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    Bangladesh fills the gas supply gap [NGW Magazine]

Summary

Once self-sufficient in gas, Bangladesh has turned to importing LNG in order to meet its surging demand for power. It is also opening up the market. [NGW Magazine Volume 5, Issue 2]

by: M Azizur Rahman

Posted in:

Liquified Natural Gas (LNG), Featured Articles, Asia/Pacific, Premium, NGW Magazine Articles, Volume 5, Issue 2, Bangladesh

Bangladesh fills the gas supply gap [NGW Magazine]

Power generation and industry are expected to boost gas demand in Bangladesh and take LNG demand to around 2bn ft³/d from the current 600mn ft³/d in five years’ time, state-run Petrobangla has estimated.

Petrobangla has planned to ramp up the overall LNG supply in phases to cope with the soaring demand.

"We are working to ensure LNG imports are around 1bn ft³/d by 2021 and double that by 2025," a senior Petrobangla official told NGW January 9.

He said the two LNG import terminals that are now operational, both of them FSRUs, will inject around 1bn ft³/d into the grid by 2025.

LNG re-gasification will reach 2bn ft³/d from 2025 with the commissioning of a proposed 7.5mn metric tons (mt)/yr land-based LNG import terminal at Moheshkhali Island in the Bay of Bengal, he said.

Rupantarita Prakritik Gas Company (RPGCL), a wholly owned subsidiary of state-run Petrobangla, has the authority to oversee LNG import issues in Bangladesh.

According to Petrobangla's estimates, power plants’ demand for gas will soar by 35.17% to 1.764bn ft³/d by 2021 and reach 1.98bn ft³/d by 2025, the general manager of RPGCL, Rafiqul Islam, said.

In industry, natural gas demand will rise 42.04% to 750mn ft³/d by 2021 and 89.39% to 1bn ft³/d by 2025. Fertiliser factories will also use substantially more gas according to Petrobangla’s predictions, rising 42.85% to 300mn ft³/d by 2021 and further to 350mn ft³/d by 2025.

Natural gas demand in other sectors will also increase except for captive power plants – small power plants whose only function is to supply electricity to the industrial site that needs them – it has been estimated.

Most of the additional natural gas will come as re-gasified LNG as domestic natural gas supply is depleting, said the Petrobangla official.

Bangladesh imports LNG under long-term deals from two global suppliers: QatarGas and Oman Trading International.

But for additional gas it will be likelier to go to the spot market in order to enjoy the benefits of the global downtrend of LNG prices, a senior energy ministry official said on condition of anonymity.

State-run Petrobangla will ink master sales and purchase agreement soon with some 17 short-listed LNG suppliers to import LNG from the spot market, he added. But this is not the only option: the ministry will also consider “any attractive price offer from our long-term suppliers,” he added.

Move to reduce LNG import cost 

The minister of state for the MPEMR Nasrul Hamid recently requested Qatar to reconsider lowering the LNG import price.

He suggested linking the contract to the US Henry Hub benchmark instead of crude, at a recent meeting with an eight-member visiting delegation from the Gulf country headed by Qatar's state minister for energy affairs, Saad Sherida Al-Kaabi.

Al-Kaabi proposed a fresh deal for additional imports, wherein the gas price would be lower said a senior EMRD official.

Currently, Petrobangla has a contract with Qatar to buy around 2.5mn mt/yr of LNG over 15 years.

For the first five years, RasGas will supply around 1.8mn mt/yr before it reaches plateau, said a senior Petrobangla official.

The purchase price has been set at around 12.65% of the three-month average price of Brent crude oil plus $0.50/mn Btu.

If Petrobangla sees demand rising during that initial period, it can increase the LNG import volume to 2.5mn mt/yr; and during the next 10 years, Petrobangla has the option to reduce the amount by 10% every year.

If Bangladesh takes less than the base amount of LNG in any year, it will still have to pay.

It has similar agreement with Oman for around 1mn mt/yr of LNG for 15 years.

Petrobangla has been purchasing LNG at around 11.9% of the three-month average of Brent crude oil prices plus a constant of $0.40/mn Btu, payable within 25 days of delivery.

Petrobangla has the option of increasing LNG imports to 1.5mn mt/yr or lowering them to 0.9mn mt/yr without having to pay any penalty, said the official.

The private sector can enter LNG business.

The country's private sector can also enter the ranks of importers and sell the LNG to customers they have contracted with as the government has opened up the market to new companies.

"The private sector will be able to import LNG, re-gasify it and sell it," state minister for the MPEMR Nasrul Hamid said.

The price of gas in whatever form is set by the private sector  which is free to sell it at a negotiable price to consumers, he said.

The private sector would be allowed to build LNG import terminals, if necessary, to facilitate business, and be allowed to supply their re-gasified LNG through state-run national gas grid for a negotiable wheeling charge, he added.

Pipeline Constraints

Pipeline constraints are still capping the country's overall import of LNG, as it cannot carry more than 594mn m³/d against the total capacity of 1.0bn ft³/d, according to Petrobangla statistics as of January 8.

A senior official of state-run Gas Transmission Company (GTCL), said the existing pipeline infrastructure has a maximum capacity to supply around 650mn ft³/d of gas from the LNG plants.

It will not be possible to supply additional gas from the FSRUs until the construction work of two necessary pipelines – a 90-km pipeline connecting Moheshkhali to Anwara and another 181-km pipeline connecting Chattogram, Feni and Bakhrabad – are completed, he added.

The GTCL is responsible for building gas transmission pipelines in the country.

The official, however, said that building these pipelines is in progress and he hoped that the work will be finished in the next few months.

According to a report prepared by Copenhagen-based research firm Ramboll in association with Geological Survey of Denmark and EQMS Consulting, Bangladesh will need to import around 30mn mt/yr to meet demand by 2041 as domestic gas reserves are depleting fast.

Bangladesh's existing gas reserves of around 12 trillion ft³ will be completely depleted by 2038 if no new discoveries are made, said the report.