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Bangladesh - 4 weeks ago

LNG import deals signed without payment plan

Zarif Mahmud : The government is moving ahead with plans to build a 295 km long pipeline (Maheshkhali-Matarbari-Bakhrabad) to increase the supply of LNG to the national grid. This project is now in the Planning Commission. It has been estimated to cost about 1.4 billion dollars. The government is still not sure about the source of this money. If work starts this year, the construction of the pipeline will take at least 2029. Petrobangla has already signed three long-term LNG supply contracts, although there is no certainty about the pipeline or funding. Concerned parties fear that if there is no coordination between LNG import and pipeline work, Petrobangla may have to face a huge financial loss.
An additional 5.5 million tonnes of LNG is slated to arrive in the country by 2026 under Petrobangla’s new and pending contracts. To bring this amount of LNG, the company will have to count billions of dollars a year.
However, these deals are being made at a time when the company is unable to finance LNG imports under existing contracts. Sometimes the company has to approach the Gas Development Fund (GDF) and sometimes foreign loans to get import money. Energy experts also see the provision of sufficient funds for LNG import and the planned construction of necessary infrastructure as a major challenge for Petrobangla.
However, the company claims that under the new contracts, if LNG imports start in the country, it can be supplied through existing pipelines. Petrobangla Director (Operation and Mines) Engineer Md. Kamruzzaman claimed, ‘The capacity of the existing LNG supply pipeline is up to 1,700 million cubic feet. Currently, 750-800 million cubic feet are being supplied through two floating terminals (FSRUs). Petrobangla will supply the new LNG import contract to the pipeline. A pipeline construction project for LNG land base terminal has been initiated. Its feasibility study has been completed. Once the construction of this pipeline is completed, it will be possible to supply the contracted LNG in full.
According to sources in the Energy Department, the government approved the third terminal construction project with a daily supply capacity of 600 million cubic feet in June last year to increase LNG import activities. Summit Group, a local company in the energy sector, is going to build this terminal at Maheshkhali in Cox’s Bazar. Its construction activities are still awaiting final approval.
When asked about the matter, Faisal Khan, director of Summit Group told, “Currently, we are waiting for the signing of the TUA (Terminal Use Agreement) for the construction of the terminal.”
Besides, US company Accelerate Energy is planning to build another floating terminal at Payra in Patuakhali. The company has not yet signed an agreement with Petrobangla for the construction of this terminal with a daily supply capacity of 500 million cubic feet. However, Petrobangla has already signed two contracts under JTUZ and one with the private sector for long-term LNG supply. Another new contract for private sector LNG import is awaited. Under the agreement, LNG imports could begin by 2026. According to import projections, the LNG supply to the national grid is 2,000 million cubic feet per day.
The country does not have any pipeline of large capacity to supply LNG on a large scale. The new pipeline that is planned to be built around the import of LNG will also take at least 2029. The project is still awaiting approval. Despite the approval, the transmission company Gas Transmission Company Limited (GTCL) has not yet confirmed how its financing will come.
In this regard, a senior official of GTCL told, “Initiatives have been taken to undertake a large project in LNG supply. The Preliminary Project Proposal (PDPP) has already been sent to the Planning Commission for in-principle approval. After approval, loan proposals will be sent to various development partners.
According to GTCL sources, a project proposal has been prepared for the construction of the 295 km long Maheshkhali/Matarbari-Bakhrabad pipeline. Originally, it has been proposed to build this pipeline in coordination with the construction of land-based LNG terminal in Maheshkhali. Even in the construction of this terminal with a daily supply capacity of 1 thousand million cubic feet, only the necessary land related complications have been solved so far.
Two officials of Petrobangla and RPGCL told on condition of anonymity, “A maximum of 150 million cubic feet of gas can be supplied to the national grid daily through the existing pipelines of the country.” If the import of gas increases, it is not possible to supply it properly with the existing infrastructure.
The government has already signed three long-term LNG import contracts to ease the gas supply crisis. Among them, according to the agreement with Oman’s OQ Trading Limited (OQT) in June last year, the country will import from 10.25 million tons to a maximum of 1.5 million tons of LNG annually. Under this 10-year agreement, the import of cargo from Oman will begin in 2026.
Petrobangla signed another agreement with Qatar Energy Trading LLC in June last year. Under this 15-year contract, Petrobangla will buy one and a half million tons of LNG per year.
On November 8 last year, the company signed another contract with US private sector company Accelerate Energy. According to the contract, the US company is supposed to supply one million tonnes of LNG annually. The supply will start in January 2026.
Apart from this, under a 15-year contract with the domestic power and energy sector company Summit Group, another one and a half million tons of LNG is expected to be supplied annually. Delivery under this will start in October 2026. In the meantime, the preliminary agreement regarding this has been signed, it was recently confirmed to the news agency Reuters on behalf of the summit.
Currently, Petrobangla is bringing LNG from Qatar and Oman under two long-term contracts. Under the agreements, the two countries have an opportunity to import four million tonnes of LNG annually. If the new four contracts are signed, another five and a half million tons will come. However, when the existing agreement with Oman expires in 2026, eight and a half million tons of LNG will be imported annually.
At present there are two floating terminals in the country for regasification of imported LNG. The two terminals owned by Summit and Accelerate are expected to supply 1,000 million cubic feet of gas per day. However, this capacity is now 1,100 million cubic feet (the daily capacity of Accelerate’s terminal has been increased by 100 million cubic feet through renovation).
According to the design of the terminal, the supply capacity of the two FSRUs is 1,200 million cubic feet per day. However, gas could never be supplied at such capacity due to low gas pressure.
Energy sector stakeholders feel that there are enough challenges in implementing the government’s new plans around LNG import. They say that the way to provide enough money to import the product is not yet certain. Again, due to the signing of the agreement without infrastructure development, there is a strong fear that it will cause huge financial losses in the coming days.
Energy expert and BUET Professor M. Tamim told, “With the LNG import contract, the supply capacity is also important. Especially since there is talk of LNG import in the country, whether the terminals can be prepared at that time is also a matter to be seen. The power and energy sector has always seen a lack of coordination with project work. That is why capacity has to be laid down, as seen in the case of electricity. If this is the case, a large sum of money has to be calculated under the contract. A huge amount of financial loss has to be faced in this.
Although various infrastructures of power and energy sector have been built in the country, many projects in this sector are not getting economic success due to lack of coordination. Especially in Meghnaghat, three big power plants have been built, but due to lack of gas pipeline, these plants have been sitting for almost a year. Besides, gas could not be supplied to Khulna in the southern part of the country despite the construction of a long gas transmission line. Large scale gas supply is not possible in Rangpur, Bogra and Syedpur.
Incidentally, the import of LNG into the country started in April 2018. This import activity is being completed through Petrobangla’s subsidiary Transformed Natural Gas Company Limited (RPGCL). And the data of the wing hydrocarbon unit of the energy department showed that from August 2018 to last June, a little more than 1 thousand 2 BCF of LNG was imported into the country. About 10 billion dollars have been spent on importing LNG. The financial and liability pressure of Petrobangla has increased while spending this huge amount of money. The once-profitable company is on the brink of bankruptcy. The company has to take loans from various lenders and gas development funds due to foreign exchange and financial crisis. Even the company has accumulated arrears to the LNG supply companies.

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