State-run Rupantarita Prakritik Gas Company Ltd has initiated master sales agreements (MSAs) with 17 global suppliers separately to source liquefied natural gas (LNG) from spot market.
Final deals will be signed soon following the approval from the cabinet committee on economic affairs, a senior company official told the FE.
He said the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources (MPEMR) has already decided, in principle, to import around one-fourth of the country's total LNG requirement from the spot market to reap the benefit of falling prices.
Spot market is a public market in which financial instruments or commodities are traded for immediate delivery.
Spot market for the LNG was developed over the past several years with the gluts of LNG output alongside the growth of emerging markets for LNG (liquefied natural gas).
Market insiders said the Platts JKM, which represents the prices of spot cargoes delivered to northeast Asia, averaged around $4.93 per MMBtu (million British thermal unit) in the second quarter of 2019, down from $8.26 per Mmbtu a year ago.
However, state-run Petrobangla has been importing LNG under term deals within the range of around $8.5 per Mmbtu to $10 per Mmbtu over the past one year since April 24, 2018, when the first shipment reached Moheshkhali Island in the Bay of Bengal.
The imported LNG is re-gasified at FSRUs (floating, storage, re-gasification units) before it is added to the national grid for use by end users.
Officials said the 17 interested LNG suppliers have been selected following a competitive bidding.
They will provide fuel to the country's LNG-receiving terminals from the spot market following instructions time to time, based on demand, said the officials referring to some features of the initials.
The RPGCL would initially make proposal to the selected firms specifying the quantity of spot LNG for supplying to the LNG terminals.
It would seek to purchase LNG from the selected firms under the final MSA.
The imported spot LNG should have a gross heating value ranging from 1,025 to 1,100 Btu per standard cubic feet (scf).
The imported spot LNG would require to be blended with locally-produced natural gas, which is sulfur-free and sweet gas, before it is delivered to the end-user.
The imported LNG's sulfur content could be low as a result.
The selected firms would have to supply LNG on a delivered ex-ship basis and the vessel size should range from 125,000 cubic metre to 220,000 cubic metre.
The RPGCL will procure spot LNG based on market prices, terminal availability, increased re-gasification capacity and downstream demand.
Currently, two FSRUs, owned by US-based Excelerate Energy and local Summit Group, are currently re-gasifying around 580 mmcfd of LNG.
Both the FSRUs have the capacity to re-gasify around 1,000 mmcfd of LNG in total, said a senior Petrobangla official.