Summit proposes long-term LNG supply to Petrobangla

At a time when Bangladesh's bid to boost long-term LNG sourcing amid an energy dearth has suffered a setback as Qatar, one of the two existing suppliers, refused to increase supplies, local giant Summit Group has stepped in and expressed willingness to supply LNG to the state-owned Petrobangla for 15 years.

Summit Oil and Shipping Co Ltd has proposed splitting the period into two parts and supplying the fuel at multiple rates, which will fluctuate with changes in the Brent crude oil price rate, said a docket The Business Standard obtained. 

During the first phase, Summit has proposed 20.51% to 35.14% of Brent crude oil price plus a $0.4 charge per MMBTU (metric million British thermal unit) LNG from January 2023 to December 2025, it read. 

From January 2026 to December 2037, Summit has proposed 13.13% of the Brent crude oil price plus a $0.4 charge.

When asked,  Summit Group Chairman Muhammed Aziz Khan told The Business Standard that the proposal is now being considered by the government.

However, officials at Petrobangla, seeking anonymity, said the rate Summit has proposed is higher than the current spot market rate, which is already so high that the government has suspended importing.

Acknowledging that Petrobangla has received Summit's proposal, Nazmul Ahsan, chairman of Petrobangla, told TBS, "We are working to project what the power sector's gas demand will be in future and how much LNG we will need to meet that demand alongside our local production."

The government has been importing LNG since August 2018 to tackle the country's persistent gas crisis that has been affecting power generation and industrial output.

Bangladesh is importing LNG from two long-term suppliers – Qatar's RasGas and Oman's Oman Trading International (OTI) – to re-gasify it in the lone operational facility in Moheshkhali, which has the capacity of processing 3.75 million tonnes per annum.

Under the contract with RasGas, Petrobangla is obliged to import 2.5 million tonnes of LNG per annum.

However, under the contract with Oman Trading International, Petrobangla has the option to increase LNG imports to 1.5 million tonnes per year, or lower the amount to 900,000 tonnes annually.

In the first week of March this year, State Minister for Power, Energy, and Mineral Resources Nasrul Hamid flew to Qatar to request a supply of an additional one million tonnes of LNG annually after the government's plan to import low-priced LNG from the spot market failed to yield results.

He also proposed a side letter agreement along with the existing long-term agreement. But the supplier responded negatively.

Normally, Bangladesh used to import per MMBtu LNG at $6 to $7 from the spot market, which has now soared to $40 per MMBtu. 

Due to the price volatility, Bangladesh has suspended importing LNG from the spot market, aiming to ease pressure on its foreign exchange reserves.

The country used to get around 3% of its total gas from spot LNG whereas the total daily consumption is now around 2750mmcf to 2800mmcf.

Because of a lower LNG injection to the national gas grid, some sectors, including power, fertiliser and apparel industries, are struggling to continue full-scale production amid a low pressure of gas.