Cabinet committee approves purchase of LNG worth Tk527cr from spot market

The government has approved two proposals to buy 6.72 million british thermal units (MMBTU) of liquefied natural gas (LNG) from spot market at Tk527.64 crore to meet the gas shortage in domestic market.

Vitol Asia Pte Ltd, Singapore and AOT Trading AG, Switzerland will supply the fuel.

However, Vitol Group has a questionable background as last December its US subsidiary agreed to pay $164 million to resolve probes by the US government that the energy trader paid bribes in Brazil and other countries to boost its oil trading business, according to Reuters and Bloomberg.

The Cabinet Committee on Government Purchase approved the proposals on Wednesday in a meeting presided over by Finance Minister AHM Mustafa Kamal.

During a press briefing after the meeting, AHM Mustafa Kamal said they have done an in-depth study on online but did not find such allegation against Vitol.

"We urge you (journalists) to provide documents to me and my office if you find any allegation against Vitol," he said.

The government has took an initiative to import LNG from spot market and received first cargo from this market in late September last year, as regular fuel supply under two long term contracts was not sufficient to meet the growing demand.

Bangladesh had invited tenders once for November 2020 delivery and twice for December 2020, January 2021 and February 2021 deliveries, but did not get any expected price.

Therefore, the Rupantarita Prakritik Gas Company Limited (RPGCL), a company of Petrobangla, cancelled all the tenders as the price quoted by bidders were found higher than expected due to an unprecedented LNG price hike in the international market. The price hike resulted from an increased demand during the winter.

After four months, however, finally the government found the bidders with expected price rate.

Under one of the proposals, RPGCL will buy 3.3 million MMBTU of LNG at about Tk 278.70 crore. Each MMBTU will cost $8.34.

Same quantity of LNG will be imported under the second proposal at about Tk248.53 crore – $7.44 per MMBTU.

The country has two LNG re-gasification units at Moheskhali of Cox's Bazar with a capacity to provide 1,000 million cubic feet per day (mmcfd).

In February, the supply was only around 400mmcf per day, which was 40% of the overall re-gasification capacity of the country's two floating storage regasification units.

Supply has improved to some extent as 837mmcf was recorded on Wednesday. The country's overall natural gas supply is now around 3191mmcf per day, which 2,880 mmcfd last month.