LNG suppliers suspend long-term contracts, pushing Bangladesh to volatile spot market

Highlights:

• Three LNG suppliers invoke force majeure amid US-Israel war on Iran
• Bangladesh risks losing eight LNG cargoes scheduled for April deliveries
• Government seeks alternatives through volatile global LNG spot market
• QatarEnergy disruption triggers cascading supply issues with other suppliers
• Closure of Strait of Hormuz worsens LNG supply uncertainty
• Rising spot LNG prices threaten Bangladesh's already strained energy budget

Bangladesh's import of liquefied natural gas (LNG) from long-term contracts has become highly uncertain after all three suppliers invoked force majeure, a legal tool that allows them to suspend or delay contractual obligations in events beyond their control, amid the ongoing US-Israel war on Iran.

According to Petrobangla officials, the latest force majeure notice came from Oman-based OQ Trading Limited on 5 March, followed by the US-based Excelerate Energy the next day.

Earlier on 2 March, Bangladesh's largest LNG supplier QatarEnergy invoked the same.

Confirming the development, Petrobangla Chairman Md Arfanul Hoque on Saturday told TBS, "We are now looking for alternatives from the spot market to fill the window left vacant by the three suppliers."

With the three suppliers invoking force majeure, Bangladesh is set to lose all six LNG cargoes scheduled under long-term contracts for April, along with two additional deliveries from short-term arrangements.

Officials said the development could potentially block the supply of at least eight LNG cargoes from both long- and short-term contracts, leaving Bangladesh heavily dependent on the volatile spot market.

According to the import plan, three additional cargoes were supposed to be procured from the spot market in April too which means Bangladesh has a plan to procure 11 LNG cargoes in April.

All three suppliers interlinked

Petrobangla officials said once QatarEnergy – which is scheduled to supply around 40 LNG cargoes to Bangladesh in 2026 – invoked force majeure, similar moves by the other suppliers became almost inevitable as QatarEnergy accounts for around 20% of the world's seaborne LNG.

Officials added that supply arrangements from the other suppliers, OQ Trading (OQT) and Excelerate, are closely linked to deliveries tied to QatarEnergy under existing agreements.

While there is a provision to source LNG from alternative suppliers outside QatarEnergy if OQT and Excelerate can manage, the enforcement of force majeure effectively blocks this option.

Petrobangla said the force majeure imposed by OQ Trading will remain in effect until 8 April. 

Petrobangla Chairman Arfanul said, "With the imposition of force majeure by OQ, Petrobangla will lose two cargoes scheduled for delivery on 3 and 8 April."

What was the April import plan

According to Petrobangla's earlier LNG import plan, 11 cargoes were scheduled to arrive in April. Of these, six were to come under long-term contracts, two under short-term, and three from the spot market.

Of the six long-term cargoes, three were to be supplied by QatarEnergy, one by QatarEnergy Trading, one by OQT, and one by Excelerate. Of these six cargoes, five were expected to pass through the Strait of Hormuz, while one was to come from Angola.

Energy officials said that out of the six deliveries planned for April, four cargoes have already been confirmed cancelled following the invocation of force majeure by the suppliers.

Talking to TBS yesterday, Energy Secretary Md Saiful Islam said the government is now stepping up efforts to import LNG from the spot market to maintain supply. "Bangladesh is also considering purchasing LNG through G2G arrangements under direct procurement."

Short-term supply also under threat

According to Petrobangla's plan for April, Bangladesh intended to import two cargoes under short-term contracts – one from OQ Trading and another from Saudi Aramco.

Officials said one of the cargoes originates from Qatar and normally transits through the Strait of Hormuz, while the origin and route of the other cargo have yet to be confirmed. As OQ Trading has invoked force majeure, supply from the company has become uncertain.

Besides, Bangladesh had planned to procure three cargoes from the spot market in April.

Volatile spot market now only hope

With the Strait of Hormuz effectively closed and production disruptions reported at facilities operated by QatarEnergy, LNG supplies under long-term contracts have become uncertain.

To mitigate the disruption, the energy secretary said the government has already invited tenders to purchase LNG cargoes from the spot market for April delivery.

"We floated a tender on 8 March for four cargoes from the spot market. Bidders have been given two days until Tuesday to respond," said Secretary Saiful. "Apart from the spot market, we are also opening a window to purchase LNG on a G2G basis."

Officials from the Energy Division and Petrobangla warned that LNG availability in the spot market is tightening as major buyers such as China, Japan, South Korea, and India scramble for additional cargoes, pushing prices higher.

They said the situation could leave price-sensitive importers like Bangladesh, already under fiscal strain, particularly vulnerable to the ongoing volatility.

Earlier, Petrobangla floated a tender to buy two LNG cargoes for the March delivery window from the spot market, but the first attempt drew no bids.

In the second attempt, the agency secured one cargo at over $28 per MMBtu and another at around $24 per MMBtu, nearly 2.5 times higher than prices below $10 per MMBtu on 1 March.

According to the Asian spot LNG benchmark Platts JKM, prices stood at $10.73 per MMBtu on 27 February but surged to around $15.7 per MMBtu in the latest trading sessions.

Meanwhile, Energy Minister Iqbal Hassan Mahmood Tuku yesterday said fuel reserves in Bangladesh have increased with the arrival of two fuel-laden ships, reports UNB.

"Once these two ships deliver fuel, our reserves will increase further," he said at a discussion programme. The minister said rising reserves do not mean fuel can be used in an uncontrolled manner. "We will continue rationing for as long as the war continues."