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Bangladesh opts for less long-term Qatari LNG in favour of spot supply

Bangladesh is close to signing a twice-delayed long-term liquefied natural gas (LNG) supply contract with Qatar but it will take less gas than initially planned and instead turn to spot cargoes amid a supply glut that has lower prices.

Bangladesh’s deal with Qatar, the worlds’ biggest LNG exporter, will be its first and will feed its import terminal starting up in 2018 that is designed to cover the country’s domestic gas shortfall. The country’s turn to the spot market highlights the trend of gas buyers seeking more flexibility in their purchases rather that being locked in to multi-year contracts.

Under the still pending deal, Bangladesh will buy less than the 4 million tonnes per year (tpy) of LNG that it agreed to in a 2011 memorandum of understanding with Qatar’s state-owned RasGas, said Kazi Mohammad Anwarul Azim, manager of state-owned energy company Petrobangla’s LNG Cell, who declined to provide a specific volume as the deal is still under negotiation.

Petrobangla is likely to ink a deal for around 2.5 million tpy of LNG starting from early 2018, a separate Bangladesh official said on condition of anonymity as he is not authorised to discuss commercial matters.

RasGas declined to comment when contacted by Reuters.

The first floating storage and regasification unit that will start up in April 2018 can handle 3.75 million tpy of imports and the country will turn to spot purchases the market up the difference.

“We will go for both long-term and spot deals to import LNG to ensure smooth supplies and competitive prices,” Azim said.

Rupantarita Prakritik Gas Co, part of Petrobangla, last month posted a notice on its website looking to shortlist potential LNG suppliers for spot cargoes starting in 2018.

Asian LNG prices have dropped 73 percent from their peak in 2014 to $5.45 per million British thermal units because of rising production from Australian and the United States.

“It is likely that Bangladesh wanted to look at the spot market, given the coming supply glut, to meet some of its demand requirements,” said FGE analyst Poorna Rajendran. “We expect Asian spot LNG prices to remain weak, significantly below long-term contract prices.”

Bangladesh’s domestic gas output is about 2.7 billion cubic feet per day (bcfd) against demand of 3.3 bcfd, according to Petrobangla. That has left it unable to fuel its power plants and industry.
Source: Reuters (Reporting by Mark Tay in SINGAPORE and Ruma Paul in DHAKA; Editing by Christian Schmollinger)

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