Gas import deals despite dollar crisis

Despite the prevailing dollar crisis in the country, the government has taken initiative for more deals to import liquefied natural gas (LNG). Three deals were signed in June and November last year. Another one is likely to be signed soon.

Under the four deals, from June 2026 the supply of imported LNG is to be 1.7 billon cft of gas per day. The present capacity is 1.1 billion cft. However, the highest amount of gas supplied so far has been less than 900 million cft.

A new terminal will have to be constructed for regasification of the additional gas to be imported in liquefied form. Work on the construction has not begun as yet. New pipelines will also be required for the additional supply of gas. Funding of this project has not been ascertained as yet.

Unable to import additional gas due to the dollar crunch in the country, the government is placing importance of gas extraction within the country. At such a juncture, questions have arisen as to why such long-term import deals are being signed and also where will the dollars for the deals come from. Experts say if imports cannot be made as per the deals, then payments may have to be made for rent of plants in the power sector, capacity charge and so on.

Sources in Bangladesh Oil, Gas and Mineral Resources Corporation (Petrobangla) say that if they are informed before the new year begins how much gas is to be imported, then there is scope to bring 10 per cent less than the minimum amount in the contract. Also, if the decision to cancel a consignment is cancelled two months before the scheduled time, the suppliers sell this elsewhere. In such cases, if it is sold at a price less than the contract, then a fine has to be paid. This condition can be applied in the case of maximum 10 per cent too.

Petrobangla chairman Zanendra Nath Sarker, speaking to Prothom Alo, said the plans to import gas are being drawn up in keeping with the capacity to meet the demand. Several initiatives have been taken up to fulfill the estimated shortfall in capacity by 2026. He said, that the situation will not arise to pay fines for not purchasing LNG according to contract.

Experts, however, say that the same narrative is spun in the power sector too. Now capacity much more than the demand has been created, for which around Tk 260 billion has to be paid a year as rental charges, pitching the entire economy into problems.

The present demand for gas in the country is 3.8 billion cft per day. The supply is between 2.5 billion to 3 billion cft per day. Imports began in 2018 to meet the shortfall in demand. Gas in purchased from abroad in two ways. One is a long-term contract, by which gas comes from Qatar and Oman. The other is from the spot market where the prices fluctuate frequently. Around 70 per cent of the imported gas comes from long-term contracts.

In June last year two new 15-year long-term contracts were signed with Qatar and Oman. In November last year a 15-year contract was signed with the US company Excelerate Energy. A deal is also to be signed with the local business group Summit shortly. This too will be a 15-year deal. In all for deals, gas supply will start from the year 2026.

There are presently two floating offshore terminals at Maheskhali, Cox’s Bazar. One is of Excelerate Energy and the other of Summit.

Energy division sources say, Summit will construct another terminal of 500 million cft capacity for the supply of additional gas. The deal in this regard will be signed soon. This is scheduled to start before June 2026. Summit will also increase the capacity of its existing terminal by 100 million cft. In total, after two and a half years, capacity will be created to supply 1.7 billion cft from three terminals.

Outside of this, the government wants to construct two LNG terminals – one of 500 million cft capacity at Payra in Patuakhali and one of 1 billion cft capacity inland at Matarbari in Maheskhali. Energy division sources say a contract may be signed within a few months with Excelerate Energy for the construction of the terminal at Payra. A feasibility study is being carried out regarding Matarbari.

According to Petrobangla estimates, after June 2026 the daily demand for gas in the country will stand at 4.5 billion cft. The government wants to ensure an uninterrupted supply of gas from then.

Meanwhile, for the first time loans are being provided for the import of LNG. The International Islamic Trade Finance Corporation (ITFC), an affiliate of the Islamic Development Bank (IDB), is providing a USD 500 million loan in the next financial year (2024-25). Speaking to Prothom Alo about the matter, research director of the Centre for Policy Dialogue (CPD) Khandakar Golam Moazzem said the conditions of this loan have not been revealed as yet. But it is heard the interest rate will be 2 per cent with Secured Overnight Financing Rate (SOFR). That means at the present rates it may be 7.4 per cent. This loan will have to be repaid in a short period. This will require adequate foreign exchange reserves.

The Gas Transmission and Distribution Company Limited (GTCL) has two parallel pipelines to bring LNG from Maheskhali. This comes up to Anwara in Chattogram. Of these, a maximum 500 million cft can be transferred through the 30 inch pipeline and 1.2 billion cft through the 42 inch pipeline.

However, after the Anwara station, the pipeline is narrow. A maximum of 1.1 billion cft can be supplied to the national grid from there through two pipelines, 36 inch and 24 inch respectively. That means even though there is a capacity to supply 1.7 billion cft from Maheshkhali, it will not be possible for more than 1.1 billion cft to reach the national grid.

According to Petrobangla, the demand for gas in Chattogram will increase. Initiative has been taken to set up new pipelines to take the remaining gas to other districts.

GTCL sources say they have taken up a plan to construct a third parallel pipeline from Maheshkhali to Bakhrabad in Cumilla. Contractors are being appointed to carry out a feasibility study for this. After that, land will be acquired and funds will be required. While the project may be finalised this year, it will take at least give years for the project to be completed.

Sources in Petrobangla say Excelerate Energy will construct the Payra-Barishal-Khulna-Gopalganj pipeline in keeping with the time of the terminal being set up. And GTCL plans to bring a 52 inch pipeline connecting from Matarbari up till Dhaka within 2031.

Geologist Badrul Imam told Prothom Alo that import dependency should be decreased and stressed place in exploration and extraction of local gas. After all, there is the dollar uncertainty to consider.

The government plans to import additional LNG and supply this to industries as well as power plants. Work on five large LNG-fired power plants is near completion. One of these was supposed to go into production last month but gas supply was not ensured.

It has been learnt from the power division that certificates of consent have been provided for the construction of the three new LNG run power plants. The government plans to construct nine more.

The questions remains as to where will the dollars be arranged from for the gas import. Over the past two financial years a total of around USD 4 billion per year has been spent on gas import and terminal rent. The government is unable to make the payments to the power and energy sectors in time due to the dollar crisis.

According to Bangladesh Bank records, on 7 February the central bank’s reserves stood at USD25.08 billion. However, according to the BPM 6 calculation method of the International Monetary Fund (IMF), the reserves are USD 19.95 billion. In August 2021 this had been over USD 48 billion.

Experts say, alongside fuel import, the pressure of repaying foreign debts will mount in the coming years. At the same time there are apprehensions about any significant increase in export revenue and remittance.

Speaking to Prothom Alo about the overall matter, CPD’s research director Khandakar Golam Moazzem said the shortfall in supply and demand can always be used to justify the import of gas. But it must be seen what initiatives have been taken to increase supply from local sources, how much gas can be availed in this manner and then how much needs to be imported. He said that given the prevailing circumstances, it will be dangerous to become dependent on gas imports.