LNG Spot Purchase: Another cargo on way at lesser price

Bangladesh has ramped up its activity in the international spot market for liquefied natural gas after the recess of seven months, purchasing yet another cargo in a space of two weeks as the government looks to ensure adequate supply ahead of Ramadan and the summer months.

The country depends on imported natural gas for about three-quarters of its power generation, but was forced to ration gas supplies last year as global prices were driven up by Russia's war in Ukraine.

Since the start of the year, LNG prices plunged more than 70 percent from August's record $70 MMBtu on slower demand and high inventory levels in Europe and North Asia.

This along with the forthcoming summer and irrigation season means the government is active in the spot LNG market once again, issuing tenders regularly.

Japanese JERA offered to supply a cargo to state-owned Rupantarita Prakritik Gas (RPGCL) at about $16.5 per Million British Thermal Units (MMBtu) in a tender that closed on Sunday, according to officials of Petrobangla, which is in charge of LNG imports.

The offer from JERA, a major LNG reseller, is the lowest received.

The LNG cargo of 33,600 MMBtu would be delivered between March 10 and 11.

JERA's tender would be placed for approval at the next meeting of the cabinet committee on purchase.

Two weeks earlier, RPGCL had purchased one LNG cargo from French TotalEnergies for delivery in late February.

TotalEnergies offered $19.74 MMBtu, the lowest among four participants who competed in the tender that closed on January 29.

RPGCL has another tender open at present.

If prices of the super-chilled fuel stay below $20 MMBtu, Bangladesh would be purchasing 10-12 cargo between February and June, Taufiq-e-Elahi Chowdhury, energy adviser to the prime minister, told Reuters on February 6.

When Bangladesh paused spot LNG purchase in June last year, the country paid $24.25 per MMBtu for a cargo.

Asian spot LNG prices slipped to $19.50 per MMBtu in the week to February 3, the first time they have fallen below $20 since September 2021, as inventories remain high with peak winter demand due to end soon.

"This is a high demand season for us. Ramadan is coming, this is also irrigation season," Chowdhury told Reuters on the sidelines of the India Energy Week, held in Bengaluru from February 6 and 8.

European sanctions on Russia that pushed LNG prices up are discriminatory in nature for countries like Bangladesh, which are unable to secure LNG supplies due to high prices, he said.

The development means the industries, which have been running on a truncated production schedule for want of gas, can brace themselves for uninterrupted supply once again.

To enable the spot purchases, the government last month hiked the retail price of gas by 14.5 percent to 178.9 percent for industries, power plants and commercial establishments, who together account for 78 percent of gas use in Bangladesh.

"So, supplying uninterrupted gas to them is our first priority now," the Petrobangla official said.

Other than spot purchases, the country also imports LNG for about $11 MMBtu through a 10-year import deal with Oman and a 15-year import deal with Qatar, according to Petrobangla officials.

At present, the total gas supply to the national grid is 2,656 million cubic feet per day (mmcfd), which includes the 401 mmcfd supplied by Qatar and Oman, shows the daily supply report of Petrobangla.

Once the cargo from the spot market arrives, the supply would increase by another 100 mmcfd, according to Petrobangla officials.