Tenders fail to secure enough LNG amid gas crisis

The government is struggling to secure liquefied natural gas (LNG) as none of the cargoes ordered through the direct procurement method (DPM) have arrived. With LNG unavailable as needed, the government has had to buy cargoes at higher prices in emergency tenders, increasing the cost of one cargo by at least Tk 1.65 billion.

Petrobangla oversees LNG imports with approval from the Energy Division, while its subsidiary Rupantarita Prakritik Gas Company Ltd (RPGCL) is responsible for importing the fuel.

Three officials involved in LNG supply told Prothom Alo that LNG prices are rising with every tender. They said LNG could have been purchased at lower prices had tenders been invited earlier instead of using the DPM.

According to Petrobangla and RPGCL sources, tenders were invited on 17 August to purchase three LNG cargoes for August and two for the first week of September. British Petroleum (BP) emerged as the lowest bidder for two cargoes, quoting less than USD 22 per unit.

A second tender was called on 18 August for three more cargoes, with Saudi Aramco emerging as the lowest bidder for the 1–2 September cargo at below USD 24.

In a third tender on 19 August, BP offered USD 25.31 for the 26–27 August cargo. The government decided not to buy the 29–30 August cargo because bids were even higher.

The government had earlier approved direct purchases of several cargoes in an effort to secure LNG at lower prices. Four of those cargoes were scheduled to arrive in August, but none has arrived. This has created a shortfall in gas supply, forcing the government to buy LNG at higher prices.

Officials involved in LNG imports said every USD 1 increase in the price of LNG per unit costs the government an additional Tk 413.3 million. As much as USD 4 more per unit has had to be paid for an emergency cargo, meaning the additional cost for one cargo is at least Tk 1.65 billion.

Petrobangla Chairman Md Abdul Mannan told Prothom Alo that LNG supply has increased compared with earlier and efforts are being made to maintain supply with the amount available. The government is also trying to bring in LNG under long- and short-term contracts, he said.

Domestic gas production has been declining for nine years, prompting Bangladesh to begin importing LNG in 2018. Two floating LNG terminals operate at Maheshkhali—one owned by US company Excelerate Energy and the other by local company Summit. Excelerate’s terminal was shut down after a fire on 21 July.

Excelerate’s terminal has a daily capacity of 600 million cubic feet, while Summit’s can handle 500 million cubic feet. Together, they could supply up to 1.05 billion cubic feet a day.

Bangladesh imported 11 LNG cargoes in July through long- and short-term contracts and the spot market. In August, nine cargoes were expected, but only four have arrived.

One came from Qatar under a long-term contract, while an LNG cargo from Saudi Aramco under a short-term deal could not be unloaded because it was not suitable for transfer.

None of the four cargoes purchased directly arrived. As a result, the government bought an emergency cargo at a higher price. It reached the Bay of Bengal on 22 August, and Excelerate’s terminal resumed supplying gas to the pipeline that afternoon.

Gas supply has since increased, but it is being kept limited because there is no certainty about when the next LNG cargo will arrive. As a result, the gas crisis may take more time to ease fully.

According to Petrobangla, daily gas demand is around 3.8 billion cubic feet, while the maximum supply has been about 2.7 billion cubic feet. LNG normally accounts for 1.05 billion cubic feet of that supply, with the rest coming from domestic gas fields. LNG supply has averaged only about half of terminal capacity over the past month. On Saturday, supply increased somewhat, reaching 750 million cubic feet on Sunday evening. Total gas supply was 2.38 billion cubic feet.

Bangladesh normally imports LNG through long-term contracts and tenders. The government has long-term contracts with Qatar and Oman, but LNG shipments from the two countries have virtually stopped since the war began in the Middle East, with only occasional cargoes arriving. Bangladesh also has a short-term contract with Saudi Aramco and regularly purchases LNG from the spot market through tenders based on demand.

Officials said the situation in the Middle East remains uncertain, while European countries are building up LNG stocks ahead of winter. With a global shortage of LNG cargoes, securing supplies could remain difficult despite repeated tenders.

Energy expert M Tamim told Prothom Alo that global energy market volatility could ease if the war ends completely. For now, the government needs to prioritise gas supply, he said. It could increase power generation using fuel oil and divert more gas to industries.

“Bangladesh cannot afford to buy LNG at the current high prices,” Tamim said, adding that the government needs to make decisions that are not merely economic but also political.