Bangladesh puts US LNG deal on hold over steep pricing

Infograph: TBS

Amid growing uncertainty over supplies from its existing long-term LNG suppliers following the US-Iran conflict, Bangladesh moved to secure a new long-term LNG supply deal with US-based commodity trader Gunvor USA LLC.

However, the deal is now on hold due to the company's high price quotation.

The Cabinet Committee on Economic Affairs (CCEA) on 28 July approved a proposal for a 13-year LNG supply agreement with Gunvor under government-to-government (G2G) arrangement and a dual-benchmark pricing mechanism, initially linked to the Asian spot LNG benchmark before shifting to the significantly cheaper US Henry Hub index.

However, the proposal did not receive final approval from the Cabinet Committee on Government Purchase (CCGP) at its meeting on 7 August, with officials citing Gunvor's high price quotation.

As the proposal was not approved by the CCGP, the signing of the supply purchase agreement (SPA) with Gunvor remains on hold.

What Gunvor proposed

Under the proposed deal, Gunvor would supply five LNG cargoes in 2026, six in 2027 and three in 2028. In a hasty negotiation following the CCEA approval, Petrobangla had settled the price for LNG deliveries during 2026-28 at JKM plus $0.875 per MMBtu. 

Energy officials said Gunvor had initially proposed a price of JKM plus $0.10 per MMBtu. The proposal eventually forwarded to the CCGP carried a higher price than Gunvor's initial quotation, prompting the government to seek a lower index-linked price.

The proposal forwarded to the CCGP shows that from 2029 to 2038, Gunvor would supply 10 LNG cargoes each year under a Henry Hub-linked pricing formula of 121% of Henry Hub plus $5.20 per MMBtu.

According to officials, Gunvor's initial proposal was to supply LNG during 2026-28 at JKM plus $0.10 per MMBtu, while deliveries from 2029 to 2038 were proposed at 122% of Henry Hub plus $5.35 per MMBtu.

Following negotiations with Petrobangla after the initial approval from the CCEA, Gunvor lowered the Henry Hub percentage and fixed premium from 122% plus $5.35 to 121% plus $5.20 per MMBtu.

However, it raised the JKM-linked price for the 2026-28 period from the initial proposal of JKM plus $0.10 to JKM plus $0.875 per MMBtu.

Why Gunvor raised price

Petrobangla and Energy Division officials said Gunvor increased the JKM-linked price because of the tight LNG supply outlook for 2026-28, while agreeing to a lower Henry Hub-linked price for the period from 2029, when global LNG prices are expected to ease as a large number of new LNG infrastructure projects come into operation.

Petrobangla officials said the global energy market has become highly volatile following the Iran war and disruption around the Strait of Hormuz, and they expect the LNG market to remain bullish at least until 2028.

"Gunvor is taking the opportunity as very few companies in the world want to enter into long-term LNG deals now," a Petrobangla official told TBS, seeking anonymity.

Energy Division officials said they are trying to bring down both the index-linked premium and the Henry Hub multiplier, but Gunvor appears unwilling to make significant concessions in the current tight market.

Henry Hub-linked LNG is generally cheaper than LNG priced against JKM because the former reflects wholesale natural gas prices in the United States, where abundant shale gas production has kept domestic prices relatively low.

However, officials said the 121% Henry Hub multiplier is somewhat higher than the industry norm.

Long-term US LNG contracts are typically linked to around 115% of Henry Hub, along with a fixed liquefaction charge of roughly $5-$6 per MMBtu.

Price comparison with other suppliers

Bangladesh's first long-term LNG supplier, QatarEnergy LNG, currently supplies 1.8-2.5 million tonnes per annum (mtpa) at $10.114 per MMBtu.

Its second long-term supplier, OQ Trading Ltd, formerly Oman Trading International Ltd, began supplying LNG to Bangladesh in 2019. It supplies 1-1.5 mtpa under a 10-year agreement at $9.444 per MMBtu, which expires in 2028.

Meanwhile, India's state-owned Gas Authority of India Limited signed a five-year LNG supply agreement with QatarEnergy Trading in 2024, with pricing set at 115% of Henry Hub plus $5.60 per MMBtu.

Gujarat State Petroleum Corporation also signed a 10-year LNG supply agreement with TotalEnergies, with deliveries due to begin in 2026. The price was set at 119% of Henry Hub plus $4.40 per MMBtu.

An Energy Division official, seeking anonymity, said the higher multiplier proposed under the Gunvor deal reflects tight global LNG supplies following damage to LNG processing infrastructure in the Middle East, which has strengthened sellers' bargaining power.

Energy uncertainty

The proposed Gunvor deal has gained urgency as Bangladesh faces growing uncertainty over supplies from its existing long-term LNG suppliers.

According to officials, QatarEnergy, Bangladesh's largest LNG supplier, has recently informed the government that it may deliver only around half of its contracted cargoes in 2026.

Under Bangladesh's Annual Delivery Plan for 2026, the country plans to import 115 LNG cargoes. QatarEnergy was scheduled to supply 40, accounting for 34.8% of planned imports. 

Oman's OQT was due to deliver 16 cargoes, QatarEnergy Trading 12, OQ Trading LLC four and Excelerate Gas Marketing 14.

Another 12 cargoes were expected under short-term contracts, while the remaining 17 were to be purchased from the spot market.

Bangladesh is also preparing for the expiry of its first long-term LNG supply agreement with OQT in 2028, creating an urgent need to secure replacement volumes well in advance.

Supply concerns intensified after the Iran-US conflict earlier this year disrupted LNG exports from the Gulf. Following the outbreak of the conflict on 28 February and subsequent disruptions around the Strait of Hormuz, QatarEnergy declared force majeure on 2 March. OQT followed on 5 March, while US-based Excelerate Energy invoked force majeure on 6 March.

Although the Strait of Hormuz has since reopened, Energy Division officials believe global LNG supplies could remain tight for another three to five years because of damage to regional LNG infrastructure and the slow recovery of export capacity.

The disruptions forced Bangladesh to rely more heavily on spot LNG purchases as prices surged to more than twice their pre-war levels, significantly increasing import costs.

Officials said securing substantial price concessions could be difficult under current market conditions, particularly following the attack on QatarEnergy's Ras Laffan industrial complex and continued concerns over global LNG supply security.

Alongside the proposed Gunvor agreement, Bangladesh is exploring short-term LNG procurement from non-traditional suppliers to diversify its import sources. Countries under consideration include Australia, Brunei, Indonesia, Malaysia, Azerbaijan, Kazakhstan, Angola, Nigeria and Algeria.

Energy officials said Indonesia, Nigeria and Algeria currently appear among the most promising options for securing additional LNG supplies in the near term.