Gunvor's LNG deal: Cheap long-term promise masked by expensive start
Against this backdrop, Petrobangla has signed a 13-year long-term agreement with Gunvor USA LLC for 117 LNG cargoes to be delivered between 2026 and 2038 after several rounds of negotiations.
Highlights:
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Petrobangla signed Gunvor a 13-year deal for 117 cargoes.
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Gunvor's JKM-linked pricing could make early LNG purchases costly.
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Oil-linked contracts remain significantly cheaper at current market prices.
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Gunvor's JKM premium is lowest among Bangladesh's short-term contracts.
- Henry Hub pricing could reduce costs from 2029 onward.
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The Middle East war and drastic supply cuts by Bangladesh's traditional LNG suppliers have left the country scrambling to secure cargoes from an increasingly volatile spot market.
Prices are high and choices are limited: Bangladesh often has little option but to accept the available cargo or risk losing it and paying even more later.
Against this backdrop, Petrobangla has signed a 13-year long-term agreement with Gunvor USA LLC for 117 LNG cargoes to be delivered between 2026 and 2038 after several rounds of negotiations.
But an analysis of the deal shows that its two market-linked pricing mechanisms, which replace the Brent crude oil index that underpins most of Bangladesh's long-term LNG purchases, could make the agreement costly in its initial three years.
The Gunvor deal's premium during its Japan Korea Marker (JKM)-linked phase appears lower than those of the country's existing short-term contracts.
But because deliveries from 2026 to 2028 will be priced against JKM, Bangladesh will remain exposed to a market that is currently trading at almost twice the prices implied by its existing oil-indexed long-term contracts.
Under JKM plus $0.0875, Bangladesh will buy 14 cargoes from 2026 to 2028.
Here is the catch.
The pricing structure marks a departure from most of Bangladesh's existing long-term LNG agreements, which are predominantly linked to crude oil prices through Brent-indexed formulas.
In a separate arrangement, three cargoes in 2028 are scheduled to be linked to the Henry Hub formula, followed by 10 cargoes annually from 2029 to 2038, priced at 121% of Henry Hub plus $5.20 per MMBtu.
To understand how the Gunvor deal could perform in the future, a comparison was drawn using a Brent crude oil price of $88.52 per barrel on 16 August, a JKM price of $21.21 per MMBtu, and a Henry Hub natural gas price of $2.71 per MMBtu on 17 August.
To be fair, actual LNG prices under each contract will move as the underlying oil and gas benchmarks change.
Oil-linked contracts remain substantially cheaper at current prices
The Gunvor deal appears favourable when its premium is compared with those of short-term JKM-linked contracts. But a comparison with the country's oil-indexed long-term agreements tells a different story.
The larger issue is the benchmark itself.
Based on the Brent crude price of $88.52 per barrel on 16 August, LNG supplied under Bangladesh's long-term oil-linked contracts would cost between roughly $10.93 and $12.32 per MMBtu, depending on the percentage of the slope of Brent and premium.
QatarEnergy, Bangladesh's largest LNG supplier, delivers 40 cargoes annually under a 15-year agreement. At the 16 August Brent price, the LNG would cost around $11.70 per MMBtu.
But under the JKM plus $0.0875 formula, the price would be $21.30 per MMBtu, a difference of $9.60.
Similarly, OQ Trading's 10-year contract for 16 cargoes annually would cost an estimated $10.93 per MMBtu at the prevailing Brent price, creating a $10.37 difference between the JKM-linked and oil-linked prices.
QatarEnergy Trading LLC supplies 12 cargoes annually under a 15-year agreement priced against Brent. At the same Brent price, the LNG would cost $11.73 per MMBtu, creating a difference of $9.57 compared with Gunvor's JKM-linked price.
Another OQ Trading agreement, covering four cargoes annually for 12 years, would cost $12.32 per MMBtu under its Brent formula, making Gunvor's JKM-linked LNG $8.98 more expensive per MMBtu.
Excelerate Gas, which supplies 14 cargoes annually under a 15-year deal, uses a Brent formula with a price capped at $12.12 per MMBtu, making Gunvor LNG $9.18 more expensive.
