Bangladesh has finalised a government-to-government negotiation with Qatar’s RasGas to import around 2.5 million tonnes of lean LNG annually for over 15 years, starting from early 2018, said officials.

An initial agreement with RasGas is expected to be inked early July when a delegation from the company will be visiting Dhaka, state-run Petrobangla’s chairman Abul Mansur Md Faizullah told the FE.

The final sales and purchase agreement of the term deal with Qatar’s state-owned firm is expected to be inked in August after approval from Bangladesh’s cabinet committee on government purchase, said Mr Faizullah on his return from Qatar.

This would be the country’s first-ever deal to bring in LNG, a new source of energy for the country, to meet the mounting demand for natural gas against the backdrop of depleting reserve of the same.

A high-powered Bangladeshi delegation visited Qatar last week to finalise negotiation over purchase of LNG under term deal.

“We have been exercising caution in inking our first-ever deal to import LNG as it is very new to us,” manager of the LNG Cell Kazi Md Anwarul Azim, who took part in the negotiation with RasGas last week, said.

That’s why the quantity of LNG to be imported from RasGas is only one-third of our total LNG handling capacity of around 7.5 million tonnes per year to be readied in 2018 through two floating, storage and re-gasification units (FSRU) now being developed by two separate entities.

“We want everything to be done smoothly in terms of importing LNG at least for initial period during 2018-19 as LNG will be imported through a new terminal in new location,” Mr Azim added.

“The quantity could be increased later as the deal would be flexible. We can ink more deals to bring enhanced quantity of natural gas from RasGas like the agreements inked by Pakistan and India,” he added.

Bangladesh will be importing lean LNG avoiding rich specification considering the specification of natural gas being produced from the country’s local gas fields, he said.

“We shall import lean LNG, which would be blended with local gas before supplying to user-ends as no dedicated pipeline is needed, at least for now, to carry re-gasified imported LNG,” Mr Azim said.

Petrobangla’s contract with RasGas is expected to be priced against international crude oil benchmarks, but the company is open to pricing future deliveries with a link to alternative indexes such as the Platts JKM (Japan, Korea Marker), a daily physical spot market price assessment for LNG delivered to Japan, South Korea, China and Taiwan.

Whichever the price indexation is, Petrobangla is counting on government subsidies to be able to pay for the imported LNG, said officials.

Petrobangla has already requested for a subsidy of $1.4 billion, around 77.77 per cent of the total estimated cost, from the government to foot the LNG import bill for 2018.

Subsidies will be aimed at bridging the wide gap between international LNG prices and domestic gas prices.

Bangladesh is eyeing to start LNG imports early 2018 and is now making concerted efforts to move forward with LNG import infrastructure.

The country’s first LNG import terminal, a 3.75 million metric tonne-a-year floating storage and re-gasification unit (FSRU) being developed by US-based Excelerate Energy, is expected to be commissioned in April 2018.

It will be located at Moheshkhali Island in the Bay of Bengal, and ownership of the vessels will be transferred to Petrobangla after 15 years of operations.

Petrobangla is also planning to set up two onshore LNG terminals, each with a capacity of 7.5 million tonnes per year by 2025.

It also signed a memorandum of understanding (MOU) with India ‘s Petronet in December to build one of them on Kutubdia Island, and issued an international tender in April seeking bids for the construction of the second one.

Bangladesh started facing a natural gas deficit in 2009 when rapid industrialisation forced Petrobangla to ration supplies to industries, power plants, CNG filling stations and fertiliser factories, and suspended new piped gas connections to commercial and household consumers.

Source: The Financial Express