Two Indian energy companies are eyeing export of re-gasified liquefied natural gas (RLNG) to Bangladesh within next few years after laying two separate pipelines totalling 265 kilometres.
After importing the gas from international suppliers, Indian state-run GAIL and private company H-Energy will supply RLNG to separate Bangladeshi entities.
India's H-Energy is set to sign a deal with Bangladesh's state-owned oil, gas and mineral corporation Petrobangla, while GAIL is finalising a re-gasified LNG sales agreement with private Bangladeshi firm Dipon Gas Company.
Market analysts attribute this move by the Indian companies to sluggish domestic LNG consumption in India over the past several years.
Neighbouring India imported around 23.3 million tonnes (mt) of LNG during the fiscal year of 2023-2024 (April-March), which is a 7.17 per cent decrease compared to the country's peak LNG import volume of 25.1 mt in FY 2020-21, according to India's Petroleum Planning and Analysis Cell (PPAC).
India's GAIL and H-Energy will primarily export a combined total of around 1.6-2.0 million tonnes per annum (MTPA) of re-gasified LNG, which could be expanded through mutual negotiations.
H-Energy, a subsidiary of the Hiranandani Group, intends to supply half of the total, or 0.8-1.0 MTPA, while GAIL will handle the remaining half of 0.8-1.0 MTPA.
The pipelines, prices
H-Energy plans to supply the gas from Digha in West Bengal to Khulna in Bangladesh. This will require constructing a 155 km cross-border pipeline stretching from Kanai Chatta in East Medinipur district to Shrirampur in Khulna.
The pipeline will be divided, with 90 km laid within India and 65 km within Bangladesh.
H-Energy will cover the construction costs, while Petrobangla will be responsible for the wheeling charges.
H-Energy's selling price will be linked to Brent Crude, ensuring flexibility to fluctuate with international market movements.
GAIL will supply the gas to Jashore district in southwestern Bangladesh. The gas will be delivered through a 110 km cross-border pipeline constructed from the Benapole border.
The pipeline will be divided, with 65 km laid within India and 45 km within Bangladesh.
GAIL will build the Indian segment of the pipeline, while Bangladesh's Dipon Gas will be responsible for constructing the Bangladeshi stretch.
Dipon Gas and GAIL have not yet finalised the benchmark for setting RLNG prices.
"We are now at the final stage of inking RLNG import deals with India's H-Energy," Petrobangla Chairman Zanendra Nath Sarker told The Financial Express recently.
"All relevant issues, including payment methods, pipeline management and pricing, have already been discussed," he added.
According to the Petrobangla chairman, H-Energy will be able to deliver re-gasified LNG to Bangladesh within two years of finalising the deals. This timeframe encompasses pipeline construction and the signing of purchase and sales agreements.
"We expect to receive RLNG from H-Energy by 2027," said a senior Petrobangla official involved in the negotiations.
Indian LNG to feed power plants, southern industries
He said re-gasified LNG from H-Energy will mainly be used for a 22-year period to feed the 800MW Rupsha combined-cycle power plant, owned by the state-run North West Power Generation Company.
"The remaining RLNG could be used by industries and other gas-fired power plants in the southern region," he added.
The Asian Development Bank (ADB) is providing a loan of around $600 million, while the Islamic Development Bank (IsDB) is contributing around $200 million to the Rupsha power plant project, which features two 400MW gas-fired units. The government intends to cover the remaining $150 million.
An insider from GAIL said RLNG supply to Jashore might be expedited if major land acquisition hurdles for pipeline construction can be avoided.
Dipon Gas will be utilising funds from Saudi Arabia to implement the pipeline project and import RLNG. Initially, the company will sell RLNG to Petrobangla and other interested private consumers, including industries and power plants.
It has future plans to set up a fertiliser factory and a power plant that will utilise GAIL's RLNG as their primary energy source.
To this end, state-owned Petrobangla signed a memorandum of understanding with H-Energy a few years ago.
In 2018, Petrobangla also signed an agreement with the Indian Oil Corporation (IOCL) for a similar purpose. However, this agreement has not progressed since then.
Four new long-term LNG deals in past year
Apart from natural gas production at domestic gas fields, the country has been importing LNG since April 2018 and re-gasifying it in two privately owned floating storage and re-gasification units (FSRU) at Moheshkhali island in the Bay of Bengal.
Combined, these FSRUs have a regasification capacity of around 1,100 million cubic feet per day (mmcfd). The country has also been a participant in the international LNG spot market since September 2020.
Over the past year, Bangladesh has signed four new long-term LNG sales and purchase agreements (SPAs).
These agreements, which take effect from 2026 onwards, will see the country import an estimated 5.0-6.0 million tonnes per annum (MTPA) of LNG.
Qatargas and OQ Trading International (formerly Oman Trading International) are currently supplying LNG to Bangladesh under long-term contracts.
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