The comparison illustrates a gap of up to $10.80 per MMBtu between current oil-linked long-term LNG deals and Gunvor's JKM-based price mechanism.
The comparisons reflect current market conditions only, as oil-linked prices rise and fall with Brent crude, while JKM-linked prices respond to supply and demand dynamics in the global LNG market.
Gunvor's premium lower than existing short-term deals
A comparison of Bangladesh's current short-term LNG contracts shows that Gunvor's proposed premium is the lowest among the existing JKM-linked deals.
OQ Trading Ltd, which is supplying 12 cargoes annually under a two-year contract covering 2025-26, sells LNG at JKM plus a premium of $0.15 per MMBtu, while Gunvor charges $0.0875, or 5.75 cents less.
Aramco Trading's one-year contract for five cargoes in 2026 is priced at JKM plus $0.145 per MMBtu, making Gunvor's premium 5.75 cents lower. SOCAR Trading SA of Switzerland, recently approved to supply two cargoes in 2026, will deliver LNG at JKM plus $0.125 per MMBtu, making Gunvor's premium 3.75 cents lower.
Using the Platts JKM assessment of $21.21 per MMBtu plus the respective premiums, OQ's LNG would cost around $21.36 per MMBtu, Aramco's around $21.35 per MMBtu and SOCAR's about $21.34 per MMBtu.
Under the same market conditions, Gunvor's formula would result in a delivered price of approximately $21.30 per MMBtu, making it marginally cheaper than all three existing short-term contracts.
The advantage, however, stems from a lower premium rather than a lower benchmark.
Since all four contracts are linked to JKM, the final price will move in line with fluctuations in the Asian spot LNG market.
For example, if JKM falls to $10 per MMBtu, OQ's LNG price would decline to $10.15 per MMBtu, while Gunvor's would drop to roughly $10.09 per MMBtu.
Henry Hub phase may lower average cost
The second phase of the Gunvor agreement is linked to Henry Hub, the US natural gas benchmark.
Based on the NYMEX Henry Hub price of $2.71 per MMBtu on 17 August, the Gunvor formula of 121% of Henry Hub plus $5.20 would produce an LNG price of approximately $8.48 per MMBtu.
Industry forecasts suggest Henry Hub prices may average between $3.40 and $4.30 per MMBtu from 2029 onwards. Under those assumptions, LNG supplied under Gunvor's formula would cost between $9.31 and $10.40 per MMBtu.
These levels remain well below current JKM-linked prices and broadly comparable with Bangladesh's existing oil-indexed contracts.
But the Henry Hub formula also raises questions about the terms Bangladesh has secured.
India's GAIL secured a QatarEnergy Trading contract at 115% of Henry Hub plus $5.66 per MMBtu. Based on the 17 August Henry Hub price of $2.71 per MMBtu, the port-end price would be $8.78 per MMBtu.
Indian Oil Corporation's deal with Trafigura, meanwhile, is priced at 121% of Henry Hub plus $4.50 per MMBtu, which would have produced a price of $7.78 per MMBtu on 17 August.
ConocoPhillips' 15-year LNG agreement with China's Guangdong Pearl River Management Group is also understood to be priced at roughly 121% of Henry Hub plus $4.50 per MMBtu, producing the same $7.78 price under those market conditions.
Against those deals, Gunvor's 121% slope plus a $5.20 premium marks a significantly higher constant and a stiff premium, which could cause Bangladesh to suffer in the long run if oil prices come down to pre-Iran war levels.
Despite being a long-term deal, Gunvor got away with a structure that allows the company to make a quick buck during the tight market from 2026-2028 by linking the initial three years' supply to the Asian spot price.
Gunvor also secured a higher Henry Hub slope of 121%, which is 6% higher than the traditional Henry Hub deals.
What the Energy Division finds as a solace in the deal is reflected in its price sensitivity analysis, which states, "The combination of higher-priced JKM-linked volumes in the early years and lower-cost Henry Hub-linked volumes later in the contract could bring the overall average purchase price below some of Bangladesh's existing long-term LNG supply arrangements."
