Dhaka signs initial deal with Doha to import 2.5m tonnes of LNG a yr

Dhaka,  Wed,  27 September 2017
Published : 14 Jul 2017, 01:18:19

Dhaka signs initial deal with Doha to import 2.5m tonnes of LNG a yr

Final agreement likely next month
M Azizur Rahman

Bangladesh inked Thursday the country's first-ever deal to import from Qatar liquefied natural gas (LNG), a new fuel for the country, to meet the mounting natural gas demand.

Qatar's RasGas and Bangladesh's state-owned Petrobangla signed the long-awaited initial deal at Petrocentre in the city over import of around 2.5 million tonne per year of lean LNG for 15 years, a senior Petrobangla official told the FE.

A delegation from RasGas arrived in Dhaka on Wednesday last aiming to ink the initial agreement. But  the move to sign it failed last week as the two sides could not reach any final decision over pricing then, said the official of Petrobangla requesting anonymity.

Dhaka signs initial deal with Doha to import 2.5m tonnes of LNG a yrBoth the parties talked about different pricing formula Thursday again and decided that the pricing would be linked to the international price of crude oil, said the official, as he was not authorised to speak to the media.

Other issues including quantity, the mode of payment and tenure of agreement were also discussed during Thursday's meeting, he added.

The official did not say anything further, terming it as 'confidential.'

Petrobangla chairman Abul Mansur Md Faizullah earlier in late June said that Bangladesh finalised preliminary government-to-government negotiations with Qatar's RasGas during a visit to the Gulf country then to import the fuel.

They settled all the issues then except pricing.

A final sales and purchase agreement is slated to be signed in August after receiving approval from the country's cabinet committee, he added

This is Bangladesh's first long-term LNG contract.

Bangladesh had signed initially a memorandum of understanding (MOU)  with RasGas back in January 2011 to import annually around 4.0 million tonne of LNG, which was extended several times after that and a 'confidentiality agreement' was inked over the issue in 2015, said the official.

Separately, state-owned Petrobangla signed a MOU on LNG import with Switzerland-based AOT Energy, with a final sales and purchase agreement due to be signed by the year-end, and recently issued an international tender seeking expression of interest to supply LNG on a spot basis.

"We are very cautious in inking our first-ever deal to import LNG as it is very new for us," said the Petrobangla official.

"The quantity could be increased later as the deal is flexible," he said.

"We can ink more deals to bring enhanced quantity of natural gas from RasGas like the agreements signed by Pakistan and India," he added.

Bangladesh will be importing lean LNG in line with the type of natural gas produced from the country's domestic gas fields, said officials.

"We will import lean LNG, which will be blended with local gas before supplying to end-users, as we will have no dedicated pipeline, at least for now, to carry regasified imported LNG," the official added.

Petrobangla's contract with RasGas will be priced against international crude oil benchmarks, but the official said the company was open to pricing future deliveries with a link to other indexes such as the Platts JKM, a daily physical spot market price assessment for LNG delivered to Japan, South Korea, China and Taiwan.

"For the first project, we are keeping it very simple," he said.

Whatever the price indexation, Petrobangla is counting on government subsidies to enable it to pay for the imported LNG. Earlier this year, the company requested for a subsidy of $1.4 billion from the government to foot its LNG import bill for 2018.

Subsidies will be aimed at bridging the wide gap between international LNG prices and domestic gas prices in the power and fertiliser sectors, which will be the key consumers of the imported LNG, accounting for more than 60 per cent of Bangladesh's gas consumption.

Currently, the power sector accounts for more than 57.7 per cent of Bangladesh's natural gas consumption, and this percentage is likely to increase, the officials said, as the country aims to expand its gas-fired power generation capacity.

Bangladesh seeks to start LNG imports in early 2018 and is making concerted efforts to move forward with LNG import infrastructure.       

The country's first LNG import terminal, a 3.75 million tonne per year floating, storage and re-gasification unit (FSRU) being developed by US-based Excelerate Energy, is expected to be commissioned in April 2018.

Bangladesh has been grappling with a natural gas deficit since 2009, when rapid industrialisation forced Petrobangla to ration supplies to industries, power plants, CNG filling stations and fertiliser factories, and suspend new piped gas connections to commercial and household consumers.

Editor : A.H.M Moazzem Hossain
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