LNG cargo uncertainty persists as gas supply falls again

Four liquefied natural gas (LNG) cargoes were ordered through direct procurement, without a tender, to ensure swift supplies. All four were due to arrive in August, but none had reached Bangladesh by Monday.

There is still no certainty over when they will arrive, raising fresh concerns over gas supplies. There are also few signs that the crisis will ease anytime soon.

Against this backdrop, the authorities have moved to procure five more LNG cargoes through an emergency tender. Bids were received for only two of them, while no company submitted offers for the remaining three.

The Bangladesh Oil, Gas and Mineral Resources Corporation (Petrobangla), under the Ministry of Power, Energy and Mineral Resources, oversees LNG imports. Its subsidiary, the Rupantarita Prakritik Gas Company Limited (RPGCL), is responsible for importing the fuel. Two officials involved in LNG supplies told Prothom Alo that the failure of the directly procured cargoes to arrive had further aggravated the gas crisis.

Sources at Petrobangla and RPGCL said Bangladesh normally imports 10 LNG cargoes a month. Because of technical problems at the terminals, nine cargoes were scheduled for August: three through tenders, one under a long-term contract, one under a short-term agreement and four through direct procurement.

Of the three tendered cargoes, two have already supplied gas, while the third is scheduled to arrive on 20 August. Bangladesh has also received one cargo from Qatar under a long-term contract. A vessel carrying a cargo procured under a short-term agreement with Saudi Aramco had reached the Bay of Bengal, but the terminal declined to receive the LNG because of the risks involved in transferring it.

Two of the four directly procured cargoes were to be supplied by Hong Kong-based Zhenyu Shipping. The company provided details of one vessel last Sunday.

Officials said the vessel is on the UK sanctions list. The government decided not to receive it over concerns that doing so could create complications in Bangladesh’s subsequent transactions with other vessels and international companies.

The suppliers of the other three cargoes are yet to confirm delivery dates. They may seek permission to defer the deliveries until September.

State Minister for Power, Energy and Mineral Resources Aninda Islam Amit told Prothom Alo on Monday night that the suppliers awarded the direct-procurement contracts had been unable to complete the necessary documentation and formalities.

He further said as the vessels had not arrived, the authorities had already invited fresh tenders to bring in new LNG cargoes. The supplies could be maintained and there would be no problem.

In early August, the authorities decided to procure two LNG cargoes each from UK-based Blackcube International, Oman-based Maxwell International SPC and Hong Kong-based Zhenyu Shipping through direct procurement.

One of Blackcube's cargoes was scheduled for August and the other for September; one of Maxwell's for August and the other for October; while both Zhenyu cargoes were due in August.

According to RPGCL sources, the international LNG price has remained above US$20 per unit, or million British thermal units (MMBtu), for the past month. It stood at around $22 on Monday. Blackcube, however, quoted $15.50 per MMBtu, while Zhenyu offered $14.95.

Officials involved in the LNG sector said that, given the exceptionally low prices compared with the market, the companies, the source of the cargoes and the proposed vessels should have been scrutinised more rigorously. If suppliers are now allowed to defer deliveries until September, they could benefit from changes in market prices. Under the contracts, however, failure to deliver on schedule should result in deductions from their security deposits.

During previous fuel-oil shortages, several companies awarded direct procurement contracts also failed to supply oil. Despite this, new companies were subsequently given direct contracts to supply LNG without tenders, rather than relying on regular suppliers.

With the directly procured LNG cargoes now uncertain, an emergency tender was floated on Monday. Offers were sought for five cargoes—three for delivery in August and two for the first week of September.

Bids were received for cargoes scheduled for delivery on 23–24 August and 4–5 September. British Petroleum submitted the lowest bid for both, at around $22 per MMBtu. No company submitted bids for the remaining three cargoes. Fresh tenders may be invited for those shipments.

Bangladesh generally imports LNG through two channels: long-term contracts and the spot market. It has long-term agreements with Qatar and Oman, but regular supplies from the two countries have been disrupted since the outbreak of war in the Middle East. They have occasionally sent one or two cargoes.

Bangladesh also has a short-term government-to-government agreement with Saudi Aramco. In addition, LNG is purchased from the spot market through tenders among companies listed by Petrobangla. The current government has updated the list and finalised 29 companies.

Bangladesh has two floating storage and regasification units (FSRUs) at Maheshkhali in Cox's Bazar for supplying imported LNG. US company Excelerate Energy's terminal has a daily capacity of 600 million cubic feet, while the terminal operated by local company Summit has a capacity of 500 million cubic feet.

Excelerate Energy's terminal was shut down following a fire on 21 July. After 25 days of severe shortages, supplies increased last Saturday when Summit's terminal resumed full operations and Excelerate's terminal restarted partially.

However, supplies from Excelerate's terminal have been falling for the past two days because there are no new cargoes. If another vessel does not arrive, supplies from the terminal could cease altogether.

Total gas supplies in Bangladesh fell to 1.64 billion cubic feet per day on Friday afternoon. They rose to 2.42 billion cubic feet on Saturday night, before declining to 2.4 billion cubic feet on Sunday and 2.28 billion cubic feet on Monday. LNG accounted for 660 million cubic feet of Monday's supply.

The improvement in gas pressure after Saturday enabled several factories in Narayanganj, Gazipur, Savar and Habiganj to resume production on Sunday. The situation, however, remains uneven across different areas.

Kamrul Hasan, executive director of leading industrial conglomerate ACI Limited, told Prothom Alo that gas supplies had improved and production was now broadly back to normal.

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said gas pressure in Narayanganj had reached a satisfactory level. Supplies had also improved in Narsingdi, he said, although shortages persisted in some parts of Gazipur.

The situation, however, has not improved at Little Star Spinning Mills in Savar. Khorshed Alam, chairman of Little Star Group, said, “Under normal circumstances, gas pressure at our factory is 5 psi during the day and 10 psi at night. But yesterday we did not receive the pressure we needed.”

Energy expert M Tamim told Prothom Alo that the very purpose of direct procurement was to ensure supplies quickly.

“There is no point in direct procurement if suppliers cannot deliver during a crisis,” he said. “Those who have failed should not be given extensions. Their security deposits should be forfeited and they should be blacklisted. LNG must now be secured quickly through tenders. Even if the price is higher, ensuring gas supplies should be the priority.”