Bangladesh turns to expensive spot LNG as volatility scares off bidders

Bangladesh has purchased two liquefied natural gas (LNG) cargoes from the volatile spot market at sharply higher prices to keep domestic gas supply at a tolerable level after an initial tender failed to attract bidders amid extreme global market uncertainty.

In a desperate two-day effort, state-owned energy corporation Petrobangla could purchase the two cargoes on Wednesday – one at over $28 per MMBtu, while another at $24 per MMBtu – almost 2.5 times higher than prices recorded at below $10 on 1 March.

Energy Secretary Md Saiful Islam said the global LNG market has become highly unstable following attacks on Qatar's energy facilities.

"We are buying spot LNG at an exorbitant price, which is almost 2.5 times higher than the price of four days ago," he told TBS.

Petrobangla was forced into the spot market after delivery from its largest long-term supplier Qatar – scheduled under long-term contracts – became uncertain due to escalating conflict in the Middle East and shipping disruptions through the Strait of Hormuz.

Officials said a tender floated on Tuesday for two spot cargoes failed to receive any bids as traders stayed away due to intense market volatility. A fresh tender issued on Wednesday eventually drew offers from international traders Vital Asia and Gunvor, which are expected to deliver the cargoes around 15 March and 18 March.

The current supply shock follows a decision by QatarEnergy to halt LNG production after Iranian attacks targeted its energy infrastructure, prompting the company to invoke the force majeure clause in several long-term supply contracts.

Force majeure allows suppliers to suspend contractual obligations when extraordinary events prevent delivery.

Qatar plays a critical role in the global LNG market, accounting for roughly 20% of global LNG supply, and the disruption has already triggered sharp price spikes in global gas markets.

Petrobangla confirmed that QatarEnergy formally notified Bangladesh about the force majeure on 2 March.

In response, Petrobangla sent a letter seeking clarification on the status of at least two LNG cargoes scheduled for delivery in April, but officials say QatarEnergy has not yet responded.

"We have written to QatarEnergy asking them to clarify their position regarding the April cargoes," said the energy secretary. "But we have not received any response yet."

Officials from Petrobangla and the Energy Division said the lack of clarity over future deliveries is raising serious concerns for Bangladesh's energy security.

The concern is significant because QatarEnergy was scheduled to deliver 40 out of the country's planned 115 LNG cargoes this year.

Other long-term suppliers – including QatarEnergy Trading LLC, OQ Trading Ltd and Excelerate Gas Marketing Ltd – could also face disruptions because much of their LNG sourcing ultimately depends on Qatari supply.

Intense competition among Asian LNG buyers

Energy analysts warn that the crisis is already triggering intense competition among Asian buyers for alternative LNG cargoes, pushing spot prices sharply higher and making it increasingly difficult for smaller economies like Bangladesh to secure affordable fuel.

The crisis is not limited to LNG alone.

Uncertainty is also growing over the availability of liquefied petroleum gas (LPG), as a large share of global LPG shipments from the Gulf region passes through the Strait of Hormuz, one of the world's most critical energy shipping chokepoints.

Nearly one-fifth of global oil and LNG shipments move through the strait, making any disruption there a major threat to global energy trade.

Concerned about possible shortages, Power, Energy and Mineral Resources Minister Iqbal Hasan Mahmud Tuku held a meeting with LPG importers yesterday and urged them to increase imports to ensure a stable supply.

However, importers say the situation is becoming increasingly challenging.

Speaking to this newspaper, Md Abdur Razzaq, managing director of JMI Group, which operates JMI LPG, said the war has made LPG imports significantly more complicated.

"The Middle East war has made LPG imports very difficult. Freight costs are rising, shipping routes are uncertain, and traders are becoming cautious," he said.

Reserve of fuels also on the wane

According to data from Bangladesh Petroleum Corporation, as of 4 March, the country's diesel reserve declined to 1,15,473 tonnes, enough to meet demand for around nine days, down from 1,34,062 tonnes just two days earlier.

The stock of octane has also dropped, falling from 33,640 tonnes to 28,152 tonnes, which is sufficient to cover roughly 15 days of consumption.

Meanwhile, the reserve of furnace oil – a critical fuel for running power plants – has also decreased. The stock has fallen from 76,156 tonnes, which previously ensured supply for 93 days, to 66,192 tonnes, now sufficient for only about 60 days.