay of Bengal.

The imported LNG is re-gasified at FSRUs (floating, storage, re-gasification units) before it is added to the national grid for use by end users.

The imported spot LNG should have a gross heating value ranging from 1,025 to 1,100 Btu per standard cubic feet (scf).

The imported spot LNG would require to be blended with locally produced natural gas, which is sulfur-free and sweet gas, before it is delivered to the end-user.

The imported LNG's sulfur content could be low as a result.

The selected firms would have to supply LNG on a delivered ex-ship basis and the vessel size should range from 125,000 cubic metre to 220,000 cubic metre.

Currently, two FSRUs, owned by US-based Excelerate Energy and local Summit Group, are currently re-gasifying around 580 mmcfd of LNG. Both the FSRUs have the capacity to re-gasify around 1,000 mmcfd of LNG in total.

 As per the government’s vision, there will be 100 economic zones in the country, and so, the demand for gas will increase day by day.